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Singapore follows a territorial basis of taxation. In other words, companies and individuals are taxed mainly on Singapore sourced income. Foreign sourced income (branch profits, dividends, service income, etc.) will be taxed when it is remitted or deemed remitted into Singapore unless the income was already subjected to taxes in a jurisdiction with headline tax rates of at least 15%. Although the concept of locality of the source of income seems simple, in realty its application often can be complex and contentious. No universal rule can apply to every scenario. Whether profits arise in or are derived from Singapore depends on the nature of the profits and of the transactions which give rise to such profits. Singapore corporate tax rate is capped at 17%. By keeping corporate rates competitive, Singapore continues to attract a good share of foreign investment. Singapore follows a single-tier corporate tax system, where tax paid by a company on its profits is not imputed to the shareholders (i.e. dividends are tax free). Singapore personal tax rates start at 0% and are capped at 20% (above S$320,000) for residents and a flat rate of 15% for non-residents. As an example, if you are tax resident in Singapore and your personal income for the year was S$160,000, your income tax liability will be approximately S$15,5000. To increase the resilience of taxes as a source of government revenue, Goods and Services Tax (GST) was introduced in 1994. The current GST rate is 7%. The balanced mix of tax on consumption and income reduces the vulnerability of revenue intake to adverse changes in economic conditions and strengthens the resilience of Singapores fiscal position. Interest, royalties, rentals from movable properties, management and technical fees, and directors fees paid to non-residents (individuals or companies) are subject to withholding tax in Singapore.
For personal taxes, the tax year is the normal calendar year i.e. January 1 December 31. Deadline for filing personal tax return is April 15. For corporate taxes, a company is free to to decide on its financial year. Deadline for filing corporate tax return is November 30. Taxes are paid on a preceding year basis. Singapore has no capital gains tax. Capital loss expenses are correspondingly not allowed as deductions. Singapore has concluded more than 50 bilateral comprehensive tax treaties to help Singapore companies minimize their tax burden.
providing policy inputs, as well as the technical and administrative implications of each policy. IRAS also actively monitors developments in external economic and tax environment to identify areas for policy review and changes. It aims to foster a competitive tax environment that encourages enterprise and growth. The other non-revenue functions performed by IRAS include representing the government in tax treaty negotiations, providing advice on property valuation and drafting of tax legislation.
Singapore follows a progressive tax rate starting at 0% and ending at 20% above S$320,000. There is no capital gain or inheritance tax. Individuals are taxed only on the income earned in Singapore. The income earned by individuals while working overseas is not subject to taxation barring few exceptions. Tax rules differ based on the tax residency of the individual. Tax filing due date for individuals is April 15 of each year. Income tax is assessed based on a preceding year basis.
The rest of this guide explains personal income tax in more detail. If you are interested to learn about corporate taxation, refer to Singapore corporate tax guide. To calculate estimated Singapore taxes and to compare how they stack up against those in your home country, refer to our online tax calculator.
Different income tax rules apply in Singapore depending on the tax residency status of the individual.
a Singaporean; or a Singapore Permanent Resident and have established your permanent home in Singapore; or a foreigner who has stayed or worked in Singapore for 183 days or more in the tax year
Tax residents pay taxes on their chargeable income as per the tax rate table above. What is chargeable income? The chargeable income (i.e. income subject to taxation) for tax residents is determined as below:
Whereas
Total income means o gains or profits from carrying on any business, trade, profession or vocation either as a sole proprietor or partner in a partnership o gains or profits from any employment o dividends, interests, investment income o rents, royalties, premiums and other profits arising from properties o exclude qualified income earned overseas (more deails provided later in the guide). Expenses means o qualified employment related expenses o qualified rental related expenses are expenses Donations means o donations to qualified charitable organizations Personal Reliefs means o special personal reliefs such as eligible course fees, earned income relief, parent relief, etc.
Chargeable income is this adjusted income after deductions from the total income (as shown in the picture above).
Your employment income is exempt from tax if you are here on short-term employment for 60 days or less in a year. This exemption does not apply if you are a director of a company, a public entertainer or exercising a profession in Singapore. Professionals include foreign experts, foreign speakers, queens counsels, consultants, trainers, coaches etc. If you are in Singapore for 61-182 days in a year, you will be taxed on all income earned in Singapore. You may claim expenses and donations to save tax. However, you are not eligible to claim personal reliefs. Your employment income is taxed at 15% or the progressive resident rate (see rate table above), whichever gives rise to a higher tax amount. Director fees, consultant fees and all other incomes are taxed at 20%.
You need to pay the full amount of tax within 30 days of receiving your Notice of Assessment. This is regardless of whether you have informed tax authority about your objection. If your tax remains outstanding after 30 days, a penalty will be imposed.
It is received in Singapore through partnerships in Singapore. Your overseas employment is incidental to your Singapore employment. That is, as part of your work here, you need to travel overseas. You are employed outside Singapore on behalf of Government of Singapore.
You need to declare the qualified taxable overseas income under employment income and other income (whichever applicable) in your tax form.
