One of the key tractions for international businesses and entrepreneurs who set up company in Singapore is the city-state’s attractive tax regime. Compared to the regional jurisdictions, Singapore’s tax rates are moderate, and with several incentive schemes in place the effective tax rate on business profits could be substantially lower than the headline tax rate. Besides the attractive tax rate, the basis and scope of taxation is by itself very conducive to businesses. Following is an overview of the scope of corporate taxation in Singapore.
Basis of Taxation
Preceding Year Basis:
Singapore adopts the preceding year basis of taxation for all sources of income, meaning the incomes earned in 2017 will be taxed in the year 2018. Companies are required to file an estimate of their chargeable income with IRAS within 3 months after the end of their accounting period and to file their tax return by 30 November annually. For e- ling of annual tax return, IRAS allows further extension of time of up to 15 December.
Single Tier Taxation:
Singapore adopts a single-tier tax system. Dividends paid by a Singapore company to its shareholders are tax exempt.
Territorial Basis of Taxation:
Tax is charged on incomes accruing in or derived from Singapore. Incomes earned outside Singapore is not chargeable unless it is received in or remitted into Singapore. Notably, Singapore has a wide network of Double Taxation Avoidance Agreements and Unilateral Tax Credit Relief System whereby a tax credit is available for foreign tax suffered by companies when their foreign sourced incomes become chargeable in Singapore.
Foreign sourced income is considered received in Singapore when it is:
- 1. remitted to, transmitted or brought into Singapore;
- 2. used to pay off any debt incurred in respect of a trade or business carried on in Singapore; or
- 3. used to purchase any moveable property brought into Singapore.
Read more about the scope of Taxation in Singapore at InCorp Global.
