Singapore Corporate Tax: Your guide to corporate tax rate and more (2020)

If you have - or are thinking of setting up - a business in Singapore, you’ll need to know about how corporate income tax works.

This guide has you covered with a walk through the key details you need to understand the Singapore corporate tax rate 2020, the corporate tax filing deadline and process, and how corporate tax rebates, exemptions and incentives can help your business grow.

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Here’s what we’ll cover:

• Corporate tax Singapore: Key facts
• Singapore corporate tax rate
• Taxable income in Singapore
• Tax residency: Singapore tax resident vs non-resident
• Tax incentives
• How to file tax returns
• Frequently asked questions
  • Is Singapore a tax haven?
  • How can I reduce my tax in Singapore?
  • How is corporate tax calculated?

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Corporate tax Singapore: Key facts

Singapore is well known as a business friendly environment - and one key part of that is the tax structure. As well as having an advanced and relatively simple system for reporting and paying tax, there are a good range of incentives and exemptions which are designed to help company owners set up in the city state, and give existing businesses the boost they need to grow.

Here are some key facts about corporate tax in Singapore:

Corporate tax is looked after by the Inland Revenue Authority of Singapore (IRAS)¹ Singapore has a single-tier corporate income tax system set at 17% Tax treaties with a broad range of countries around the world mean there should be no double taxation No tax is payable on dividends paid out to shareholders, or on capital gains Tax breaks and incentives are in place to encourage local and incoming businesses to grow Certain types of foreign income are tax exempt for tax resident businesses in Singapore

Singapore corporate tax rate

With effect from YA 2010, a company is taxed at a flat rate of 17% on its chargeable income regardless of whether it is a local or foreign company. However, thanks to a selection of incentives and exemptions, the effective tax rate paid by businesses is typically much lower than this. We’ll take a look at this in a little more detail shortly - first, the headlines:

Corporate tax type	Tax rate
Tax on profits	17%
Tax on capital gains	0%
Tax on dividends distributed	0%
Tax on foreign sourced income	0%

Of course, as with everything tax, there are eligibility criteria and rules which sit around all the above numbers. We’ll look at these more thoroughly later - but you’re also advised to get professional help if you’re unsure about your tax liabilities, to avoid mistakes.

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Taxable income in Singapore

Before you can start to work out your tax liabilities you’ll need to establish what proportion of your income is taxable. Here’s a broad overview of what income is - and is not - taxable in Singapore.²

Taxable income includes:

• Profits from trade or business
• Investment income like dividends or rent
• Royalties
• Anything else which is considered revenue

Income which is not usually taxed in Singapore includes:

• Capital gains
• Income which is exempt under other clauses, such as foreign sourced income for a Singapore tax resident business

Taxable income may be from business activities in Singapore or elsewhere in the world.

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Tax residency: Singapore tax resident vs non-resident

How your tax is calculated will depend in part on whether your company is considered a tax resident of Singapore or not. Here’s what you need to know.

Which companies are considered Singapore tax residents?

The decision about whether your company is considered a tax resident in Singapore or not depends on whether the business is controlled and managed from Singapore. The tax status of a single company can change from one year to the next based on the specifics of how it is run.³

The application of this concept means it doesn’t matter where your company is incorporated, so much as where strategic decisions are made. If your company holds Board of Directors meetings in Singapore this may indicate it is tax resident. However, even if your company has a large presence here it may not be considered tax resident if all decisions are taken elsewhere in the world.

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What are the differences in tax based on company residency status?

The basics of tax are the same regardless of whether your company is considered tax resident in Singapore or not.

However, resident companies are entitled to a number of tax breaks, incentives and exemptions which are not applied to non-resident businesses. Some of these are described below.

What about tax treaties?

Tax treaties exist between countries to ensure individuals and businesses are not taxed twice on the same income. They’re also known as double taxation treaties.

Singapore has a range of tax treaties with countries around the world which should protect companies from any tax issues. If your company is resident and paying tax in Singapore, you can apply for a certificate to prove this, which can then be used to claim benefits under double taxation treaties.

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Tax incentives

Singapore’s headline corporate tax is already pretty low by global standards - but where it really stands out is in the incentives, exemptions and rebates available for businesses. Here are some of the schemes you may want to look at - be sure to read the eligibility for each one carefully when considering if your business may be a fit.

