About Singapore – Singapore is a republic with a parliamentary system of government. Its tax system is well regulated and is less than in the other developed countries. It uses territorial basis of taxation where taxes are imposed on the income derived. The source of income is determined mainly by the location at which the services are rendered. IRAS (Inland Revenue Authority of Singapore) administers, assess and collects the taxes.
Corporate Tax – A Company pays tax on its earnings in the country or when it receives income from another country. Singapore is one of those countries that follows a Single Tier Tax system i.e., the profits earned by the company is only taxed once. In other words, the dividends received by the shareholder of the company are completely tax-free.
For a newly Incorporated Company – Full Tax exemptions like 0% tax on the first $ 100,000 for the first 3 years for a new company that is incorporated in Singapore, is a tax resident in Singapore and has less than 20 shareholders holding minimum 10% of the shares are given. Singapore resident companies are eligible for a partial tax of up to 9% on $ 300,000 per annum. Any income above this will be charged a headline tax which is now at 18%.
Tax Exemptions for Holding Companies and Non-Resident Companies – Exemptions are given on foreign sourced dividends and profits that are remitted in Singapore if the Headline tax of the country from where the income is sourced is at least 15% and if the income was already subjected to tax. Foreign source income which is retained outside Singapore is not taxed. There is no tax on Capital gains in Singapore and it also does not impose Withholding Tax on dividends. A company is called a resident company if its central management is in Singapore and a non-resident if it is elsewhere. A resident company is entitled to the benefits conferred under the Avoidance of Double Taxation Agreements (DTA) that Singapore has concluded with treaty countries. A Non-resident company is not eligible for the double tax treaties. The income is not liable to Singapore income tax on foreign source income if it is not received in Singapore. Therefore, non-resident companies are attractive options as international holding companies.
Goods and Services Tax (GST) – A business must register for GST if at any time at the end of a quarter their taxable supplies exceed S$1 million for a quarter and the immediate past three quarters, or if their taxable supplies are expected to exceed S$1 million for the next 12 months. Taxable supplies include goods and services supplied in Singapore, goods exported from Singapore and International services. A Company is supposed to register for GST within 30 days of becoming liable.
Tax Filing – For a newly incorporated company, IRAS send Form C in the 2nd year for assessment. The trade period for a business is the accounting period and the subsequent year would be the assessment period. For Example, if the accounting period is April 1st, 2007 to 31st March, 2008 then the assessment year would be 2009. For the subsequent years, the filing would be in the months on March/April.
For more information refer to Corporate tax Singapore guide.