A General Overview of Singapore's Tax System
Introduction
Singapore’s global economic standing, stable political landscape, strong legal system, business-friendly policies, skilled labour force, and support for innovation, among other factors, have placed the island nation among the most successful countries in the world in attracting foreign investment.
As a global financial hub, Singapore has a robust financial infrastructure to support companies in their growth and regional expansion. With its excellent connectivity providing easy access to emerging markets, Singapore has positioned itself as a launchpad for doing business in Asia. It also has a vibrant entrepreneurial ecosystem whereby start-ups are nurtured through pro-innovation government policies, easy access to angel funding, and a strong technical infrastructure.
While there are many factors that drive investment decisions, a country’s tax system does play a key role in influencing such decisions. This can be seen from the fact that regulations relating to paying taxes is one of the indicators for ranking countries in the World Bank Group’s Doing Business report. This article provides a broad overview of the Singapore tax system for companies looking to invest in Singapore.
Corporate Income Tax
Under Singapore’s territorial basis of taxation, a company’s income accruing in or derived from Singapore, or received in Singapore from outside Singapore, is taxable. This applies to both resident and non-resident companies, with certain exceptions.
Income Received in Singapore from Outside Singapore
Income from outside Singapore is considered received in Singapore when it is:
- remitted to, transmitted, or brought into Singapore
- applied in or towards the satisfaction of any debt incurred in respect of a trade or business carried on in Singapore, or
- applied to purchase any movable property which is brought into Singapore.
However, foreign dividends, overseas branch profits, and foreign-sourced service income received by a resident company are not taxable if the following conditions are met:
- The highest corporate tax rate (headline tax rate) of the foreign country from which the income is received is at least 15% in the year the income is received.
- The foreign income had been subjected to tax in the foreign country from which it was received.
Gains of a Capital Nature
Income tax is levied only on “income”, which means gains of a capital nature are not taxable in Singapore. However, capital gains that are derived from activities of a trade or business carried on in Singapore may be deemed to be in the nature of income and hence subject to income tax.
There is certainty for non-taxation of gains on disposal of ordinary shares in investee companies if, prior to the disposal, the investee company was held continuously for at least 24 months with at least 20% ordinary shareholdings. This tax certainty is applicable for disposal of ordinary shares up to 31 December 2027.
Gains from the sale or disposal of foreign assets ("foreign-sourced disposal gains") that occur on or after 1 January 2024 are chargeable to tax if the gains are:
- received in Singapore from outside Singapore by a covered entity, and
- derived by an entity without adequate economic substance in Singapore.
In addition, gains from the disposal of foreign intellectual property (IP) rights may be subject to tax when they are received in Singapore from outside Singapore by a covered entity, regardless of its level of economic substance.
A covered entity refers to an entity that is part of a multinational group in which the entities of the group are not all incorporated, registered or established in Singapore, or any entity of the group has a place of business outside Singapore. Foreign assets refer to immovable or movable property situated outside Singapore. Foreign-sourced disposal gains are subject to tax in Singapore in the year they are received in Singapore from outside Singapore.
Resident and non-resident companies are subject to tax at the same corporate tax rate. However, a tax resident enjoys several tax benefits that are not accorded to non-resident companies. For example, the tax exemption on certain foreign-sourced income, foreign tax credit and tax exemption scheme for new start-up companies are only available to resident companies. A resident company can also make use of the benefits accorded under Singapore’s wide tax treaty network, such as enjoying a lower withholding tax rate on certain foreign income derived from a jurisdiction with which Singapore has concluded a tax treaty.
A company is regarded as a resident if its management and control is exercised in Singapore. Generally, a company may be considered as exercising its powers of management and control in Singapore if its board of directors meets in Singapore to make strategic decisions. In addition, a company may be considered as having strategic decisions made in Singapore where the board of directors meets via virtual meeting technology, subject to conditions.
The year of assessment (YA) is the year in which income tax is calculated and charged. The basis period is the period of income relevant to the YA.
Singapore has a preceding-year basis of taxation, which means that the company is taxed on income earned in the preceding financial year. For example, in YA 2024, the income that is being assessed for tax is the income earned during the basis period from 1 January 2023 to 31 December 2023.
Companies are allowed to adopt a different financial year other than a calendar year. For example, for a company with a June financial year-end, the income assessable to tax in YA 2024 will be the income earned during the basis period from 1 July 2022 to 30 June 2023.