Representative Offices (ROs) that are registered with International Enterprise Singapore. Companies that are incorporated outside Singapore such as Singapore branch office setups
According to Singapore income tax law, employees will be liable to Singapore tax on all income earned during the employment period in Singapore, irrespective of the fact that the income is not paid in Singapore and that the employer is a non-resident Singapore company. Taxable income includes salary, bonus, allowances, per diem allowance, housing allowance, transport allowance, meal allowance, and other benefits-in-kind. Note that taxable income also includes any allowances received from the local sponsoring company. The general taxation rules for non-residents and residents as outlined above will apply. In other words, o The employment income of non-residents who work in Singapore for 60 days or less in a calendar year is exempt from tax. o The income of non-residents who work in Singapore for 61-182 days in a calendar will be taxed at 15% or at the progressive resident rates, whichever gives rise to a higher tax amount.
Individuals who work in Singapore for 183 days or more in a calendar year will be considered as tax residents and their income will be taxed at the progressive resident rates. Employees who are not Singapore citizens and are employed by a non-resident employer must submit to the Inland Revenue Authority of Singapore (IRAS), a letter of guarantee from a local bank or an established limited company in Singapore to cover their tax liability for a given Year of Assessment (YA). In the absence of a letter of guarantee the IRAS will issue an advance assessment based on their estimate of the individuals income for the given tax year. The non-resident employer must comply with all Singapore tax clearance requirements by submitting a duly completed tax clearance form for all non-resident employees to the IRAS, at least one month prior to the employees cessation of employment or departure from Singapore. Note that all non-resident employees must pay all their taxes befor leaving Singapore.
The Area Representative Scheme; or Exemption under Avoidance of Double Taxation Agreement (DTAs).
Area Representative Scheme The Area Representative Scheme allows time apportionment of employment income, subject to qualifying conditions, for foreign employees who travel and work in Singapore during the course of their employment with a non-resident Singapore company. In other words, only that portion of the employment income that is attributable to the number of days spent in Singapore will be subject to Singapore tax. Note however that all benefits-in-kind provided in Singapore are fully taxable. To qualify for this scheme the employee must satisfy the following criteria:
The individual must be employed by a non-resident employer; The employee must be based in Singapore for geographical convenience; The employee is required to travel outside Singapore in the course of his/her duties; and The employees remuneration is paid by the foreign employer and not charged directly or indirectly to the accounts of any company in Singapore.
Exemption under Avoidance of Double Taxation Agreement (DTAs) If the foreign employee is a resident of a country with which Singapore has a Double Taxation Agreement that provides for exemption from Singapore income tax in respect of Dependent Personal Services rendered in Singapore, (s)he can apply for a tax exemption. For this
purpose, a completed Certificate of Residence that is duly certified by the tax authority of the foreign employees home country will have to be submitted to the IRAS.
Headline income tax rate in Singapore as in many other jurisdictions does not necessarily provide an accurate indication of effective corporate tax rate. The effective rate is normally lower than the headline tax rate due to applicable tax exemptions and tax incentives, depreciation rules, etc.
0% tax on S$100K taxable income The corporate income tax rate is 0% on the first S$100,000 taxable income for each of the first three tax filing years for a newly incorporated company that meets the following conditions: o be incorporated in Singapore o be tax resident in Singapore o has no more than 20 shareholders of which at least one is an individual shareholder holding at least 10% of shares. 8.5% tax on taxable income of upto S$300K All Singapore resident companies are eligible for partial tax exemption which effectively translates to about 8.5% tax rate on taxable income of upto S$300,000 per annum. The taxable income above S$300,000 will be charged at the normal headline corporate tax rate of 17%.
300,001 2,000,000 17% After First Three Years of Income Tax Filings Taxable Income (S$) Tax Rate 0 300,000 8.5% 300,001 2,000,000 17%
One-off Corporate Income Tax (CIT) Rebate or SME Cash Grant for YA 2011
According to the Singapore Budget 2011, every Singapore company will be eligible for either a corporate income tax rebate or a cash grant for YA 2011, depending on whichever amount is higher. Singapore companies can claim a one-time 20% corporate income tax rebate on corporate income tax payable for YA 2011, subject to a cap of S$10,000 or a one-time SME Cash grant of 5% of the companys revenue for YA 2011, subject to a cap of S$5,000. However, the cash grant can be availed only if the company has made CPF contributions for at least one employee in 2010.
Withholding tax
Singapore has implemented a withholding tax law (on certain types of income) to ensure the collection of tax payable to non-residents on income generated in Singapore. The tax withholding does not apply to Singapore resident companies or individuals. Under the law, when a payment of a specified nature is made to a non-resident company or individual, a percentage of the payment has to be withheld and paid to Income Tax Authorities. The amount withheld is called the withholding tax. For more details on withholding taxes, see Singapore withholding tax guide.
