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Taxation – A brief overview
Taxation – A brief overview
In Singapore, income is assessed to tax on a preceding year basis. This means that the income earned by a company in a fiscal year will be taxed in the following tax year, referred to as the Year of Assessment. For example, income for the fiscal year ended in 2015 will be assessed in Year of Assessment 2016.
Companies are taxable on their corporate profits accruing in or derived from Singapore or received in Singapore from overseas. Effective from 1 July 2003, foreign-sourced dividend, branch profits and service fee income remitted to Singapore are exempt from tax in Singapore if tax has been paid in the foreign host location where the minimum headline tax is at least 15%.
Singapore-incorporated companies and Singapore branches of foreign corporations are taxed at the prevailing corporate tax rate of 17%.
The deadline for filing corporate tax returns is 30 November of each year.
Tax Exemption Scheme for New Start Up Companies
New companies (with individual shareholders) will enjoy full tax exemption on their first $100,000 of normal taxable income (excluding Singapore dividends). Exemption applies for each of their first three Years of Assessment from the date of incorporation.
Partial tax exemption Scheme
Companies which do not qualify for the tax exemption scheme for new startup companies will enjoy partial exemption on the first S$300,000 of their chargeable income based on the following exemption rates:
- 75% exemption for the first $10,000 of chargeable income; and
- 50% exemption for the next $290,000 of chargeable income.
Current year loss carryback for all businesses
All businesses (except investment holding companies) are allowed to carry back its current year unutilized capital allowances and trade losses to set off against taxable income in the immediate preceding year of assessment, subject to a maximum deduction of S$100,000.
Unutilized Capital Allowances/Losses/Donations in current Year of Assessment
All businesses (except investment holding companies) are allowed to carry forward their unutilized capital allowances, trade losses and approved donations for setoff against future taxable income provided that there is no substantial change (i.e. more than 50%) in their ultimate beneficial ownership composition.
For unutilized capital allowances, the claimant must be carrying on the same trade in the year in which the capital allowances arose and in the year it was utilized to setoff;
A group of Singapore companies may be considered as one single company for group relief purposes whereby the current year unutilized capital allowances, trade losses and approved donations of one company may be transferred and claimed as a deduction against the assessable income of the other company of the same group. In order to qualify for group relief, the transferor company and the claimant company must:
• Be Singapore incorporated companies;
• Belong to the same group of companies with a 75% shareholding threshold;
• Have the same accounting year end.
Concessionary tax rates
Concessionary tax rates or even full tax exemption are available to approved shipping companies and those engaged in qualifying business activities approved by the relevant authorities. Some of the significant concessionary tax rates are applicable to:
Type of qualifying activities/companies Tax rate (%)
International shipping companies Exempt
Offshore shipping companies Exempt
Regional headquarters 0 to 15
International headquarters 0 to 15
Development and expansion companies 0 to 5
Non-resident investors in certain investments Exempt
Global traders (Petroleum, commodities futures etc) 5 or 10
International freight and logistics operators Varies
Offshore investments and project Exempt
Fund managers Exempt
Financial sector companies 5 or 10
An individual is tax resident in Singapore if he is physically present or exercising employment in Singapore for at least 183 days in a calendar year. As an administrative concession, an individual who has been in Singapore for more than 183 days over two consecutive years will be treated as a tax resident even though the number of days he is in Singapore is less than 183 days in the first or second year.
A resident individual will only be taxed on all income earned in Singapore. Any foreign-sourced income that is received in Singapore will be exempted from tax. Interest income derived from standard savings, current and fixed deposits from approved financial institutions in Singapore are exempted from tax. Dividends by Singapore companies as well as those received from overseas are also exempted from tax.
A resident individual will be given personal relief and his chargeable income will be taxed at graduated rates from 0% to 22% from the Year of Assessment 2017 onwards.
Generally, a non-resident individual is a person who has been in Singapore for less than 183 days in a calendar year and will be taxed on all his employment income derived in Singapore at a flat rate of 15%. Director’s remuneration, consultancy and professional fees derived by a non-resident individual are liable to withholding tax rates of 22%.
Not-Ordinarily Resident (NOR) Scheme
Under the NOR scheme, an individual, who is a tax resident and is accorded the NOR status, can enjoy one or more of the following tax concessions provided that the qualifying criteria of each of the tax concessions are met:
a) Time apportionment of Singapore employment income to exclude his remuneration for business related travels outside Singapore;
b) Tax exemption of employer’s contribution to non-mandatory overseas pension fund or social security scheme.
Generally, withholding tax is required by a local payer in respect of the following payments to a non-resident.
Nature of Payments Rates
1) Interest, commission, fee or payments in connection with loans 15%
2) Rent or other payments for the use of movable property 15%
3) Professional fees to individuals 15%
4) Royalties or lump sum payments for the use of movable properties 10%
5) Payment for use of technical industrial commercial knowledge and information 10%
6) Technical assistance and service fee 17%
7) Management fees 17%
8) Director’s remuneration (wef Year of Assessment 2017) 20%
9) Time charter, voyage charter and bareboat charter fees 0% to 3%
10) REIT distributions to non-residents (other than individuals) 10%
Concessionary withholding tax rates may be available if the recipient is a tax resident of a country which has signed a Double Tax Agreement with Singapore.
GOODS AND SERVICES TAX (GST)
GST is a tax on the supply of goods and services made in Singapore by a taxable person in the course or furtherance of any business carried on by him; and on the importation of goods into Singapore.
In general, the supply of goods or the provision of services performed in Singapore are taxable and has to be charged by a GST registered person. The only exceptions are financial services or the sale or lease of residential properties which are exempt supplies. Export of goods or services out of Singapore by a GST registered trader will be zero-rated. A business is required to register for GST if its annual taxable turnover (excluding exempt supplies) had exceeded or is expected to exceed S$1 million within a 12-month period.
Presently, GST is charged and accounted at a rate of 7%. GST returns must be filed on a quarterly basis and within one month after the end of the financial quarter.