The corporate tax rate for both resident and non-resident companies is 17%.
Under the partial tax exemption scheme, 75% of a company’s first S$10,000 of chargeable income and 50% of the next S$190,000 of chargeable income is exempted from tax. There are no qualifying conditions for this exemption scheme.
Under the start-up tax exemption (SUTE) scheme, qualifying new start-up companies, except for investment holding companies and property developers, can enjoy 75% tax exemption on the first S$100,000 of chargeable income and 50% tax exemption on the next S$100,000 of chargeable income for the first three (3) YAs.
To qualify for SUTE, the company must meet the following conditions:
- It is incorporated in Singapore.
- It is a tax resident in Singapore for that YA.
- It has no more than 20 shareholders throughout the basis period for that YA, where all of the shareholders are individuals or at least one shareholder is an individual holding at least 10% of the issued ordinary shares of the company.
Tax Rebate and Tax Rebate Cash Grant
For YA 2024, companies are given a tax rebate of 50% of the corporate income tax payable. The tax rebate is granted to all companies regardless of their tax residency status. Furthermore, for YA 2024, a cash payout in the form of a tax rebate cash grant of S$2,000 is granted to companies that have employed at least one local employee in 2023. The maximum total benefits of tax rebate and tax rebate cash grant that a company may receive is S$40,000.
Minimum Effective Tax Rate
Singapore will implement the Income Inclusion Rule and Domestic Top-up Tax under Pillar Two of the Base Erosion and Profit Shifting 2.0 initiative on profits from financial years commencing on or after 1 January 2025. These rules enforce a minimum effective tax rate of 15% on the business profits of in-scope multinational enterprise (MNE) groups with an annual group revenue of €750 million or more in at least two (2) of the four (4) preceding financial years. The Income Inclusion Rule is applicable to in-scope MNE groups parented in Singapore, in respect of the profits of their group entities that are operating outside Singapore. The Domestic Top-up Tax is applicable to in-scope MNE groups in respect of the profits of their group entities that are operating in Singapore.
Tax Deductions
Tax deductions are allowed for revenue expenditure wholly and exclusively incurred in the production of income unless such expenditure is specifically disallowed under the Income Tax Act 1947 (ITA). Depreciation and private car expenses are examples of disallowed expenses. In some cases, such as an investment holding company, the amount of revenue expenses that can be deducted is capped.
Expenditures that are capital in nature do not qualify for tax deduction. However, capital allowances (ie tax depreciation) can be claimed on certain types of capital expenditure, such as expenses incurred on acquiring qualifying plant and machinery for the purposes of a trade or business.
For YA 2024 to YA 2028, under the Enterprise Innovation Scheme (EIS), companies may claim 400% tax deductions or allowances on up to S$400,000 of qualifying expenditure per year for each of the qualifying activities, such as research and development (R&D) undertaken in Singapore, registration of IP, acquisition and licensing of IP rights, and employee training courses. Qualifying companies are given the option to convert the above tax deductions or allowances into a cash payout. If the option is exercised, the companies will receive a non-taxable cash payout of 20% of the total qualifying expenditure incurred for each YA of up to S$100,000 across all qualifying activities, in lieu of the deduction or allowance. The cash payout is capped at S$20,000 per YA.
Enhanced deductions are available for certain types of expenditure to incentivise companies to undertake certain activities that are considered as beneficial to the Singapore economy. For example, companies may claim 200% deductions on eligible expenses incurred on certain approved internationalisation activities, such as overseas business development trips and missions, overseas investment study trips and missions, overseas trade fairs, local trade fairs, virtual trade fairs, product and service certification, overseas advertising and promotional campaigns, design of packaging for overseas markets, and advertising in local trade publications.
Tax Losses
Any capital allowances, tax losses, or donations that cannot be fully offset by the taxable profits of a YA may be carried forward for offset against future taxable profits.
There is no expiry to the carry forward of unabsorbed capital allowances and tax losses as long as the company’s ultimate shareholders remain substantially the same as at certain specified dates. For the carry forward of unabsorbed capital allowances, there is an additional requirement that the company carries on the same business from which the capital allowances arose.
For the carry forward of unabsorbed donations, the substantial shareholding requirement applies, but unabsorbed donations not utilised within five (5) years will be forfeited.
