Corporate Income Tax in Singapore
Singapore is known as a leading business hub that offers favourable corporate and income tax rates.
Corporate income tax (CIT) in Singapore is fixed at a flat rate of 17%, whereas the personal income tax system in Singapore is calculated using a progressive scale. This means that the personal income tax rate will increase with an increase in the individual’s income. There is also no capital gains tax in Singapore.
In this article, we take a look at the corporate income tax duties for companies in Singapore.
What is the Corporate Income Tax rate in Singapore?
Corporate income tax in Singapore has a rate of 17%. A partial tax exemption is available and can be applied to a resident company’s first SGD 200,000 of chargeable income. There are also tax rebates available for companies as well.
Singapore operates a single-tier tax system. This is essentially where the company is taxed upon their income, and then any dividend payments to shareholders are free from tax.
Another key aspect of corporate income tax in Singapore is that only income sourced in Singapore is subject to tax. However, any income that is remitted to Singapore or deemed to be remitted to Singapore is subject to tax.
Singapore Corporate Income Tax Rebate
Singapore currently offers the following CIT rebate.
|Chargeable Income||% exempted from Tax||Amount exempted from Tax|
Tax Incentives Available in Singapore
Singapore has the following tax exemptions/incentives available to Singapore tax resident companies.
The following tax exemptions are available for newly incorporated companies over the first three (consecutive) financial years:
- 75% exemption on the first $100,000 of normal chargeable income.
Newly incorporated companies will be exempted from 75% corporate income tax rate on the first S$100,000 taxable income for each of the first three tax filing years if they meet the following conditions:
- The company is incorporated in Singapore
- The company is a tax resident in Singapore
- Has no more than 20 shareholders (with at least one individual shareholder holding at least 10% of shares.)
- A further tax exemption of 50% on taxable income (up to S$100,000) is also available.
Newly incorporated companies are also eligible for a further partial tax exemption, of around 8.5% on taxable income of up to S$100,000 per annum. Any taxable income above S$100,000 will be charged at the normal rate of 17%.
When Is The Corporate Income Tax Filing Date?
Corporate income tax filing for Singapore companies is due on 30 November (for hard copy forms) and 15 December (for e-filing).
When Is The Income Tax Assessment Period?
In Singapore, corporate income is assessed on a preceding year basis. For example, in 2022 you will be filing a corporate tax return for your company’s financial year that ended between January 1, 2021 and December 31, 2021.
Singapore has implemented a Withholding Tax (WHT) policy for the following situations. WHT does not apply to Singapore resident companies or individuals. However, when a payment of a certain nature is made to a non-resident company or individual, a percentage must be deducted and paid to the Income Tax Authorities as a WHT.
The current WHT rate is 15%
Tax Residence Of A Company
A company will be considered a tax resident of Singapore if the control and management of the business happens in Singapore. “Control and management” refers to the making of decisions on strategic matters e.g. company policy and strategy.
Other considerations for the establishment of tax residency:
- The location of the company’s Board of Directors meetings. This refers to where the control and management of the company is exercised.
- Whether the company has an executive director or a member of senior management performing decision-making roles based in Singapore.
Typically, a company is considered a non-resident of Singapore if the directors manage and control the business and hold board meetings outside Singapore, regardless of whether day-to-day operations are undertaken in Singapore.
A Singapore branch of a foreign company is generally not considered a Singapore tax resident due to the control and management being executed by an overseas parent company.
The application of taxes for a resident company and non-resident company is generally the same with the exception of certain benefits available to resident companies. For example:
- A tax resident company is eligible for the income tax exemption scheme for start-up companies
- A tax resident company can take advantage of a income tax exemption on foreign-sourced dividends, foreign branch profits, and foreign-sourced service income under section 13(8) of the Income Tax Act with certain conditions.
- A tax resident company is entitled to benefits established by the Avoidance of Double Taxation Agreements (DTA) that Singapore has concluded other countries.
Singapore Tax Treaties
A tax treaty between two countries sets out how the income earned by a company/individual will be taxed by the authorities of each country (when both countries are involved).
Singapore has currently concluded tax treaties with more than 80 countries which relieve any double taxation burdens.
Additionally, Singapore offers unilateral tax credits to Singapore companies who have earned income in countries that don’t have double tax agreements with Singapore. Such companies will be granted tax credits on their foreign-sourced income from those countries.
Tax On Losses
A company may deduct allowable expenses against the income for taxation purposes in Singapore. Any losses can be carried forward indefinitely (subject to certain conditions), however, these losses must be deducted in the first available year where applicable.
How can our team of experts can help?
If you need more information about tax in Singapore, you can book a consultation with one of our experts. This consultation will allow you to receive dependable advice and quickly figure out the best option for your particular needs.
Please note that this article is for information purposes only and does not constitute legal advice.
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