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Corporate Tax

DETAILS

For Singapore tax purposes, a company is defined as a business entity incorporated or registered under the Singapore Company Act, a foreign company registered in Singapore as branch of a foreign company, or a foreign company incorporated or registered outside Singapore.

A company is taxed at a flat rate of 17% on its chargeable income regardless of whether it is a local or foreign company.

  • Services Taxation

Singapore follows a territorial tax system and according to Singapore tax law, a company is liable to pay tax only on (A) income accrued in or derived from Singapore or (B) income received in Singapore from outside Singapore that results from:

  1. Gains or profits from any trade or business;
  2. Investments by the company (such as income received as dividends, interest and rents);
  3. Royalties, premiums and any other profits of similar nature; and
  4. Other gains of an income nature.

However, the above income is subject to several exemptions and tax reliefs that reduce a Singapore company’s taxable income:

  1. A range of general tax incentives and sector-specific tax incentives are available to qualified companies that can reduce or eliminate its corporate tax.
  2. Qualified foreign-sourced income is exempt from taxation in Singapore.
  3. An extensive network of Singapore’s double-tax avoidance treaties with other countries ensures that if you have already paid tax in a treaty foreign country on income that is remitted to Singapore, then such income is not taxed a second time in Singapore.
  4. Singapore government makes available several other grants and incentives to further reduce the corporate tax burden.

Therefore, while the headline tax rate on taxable income is a flat 17%, due to various tax exemptions and incentives described above, the effective rate for most companies is significantly lower than 17%.

Capital gains are profits from the sale of a capital asset owned by the company, such as a real estate property, shares of a company’s stock, an IP asset, a piece of art, etc. A capital gain occurs when a capital asset is sold or exchanged at a price higher than its basis (it’s purchase price plus commissions and the cost of improvements net of depreciation).

In Singapore, capital gains are tax free i.e. there is no tax on capital gains. Therefore, if an entrepreneur starts a company in Singapore which is subsequently acquired by another company or has an IPO, the entrepreneur will pay no tax on the gains that she receives from the sale of her equity.

Since business income is taxable in Singapore while capital gains are not, whether a transaction is treated as business income or capital gains is important. If a transaction is similar to the normal course of business, it may be considered business income and not capital gains. When in doubt, consult a qualified tax professional.

Singapore’s zero tax on capital gains policy is a very important incentive for investors, entrepreneurs and talented professionals. It can dramatically increase an individual’s “take home” amount from investments or from building a new business. This policy has helped Singapore create an environment of innovation and helped attract talented individuals to the country.

A dividend is a payment made by a company to its shareholders, usually as a distribution of post-tax profits. When a company makes a profit, it can either reinvest it in the business or distribute it to shareholders or decide on some combination of these two options.

In Singapore, dividend distributions by a Singapore company are tax free. This means that neither the company nor the shareholders will have to pay any tax on the dividend payments made to shareholders. This is another critical advantage of Singapore’s corporate tax policy and it can greatly increase the “take home” payment that an investor or entrepreneur receives from her Singapore company.

For Singapore tax purposes, a company is defined as a business entity incorporated or registered under the Singapore Company Act, a foreign company registered in Singapore as branch of a foreign company, or a foreign company incorporated or registered outside Singapore.

A company is taxed at a flat rate of 17% on its chargeable income regardless of whether it is a local or foreign company.

Singapore follows a territorial tax system and according to Singapore tax law, a company is liable to pay tax only on (A) income accrued in or derived from Singapore or (B) income received in Singapore from outside Singapore that results from:

  1. Gains or profits from any trade or business;
  2. Investments by the company (such as income received as dividends, interest and rents);
  3. Royalties, premiums and any other profits of similar nature; and
  4. Other gains of an income nature.

However, the above income is subject to several exemptions and tax reliefs that reduce a Singapore company’s taxable income:

  1. A range of general tax incentives and sector-specific tax incentives are available to qualified companies that can reduce or eliminate its corporate tax.
  2. Qualified foreign-sourced income is exempt from taxation in Singapore.
  3. An extensive network of Singapore’s double-tax avoidance treaties with other countries ensures that if you have already paid tax in a treaty foreign country on income that is remitted to Singapore, then such income is not taxed a second time in Singapore.
  4. Singapore government makes available several other grants and incentives to further reduce the corporate tax burden.

If Accounting is the language of your Business. We are always happy to help. Call Us.

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