Scaling Sneaker Success - How Novelship uses Wise to pay overseas suppliers
Discover how Novelship leverages Wise Business to pay international suppliers with low costs and the mid-market rate: Explore Novelship's growth story.
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.
Here’s what we’ll cover:
We’ll also introduce Wise Business as a smart way for companies working across borders to cut costs on currency conversion, and give their profits a boost.
Let’s dive right in.
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: |
---|
|
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.
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:
Income which is not usually taxed in Singapore includes:
Taxable income may be from business activities in Singapore or elsewhere in the world.
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.
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.
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.
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.
If your business is involved in cross border trade, you’ll need smart ways to manage your money across currencies. That’s where Wise Business can help.
Wise offers an online multi-currency account with great business friendly perks like integration with Xero accounting software and batch payment facilities to sort out payroll or supplier invoices quicker.
You can send, hold and receive dozens of different currencies, and get currency conversion at the mid-market exchange rate with no markups. You’ll only ever pay a low transparent charge which works out up to 19x cheaper than an alternative like PayPal. That means it’s cheaper and easier to pay suppliers based overseas, and receive payments from customers based abroad. See if you can build your business with Transferwise, today.
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.
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
Since 2010, there has been a partial tax exemption for all companies - subject to meeting eligibility criteria. From YA2020 this offers the following:⁴
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
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
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
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.
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
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.
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.
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.
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
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.
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.
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
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.
Getting your taxes right the first time is one way to avoid unexpected bills down the line. You can also cut the costs of doing business across borders with help from Wise Business. Get mid-market rate currency conversion for low transparent fees, and receive fee free payments in a range of currencies, making it easier than ever to grow your company internationally.
Sources:
All sources checked on 9 December 2020
*Please see terms of use and product availability for your region or visit Wise fees and pricing for the most up to date pricing and fee information.
This publication is provided for general information purposes and does not constitute legal, tax or other professional advice from Wise Payments Limited or its subsidiaries and its affiliates, and it is not intended as a substitute for obtaining advice from a financial advisor or any other professional.
We make no representations, warranties or guarantees, whether expressed or implied, that the content in the publication is accurate, complete or up to date.
Discover how Novelship leverages Wise Business to pay international suppliers with low costs and the mid-market rate: Explore Novelship's growth story.
Discover how Slasify leverages Wise Business for seamless international payroll payouts, and learn how they manage global HR and payroll efficiently.
Read from our review about the multi-currency features of UOB Global Currency account for businesses and how it compares against other accounts
Wondering what’s new in digital banking in Singapore? We explored new MAS digital banking licensed banks and alternative virtual providers.
Small business owner or ecommerce seller wondering how to find a supplier in China? Read more from our guide how to find vendors in China
Making a choice between Stripe vs PayPal? We reviewed what both platforms offer for Singapore ecommerce businesses.