A Singapore resident company is eligible for income tax exemption scheme available for new start-up companies. A Singapore resident company can enjoy income tax exemption on foreign-sourced dividends, foreign branch profits, and foreign-sourced service income under section 13(8) of the Income Tax Act. A Singapore resident company is entitled to benefits conferred under the Avoidance of Double Taxation Agreements (DTA) that Singapore has concluded with treaty countries.
highest corporate tax rate) of the foreign jurisdiction from which the income is received is at least 15% and that the foreign income has been subjected to tax in the foreign country. 6. Airline or shipping profits derived by an enterprise of one country from the other country are entitled to either full or partial exemption. Where full exemption is provided for, this means that the air transport or shipping income will be taxed in the enterprises Country of Residence only. 7. Dividend income may be taxed in the recipients country of residence and that the country of source (i.e. the country in which the company paying the dividend is resident) has the right to tax the dividend income. Normally the country of source would grant full or partial tax exemption or impose a reduced dividend withholding tax rate. Since Singapore follows a one-tier corporate system it does not levy dividends withholding tax. Whether they are taxable in the treaty country would depend on the domestic tax laws of that country and what the treaty specifies. 8. Interest will be exempted or taxed at a reduced rate in the country in which the interest income arises (source country). In the Belgian and Netherlands tax treaties, residents of these countries deriving interest from Singapore are taxable at the rate of 15% and 10% respectively. In the Japanese treaty, if the interest arises from a loan that is made to an approved industrial undertaking, such interest is exempt from Singapore tax, otherwise a tax of 15% is chargeable. The treaty with Malaysia does not provide for any reduction of tax on interest. 9. Royalty income tax treatment varies from complete to partial exemption. 10. Professional services income is normally taxed in the country of residence of the individual performing the services. When the individual has a fixed base in Singapore (office or clinic) his income from the professional services will be taxed in the same manner as his business profits. Professional services cover physicians, lawyers, engineers, architects, dentists, accountants, etc. Some tax treaties (e.g. with Australia, Netherlands, Pakistan) provide tax exemption if the individual is present in Singapore for not more than 183 days in a tax year and where the services are performed for a resident of the other contracting country. 11. Income from employment will be taxed in Singapore if the employment is exercised in Singapore unless: a. the employee is not present in Singapore for more than 183 days in a tax year b. His employer is a resident of the contracting country c. His remuneration is not borne by a permanent establishment in Singapore of an enterprise of a contracting country. Singapores tax treaty with Malaysia, UK, Denmark, Norway, Federal Republic of Germany and Sweden requires an additional condition to be fulfilled the employees income must be subject to tax in the other contracting country. 12. The source of directors fees is in the country in which the company paying the fee is resident. The full domestic tax rate would apply as there is no exemption or reduced tax rate. 13. Government payments Any salary, wage, pension, or similar rewards for personal services paid by the government of a contracting country to persons performing services in Singapore on behalf of that government are exempt from tax in Singapore and will only be taxed in the contracting country. 14. Remuneration paid to visiting professors or teachers, by a contracting country, for teaching at a Singapore based educational institute is exempt from tax in Singapore.
15. Self-employed persons are liable to Singapore income tax on the full amount of their income which is earned in Singapore, net of any tax-deductible expenses which they might have incurred in order to earn that income. 16. The right to tax gains arising from the sale of immovable property and gains from sale of shares varies from DTAs signed with different countries.
Tax exemption
Double taxation can be avoided when foreign income is exempt from domestic tax. The exemption may be given on the entire or part of the foreign income. Tax exemption for foreign-sourced dividends, branch profits, and service income Sec 13(8) A Singapore tax resident company can enjoy tax exemption on its foreign-sourced dividends, foreign branch profits, and foreign-sourced service income that is remitted into Singapore if the following conditions are met:
The highest corporate tax rate (headline tax rate) of the foreign country from which the income was received is at least 15% and The foreign income had been subjected to tax in the foreign country from which they were received. The rate at which the foreign income was taxed can be different from the headline tax rate.
Furthermore, tax exemption will be granted to all foreign sourced income earned/accrued outside Singapore on or before 21 Jan 2009 to resident non-individuals and resident partners of partnerships in Singapore, and received in Singapore during the period from 22 Jan 2009 to 21 Jan 2010.
To enjoy the tax exemption on the specified foreign income, you need not submit documents (such as dividend vouchers, notices of assessment issued by the relevant foreign jurisdiction etc) with your income tax returns to substantiate that their specified foreign income qualifies for the exemption. Instead you only need to declare in the appropriate section of your income tax returns that your specified foreign income qualifies for the tax exemption and furnish the following particulars: 1. Nature and amount of income (i.e. foreign-sourced dividend, foreign branch profits or foreign-sourced service income) 2. Country from which the income is received 3. Headline tax rate of the country from which the income is received and 4. Amount of foreign tax paid/payable in the country from which the income is received. Tax exemptions for individuals Sec 13(7A) For tax resident individuals in Singapore, all foreign income received in Singapore will be exempt from tax if the Comptroller is satisfied that the tax exemption is beneficial to the individuals.
Relief by deduction
In this case, domestic tax is applied on the foreign income after deducting foreign tax suffered. Singapore does not allow a deduction of foreign income tax. However a deduction is given indirectly as under the remittance basis, Singapore would tax the amount of foreign income received (i.e. net of foreign tax) in Singapore.
1. borne directly or indirectly by a person resident in Singapore or a permanent establishment in Singapore or 2. deductible against any Singapore sourced income