Unabsorbed capital allowances and tax losses of up to S$100,000 can also be carried back to the preceding YA to offset the assessable income of that YA. The substantial shareholding requirement and the additional same business requirement for capital allowances also apply to carry back.
Under the group relief system, the current year unabsorbed capital allowances, tax losses, or donations of a company may be used by another company in the same group. A group refers to a Singapore incorporated parent and all its Singapore incorporated subsidiaries which are directly or indirectly held through another Singapore subsidiary with at least 75% shareholdings. A formal application, at the point of submitting the tax returns, is required to be made by the transferor and claimant companies for group relief.
Estimated Chargeable Income
A company should submit an estimate of its chargeable income known as Estimated Chargeable Income (ECI) within 3 months after a company’s financial year-end. A company needs to pay the estimated tax assessed within one month from the date of the Notice of Assessment (NOA), unless it qualifies to pay via instalments.
The filing of ECI is waived for any YA if both conditions below:
- Annual revenue is not more than S$5 million for the financial year.
- ECI is nil for the YA.
Tax Return Filing
The income tax return, Form C, must be filed by 30 November of the YA. For small companies with an annual turnover not exceeding S$5 million, a simplified income tax return, Form C-S, can be filed, subject to conditions. For even smaller companies that can meet the qualifications for Form C-S with turnover not exceeding S$200,000, a simplified version of Form C-S, Form C-S (Lite) can be filed.
Tax Payment
Companies are given up to a month from the date of the NOA to pay the tax liability. If a company wishes to object to the NOA, it has 2 months from the date of the NOA to do so.
Personal Income Tax
Individuals are taxed on income accruing in or derived from Singapore. Income sourced outside Singapore is not taxable, even if such income is received into Singapore (except when received through a Singapore partnership). This applies to both tax residents and non-residents.
Non-residents who are employed in Singapore for 60 days or less in a calendar year are exempted from tax on the employment income derived from that short-term employment. This tax exemption is not applicable to a company director, a public entertainer, or an independent professional exercising a profession in Singapore.
The due date for paper filing and e-filing for personal income tax is 15 April and 18 April of the YA, respectively.
Individuals are given up to a month from the date of the NOA to pay the tax liability. Individuals may also opt to pay their income taxes via General Interbank Recurring Order (GIRO) to enjoy interest-free instalments for up to 12 months. An individual has up to 30 days from the date of the NOA to file an objection to the NOA.
A tax resident’s income is subject to progressive tax rates, ranging from 0% to 24%, depending on the level of chargeable income of the individual. The highest individual tax rate of 24% is imposed on chargeable income exceeding S$1 million.
Non-residents are subject to tax on their employment income at a flat rate of 15% or the resident rate, whichever is higher. Other non-employment income, such as director’s fee, derived by non-residents is taxed at 24%.
Only a tax resident is entitled to claim personal reliefs (such as spouse relief, child relief, etc) against taxable income.
For YA 2024, a personal income tax rebate of 50% of tax payable, capped at S$200 is granted to all tax resident individuals.
An individual is treated as a tax resident if the individual resides in Singapore, or is physically present, or exercises an employment in Singapore, for at least 183 days in a calendar year.
Under an administration concession, individuals who have worked or stayed in Singapore for at least 183 days continuously over 2 calendar years can be treated as tax residents in both years. This concession does not apply to directors, public entertainers, or independent professionals.
Withholding Tax
Withholding tax is applicable on certain types of income of a non-resident that are sourced in Singapore, or deemed to be sourced in Singapore under the ITA. When a payer makes such income payments to a non-resident person, the payer must withhold a percentage of the payment and pay the amount withheld to the Inland Revenue Authority of Singapore (IRAS) as withholding tax. The rate of withholding tax varies depending on the type of payment and the country of residence of the payee.