Tax exemption scheme for new start-up companies

This is a tax exemption for new companies, which can be applied for the first 3 years of a company’s existence.
Like a few of the schemes in existence today, it’s been running for some years now, but the terms are assessed and may change annually. Under this scheme from YA2020 on, the benefits are usually:⁴

• 75% exemption on the first SGD100,000 of chargeable income
• 50% exemption on the next SGD100,000 or chargeable income

Partial tax exemption for all companies

Since 2010, there has been a partial tax exemption for all companies - subject to meeting eligibility criteria. From YA2020 this offers the following:⁴

• 75% exemption on the first SGD10,000 of chargeable income
• 50% exemption on the next SGD190,000 or chargeable income

Corporate income tax rebate

Companies may be entitled to a rebate on the tax owed after deducting other tax set-offs. In YA2020 this could mean a 25% rebate for businesses. ⁴

Tax exemption for foreign sourced income

If your company is considered to be tax-resident in Singapore, you may be able to get an exemption on income which you receive from foreign sources, if it is:⁵

• Foreign sourced dividends
• Foreign branch income
• Foreign sourced service profits

Other incentives and exemptions

Aside from those listed out above there are a range of other incentives and exemptions which are aimed at different business types. For example you may be able to apply for a deduction of expenses related to foreign trade missions, or an exemption for income from your venture company. Check out the full listings online on the IRAS website to see if any may apply to your situation.⁶

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How to file tax returns

Tax is a complex area - even in a country like Singapore which has an advanced and sophisticated system. Here are some common questions and explanations to help clear up some of the mystery.

What is a YA (Year of assessment)?

One acronym you’ll see a lot in tax information is YA. This is usually followed by a date - so YA2020 for example. In this case, we are referring to the year of assessment - the year that tax is being assessed in. However, the financial reporting period will be the tax year which ended in the preceding year. So, if your company’s tax year ends on March 31, the information submitted for YA2020 will be about the tax year which ended on 31 March 2019.⁴

What documents need to be submitted?

There are 2 tax return documents you need to know about - the Estimated Chargeable Income (ECI) and the Corporate Income Tax Return. The corporate income tax filing documents are more commonly known as Form C-S or Form C. Some businesses are exempt from filing the ECI - check out the criteria on the IRAS website to check the detail for your specific company.

When should I file my tax documents?

If your company needs to submit an ECI form, it should be filed within 3 months of the end of the relevant financial year.
Form C-S or C must be filed by December 15 for the YA2020 - but this deadline is shifting to November 30 from the following year, YA2021.
From 2021 only digital filing is allowable - there will be no physical paperwork to complete or mail in at all.

Can I get a tax calculator to help me work out what I owe?

The IRAS offers a basic corporate tax calculator, as well as other tools like the tax treaty calculator⁷ ⁸. These can be useful tools to start figuring out what tax you might need to pay - but they’re not suited to all business types, so do check before you get started.

Where can I find help and advice?

Finally, let’s all agree that tax is a complex area and not somewhere it is worth taking risks. All the information in this guide is for reference only, and does not constitute tax advice. Get professional support and read up on the rules as they apply to your specific situation to stay the right side of the law.

There’s also lots of information, including a New Company Start-up Kit available online through IRAS - a great place to start your research⁹

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Frequently asked questions

Is Singapore a tax haven?

The Singapore authorities are on record stating unequivocally that Singapore is no tax haven¹⁰. Singapore does have low corporate tax and a range of exemptions and incentives in place to attract businesses and individuals. However, the Singapore authorities are firmly against tax evasion, which is sometimes what is implied by the term tax haven.

How can I reduce my tax in Singapore?

Getting professional advice is a good place to start when you’re calculating the tax you need to pay in Singapore. There are a range of incentives, exemptions and even rebates which may apply to your business, but keeping track of everything can prove tricky if you’re not an expert. Start by doing some research on the IRAS website, and using the hints and pointers in this guide - and call in the professionals when you need them.

How is corporate tax calculated?

Corporate tax is basically calculated by establishing your company’s tax residency status, calculating the taxable income, and applying the prevailing rates. You can then also apply for any exemptions, incentives or rebates which may be relevant to your company.

Use the tax calculator which is available on the IRAS website, or follow the step by step guidance offered by the tax authorities to learn more.¹¹

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Even where the tax system is relatively straightforward, grasping the finer details of corporate tax can be a challenge. This guide should give you enough to start thinking about your Singapore corporate tax for 2020 - and there are tax professionals out there who can offer further guidance when you need it.

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Sources:

1. Inland Revenue Authority of Singapore (IRAS)
2. IRAS - Taxable and non-taxable income
3. IRAS - Tax Residence Status of a Company
4. IRAS - Overview of Corporate Income Tax
5. IRAS - Tax Exemption of Foreign-Sourced Income
6. IRAS - Applying For Tax Incentives
7. IRAS - Basic Corporate Tax Calculator
8. IRAS - S45 Withholding Tax Rate & Late Payment Penalty Calculator
9. IRAS - New Company Start-Up Kit
10. The Straits Times - MOF rejects claim of Singapore as tax haven
11. IRAS - Preparing a Tax Computation

All sources checked on 9 December 2020