Singapore is known as a top financial hub due to its organized tax and accounting systems. Businesses benefit from competitive tax rates and international agreements, while also complying with government policies and standards.

Corporate tax Singapore

Your company in Singapore will be taxed on income earned within Singapore, which includes:

- Profits from any trade or business
- Income from investments like interest and rental earnings
- Royalties, premiums, and other profits from property
- Other gains classified as income

Income earned outside Singapore and received in Singapore is generally taxable, unless specific exemptions apply under certain conditions.

Corporate Tax in Singapore: Simplified

Since January 1, 2003, Singapore has operated under a single-tier corporate income tax system. This means that the tax your company pays on its chargeable income is final, and dividends given to shareholders are not taxed further. Currently, Singapore maintains a flat corporate tax rate of 17%.

To uphold its reputation as a leading business destination and remain competitive, Singapore has kept its corporate tax rate steady at 17%.

Depending on your business’s eligibility for tax exemptions, your effective tax rate may be lower than the headline rate. You can also take advantage of industry-specific tax incentives and concessional tax rates available.

Furthermore, Singapore does not impose taxes on capital gains. This includes profits from selling fixed assets and gains from foreign exchange transactions on capital.

Income Tax Basis Period

In Singapore, corporate income tax is assessed based on the preceding year. This means the basis period for any Year of Assessment (YA) corresponds to the financial year ending (FYE) in the year just before the YA.

For instance, in 2024, you would file a corporate tax return for your company’s financial year that ended between January 1, 2023, and December 31, 2023. Your company's accounts should be prepared up to the FYE each year.

Income tax filing due date

Corporate tax filing for Singapore companies is due on November 30th. You need to submit a full set of documents to IRAS, including Form C/Form C-S, audited or unaudited accounts, and tax calculations.

Other taxes

When deciding to incorporate a business in Singapore, one of the most crucial considerations is the type of business structure you select.

Personal income tax

For effective management of employees and compliance in Singapore, it's crucial to understand the personal income tax rules.

From YA 2024 onwards, Singapore tax residents are taxed progressively from 0% to 24% based on their income. If a resident earns SG$20,000 or more annually, they must file a tax return. Those earning less than SG$20,000 annually are exempt from income tax.

Non-residents are taxed at a flat rate of 15% on employment income, or at resident rates if higher, including 24% on other income like directors’ fees.

If your company has five or more employees, joining the Auto-Inclusion Scheme (AIS) is mandatory. This involves submitting employees’ income details to IRAS, simplifying their tax filing process as they only need to verify and submit their tax returns.

Goods and services tax

GST, also known as value added tax (VAT) in other countries, applies a consumption tax to goods, services, and imports in Singapore. GST-registered businesses currently set it at 9%, adding it to the selling price.

Companies in Singapore aren't automatically registered for GST. You need to monitor your taxable turnover. Registration becomes mandatory if your turnover exceeds SG$1 million by the end of the year or if you expect it to exceed this amount in the next 12 months. Voluntary registration is also an option.

After registration, you must e-file your GST return quarterly to IRAS. Even if you have no tax to pay for a period, you must submit a ‘nil’ return. Late filing incurs penalties.

Withholding Tax

Withholding tax is important for non-resident companies in Singapore. A company is non-resident if its management is outside Singapore, including:

- Companies from outside Singapore operating within Singapore
- Singapore offices managed outside Singapore
- Singapore branches of foreign companies

Non-resident companies may face withholding tax on certain incomes like royalties, interest, or fees for technical services. The payer deducts this tax from payments and sends it to IRAS. This ensures that non-resident entities pay taxes on income earned in Singapore.

The withholding tax rate depends on the type of payment and can reduce the net income received by non-resident companies. Singapore has double tax treaties with many countries to avoid double taxation.

Double taxation agreements

As a company expanding internationally, you might worry about paying taxes twice—once in the host country and again in your home country on the same income. Singapore’s network of over 80 double taxation agreements (DTAs) can simplify your tax responsibilities.

What is a double taxation agreement (DTA)?

A DTA is a mutual agreement between two countries aimed at preventing the same income from being taxed twice under their respective national tax laws. Only individuals and entities considered residents under the DTA can benefit from its provisions, which define residency criteria for tax purposes.

Types of income included in double taxation agreements (DTAs)

Income types typically addressed in a DTA encompass:

- Income from real estate
- Shipping and transportation earnings
- Royalties
- Dividends
- Capital gains
- Interest
- Director's fees
- Employment compensation
- Professional fees

If you earn income from a treaty country, you can seek relief under the applicable tax treaty by submitting a Certificate of Residence to prove your Singapore tax residency.

Conversely, if you are a tax resident of a treaty country, you must furnish IRAS with a completed Certificate of Residence, certified by the tax authority of that treaty country.

Accounting standards in Singapore

Once you know your tax obligations, it’s crucial to ensure that your accounting practices follow Singapore’s rules.

In Singapore, accounting standards are called Singapore Financial Reporting Standards (SFRS), aligned with the International Financial Reporting Standards (IFRS). From 1 January 2003 onward, all companies must adhere to these standards.

The SFRS consists of various standards, labeled as Financial Reporting Standard (FRS) X, such as FRS 1. Each standard specifies areas such as the presentation of financial statements, revenue recognition, and inventory accounting. You can find the SFRS on the Institute of Singapore Chartered Accountants (ISCA) website.

SFRS for Small Entities

Eligible entities in Singapore can use the SFRS for Small Entities (SE) as an alternative set of financial reporting rules. It offers a simplified framework for small businesses starting from 1 January 2011.

The aim of SFRS for SE is to reduce the reporting burden for small entities while ensuring their financial statements remain clear, trustworthy, and comparable for investors and other users.

Your business may qualify for SFRS for SE if it:

• Is not accountable to the public
• Issues general-purpose financial statements for external users
• Qualifies as a small entity based on at least three of these criteria:
  1. Annual revenue is below SG$10 million
  2. Gross assets are below SG$10 million
  3. Has fewer than 50 employees

Entities meeting these criteria can use SFRS for SE until they exceed the size limits for two consecutive reporting periods. At that point, they must switch to the full SFRS.

Reach for A Trusted Solution

At Clooud Consulting, we provide a wide array of tax and accounting services to businesses in Singapore. Moreover, we customize our solutions to fit your requirements, whether you're a large multinational or a small startup. Our experienced teams use their global insights and expertise to assist you. This allows you to concentrate on your primary operations, knowing that we have everything else covered. Contact us by visiting our website or email to [email protected].