|
Categories of Income or Payments |
Withholding Tax Rates (%) |
|
Interest, commission, fees, or other payments in connection with any loan or indebtedness |
15% |
|
Royalties or other lump sum payments for the use of or the right to use movable properties |
10% |
|
Royalties and other payments made to authors, composers or choreographers |
24% |
|
Payments for the use of or the right to use scientific, technical, industrial or commercial knowledge or information |
10% |
|
Rent or other payments for the use of movable properties |
15% |
|
Management fees, technical assistance and service fees |
17% if services rendered in Singapore |
|
Distributions made by a unit trust to a non-resident unit holder |
24% if the non-resident unit holder is an individual, 17% if otherwise |
|
Distributions of taxable income made by a real estate investment trust (REIT) to a unit holder who is a non-resident non-individual |
10% |
|
Director’s fee |
24% |
|
Payments to non-resident professionals/firms |
15% on gross income or 24% on net income |
|
Payments to non-resident public entertainers |
15% |
|
Commissions or any other payments by Singapore casino operators to non-resident licensed international marketing agents |
3% |
|
Supplementary Retirement Scheme withdrawals by non-citizens |
24% |
|
Dividends |
No withholding tax |
|
Branch profits |
No withholding tax |
Withholding tax rates on certain payments can be reduced under the tax treaties signed by Singapore.
Withholding tax must be filed by the 15th of the second month from the date of payment to a non-resident. Taxpayers are allowed to consolidate and file withholding tax twice a year, on 15 June and 15 December of each year if they are claiming tax exemption under the relevant tax treaty or Approved Royalties Incentive (ARI). Payment of the withholding tax due must be made to IRAS at the time of filing unless the taxpayer is on GIRO for withholding tax payment.
Transfer Pricing
Singapore adopts the internationally accepted arm’s length principle to guide transfer pricing (TP). IRAS expects taxpayers to be able to support with documentation that they have concluded all related party transactions on an arm’s length basis.
It is mandatory to prepare contemporaneous TP documentation for the related party transactions undertaken in a basis period when either of these two (2) conditions is met:
- The gross revenue from trade or business for the basis period concerned is more than S$10 million, or
- The company is required to prepare TP documentation for a previous basis period.
Certain details of related party transactions must be reported via a prescribed form if the value of the related party transactions in the audited accounts for the relevant financial year exceeds S$15 million. Taxpayers must submit the form together with their income tax return, Form C.
Multinational enterprises whose ultimate parent entity is a tax resident in Singapore are required to prepare and file country-by-country reports if the consolidated group revenue in the preceding financial year is at least S$1,125 million. Country-by-country reports must be submitted to IRAS within 12 months from the end of the ultimate parent entity's financial year.
Taxpayers may consider applying for advance pricing agreements (APAs) to avoid TP disputes. There are 3 types of APAs, namely, unilateral, bilateral, and multilateral APAs. All taxpayers can apply for unilateral APAs, while only Singapore tax residents can apply for bilateral and multilateral APAs.
Goods and Services Tax
Goods and Services Tax, or GST, is levied on the import of goods and most supplies of goods and services in Singapore. The Singapore Customs collects GST at the point when goods are imported into Singapore.
A supply of goods and services can either be a taxable supply or an exempt supply. A person registered for GST in Singapore is required to charge GST on taxable supplies.
A taxable supply can either be standard-rated or zero-rated. The current GST rate for standard-rated supplies is 9%.
Exported goods and provision of international services are zero-rated. Certain specific transactions, such as the provision of most financial services, the supply of digital payment tokens, the sale and lease of residential properties, and the import and local supply of investment precious metals, are exempted from GST.
A GST-registered person can claim the GST incurred on business purchases and expenses (known as input tax) if the conditions for claiming input tax are satisfied.
It is compulsory for a business to register for GST if at the end of each calendar year (ie 31 December), the taxable turnover for the past 12 months exceeds S$1 million.
In addition, compulsory GST registration is also required if there is certainty at any point of time that the taxable turnover is expected to be above S$1 million for the next 12 months. Businesses can also voluntarily register for GST subject to conditions.
Under current GST rules, all goods and services consumed in Singapore, whether obtained from a supplier who originates from Singapore or outside Singapore, are subject to GST. Therefore, overseas businesses with an annual global turnover exceeding S$1 million and that make business-to-consumer (B2C) supplies of remote services and/or low-value goods to customers in Singapore exceeding S$100,000 annually, are required to register for GST in Singapore under a simplified pay-only regime. Such GST-registered overseas vendors must account for GST on B2C supplies of remote services and low-value goods made to customers in Singapore. On the other hand, GST-registered businesses belonging in Singapore that are not entitled to full input tax claims must account for GST, as if they were the supplier, on business-to-business (B2B) imported services and low-value goods under the reverse charge mechanism.
When a business registers for GST, it is allocated quarterly GST accounting periods according to its financial year-end, which means it must file a GST return every three (3) months. However, a business can request to change to a monthly GST accounting period and file its GST return monthly. Both GST returns and payment are due one month after the end of the accounting period covered by the return.
Tax Incentives
The Singapore government has established a number of tax incentive programmes to help companies improve efficiency, strengthen capabilities and explore new opportunities in their business. Some programmes cater to the needs of start-ups and local enterprises, while others are designed for global companies with large-scale needs such as the establishment of regional headquarters in Singapore.
The tax incentives are legislated, and the approving authority is usually vested with statutory bodies such as the Enterprise Singapore (ES), the Economic Development Board (EDB), the Monetary Authority of Singapore (MAS), the Singapore Tourism Board (STB), the Building and Construction Authority (BCA), and the Maritime and Port Authority of Singapore (MPA).
Some key tax incentives are listed below:
|
Incentive |
Benefits |
Suitable for |
|
Pioneer Certificate (PC) Incentive |
|
Manufacturing or services companies |
|
Development and Expansion Incentive (DEI) |
|
Regional or international headquarters |
|
Investment Allowance Scheme (IAS) |
|
Manufacturing and construction companies |
|
Finance and Treasury Centre (FTC) Incentive |
|
Finance and treasury centres |
|
Financial Sector Incentive (FSI) |
|
Financial sector companies |
|
Global Trader Programme (GTP) |
|
Trading companies |
|
Intellectual Property Development Incentive (IDI) |
|
R&D IP hubs |
|
Aircraft Leasing Scheme (ALS) |
|
Aircraft leasing companies |
Avoidance of Double Taxation Agreements
Singapore has comprehensive avoidance of double taxation agreements (DTAs) with over 90 foreign jurisdictions:
|
Regions |
Countries |
|
Asia Pacific |
Armenia, Australia, Bangladesh, Brunei, Cambodia, China, Fiji, India, Indonesia, Japan, Kazakhstan, Republic of Korea, Laos, Malaysia, Mongolia, Myanmar, New Zealand, Pakistan, Papua New Guinea, Philippines, Sri Lanka, Taiwan, Thailand, Turkmenistan, Uzbekistan, Vietnam |
|
Africa |
Egypt, Ethiopia, Ghana, Libya, Mauritius, Morocco, Nigeria, Rwanda, Seychelles, South Africa, Tunisia Signed but not ratified: Cabo Verde, Gabon, Kenya |
|
Middle-East |
Bahrain, Israel, Jordan, Kuwait, Oman, Qatar, Saudi Arabia, United Arab Emirates |
|
Americas |
Barbados, Brazil, Canada, Ecuador, Mexico, Panama, Uruguay
|
|
Europe |
Albania, Austria, Belarus, Belgium, Bulgaria, Cyprus, Czech Republic, Denmark, Estonia, Finland, France, Georgia, Germany, Greece, Guernsey, Hungary, Ireland, Isle of Man, Italy, Jersey, Latvia, Liechtenstein, Lithuania, Luxembourg, Malta, Netherlands, Norway, Poland, Portugal, Romania, Russian Federation, San Marino, Serbia, Slovak Republic, Slovenia, Spain, Sweden, Switzerland, Türkiye, Ukraine, United Kingdom |
Source: Inland Revenue Authority of Singapore, 2024
Others
Stamp duty is a tax on dutiable documents relating to any immovable property in Singapore and any stock or shares. Some common dutiable documents that are chargeable with stamp duty are:
- transfer documents for the purchase or acquisition of immovable properties
- contracts or agreements (eg sale and purchase agreements) and transfer instruments for the purchase or acquisition of shares, and
- agreements for the lease of immovable properties (including any furniture, chattels, fittings, or equipment).
Stamping of a dutiable document must be done within 14 days after signing the document if it is signed in Singapore, or within 30 days after receiving the document in Singapore if the document is signed overseas.
Estate duty is not applicable to deaths on and beyond 15 February 2008. Singapore also does not have inheritance tax.
Singapore is essentially a free port. Excise and import duties are levied only on four (4) categories of goods: intoxicating liquors, tobacco products, motor vehicles, and petroleum products and biodiesel blends.
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