Singapore is a “First-Choice” jurisdiction for Holding Companies and International Business and is committed to further increase fiscal and business advantages in order to attract foreign companies to relocate to Singapore, or to restructure their business through Singapore.
A large number of double taxation agreements provide legal certainty and a number of tax advantages, for example the DTA between Singapore and Russia.
Singapore has emerged to the World’s third largest financial centre. It offers a superb business infrastructure, an excellent advantageous tax system, a large number of double taxation agreements, and a very good reach to Asian markets.
Singapore Taxes in Brief
In Singapore, taxes are levied on income of companies, individuals and property. In addition, taxes are levied on use of property and consumption which are known as property tax and goods and services tax respectively. However, there is no capital gains tax.
Taxation of Company Profits
Companies in Singapore are subject to tax on income accruing in or derived from Singapore and foreign income received in Singapore from outside Singapore.
Foreign sourced dividends, foreign branch profits and foreign-sourced service income received in Singapore by a Singapore resident company is exempt from income tax if the following conditions are met:
- the income is subject to some form of income tax in the foreign country,
- the income is remitted from a country with a headline tax rate of not less than 15%; and
- the Comptroller of Income Tax is satisfied that the tax exemption would be beneficial to the Singapore resident company.
Under the group relief system, group companies are allowed to transfer current year’s tax losses and current year’s unutilised capital allowances (but cannot transfer investment allowances and foreign losses) to another company in the same group. A group consists of a Singapore incorporated parent company and all its Singapore incorporated subsidiaries. Two Singapore incorporated companies could be members of the same group if one is 75% owned by the other or both are 75% owned by another Singapore incorporated company. The group companies must have the same accounting period to qualify for the relief.
Corporate Income Tax Rates, Exemptions and Incentives: The corporate tax rate from the YA 2011 is 17%.
Companies (resident and non-resident) are subject to the corporate tax rate after partial tax exemption of up to $152,500 on their normal chargeable income up to $300,000 as follows:
- Up to the first $10,000 of such income, 75% of the income or an amount to $7,500 will be exempt from tax,
- Up to the next $290,000 of such income, 50% of the income or an amount up to $145,000 will be exempt from tax.
The exemption scheme does not apply to:
- income that is subject to tax at concessionary tax rates; and
- income earned by a non-resident company that is subject to a final withholding tax.
Incentive for New Companies
To encourage entrepreneurs to start up new companies to pursue their business ideas, qualifying new start-up companies are granted tax exemption of up to SGD 200.000 on the first SGD 300.000 of their normal chargeable income for each of their first three consecutive years of assessment as follows:
- 100% tax exemption for the first SGD 100.000 chargeable income
- 50% tax exemption for the next SGD 200.000 chargeable income.
Result: Unless a company’s profit do not exceed SGD 300.000, the effective tax rate will be NIL for the first SGD 100.000 profit, and 8,5 % for the profit SGD 100.001 to 300.000. This incentive is limited to the first three years of business.
The conditions to qualify for the start-up exemption are that the company must be a Singapore incorporated resident company with no more than 20 shareholders and of which at least one is an individual shareholder beneficially and directly holding at least 10% of the total number of issued ordinary shares.
Withholding Tax
Payments of the following nature are subject to withholding tax:
- interest, commission or fee in connection with any loan or indebtedness,
- royalty or other payments in one lump sum or otherwise for the use of, or the right to use, any movable property,
- fee for the use of or the right to use scientific, technical, industrial or commercial knowledge or information or for the rendering of assistance or service in connection with the application or use of such knowledge or information,
- fee for the management or assistance in the engagement of any trade, business or profession,
- rent or the payment for the use of any movable property,
- remuneration paid to a non-resident director,
- fee paid to a non-resident professional (other than employee) for services rendered in Singapore,
- proceeds from the sale of real property by a non-resident property trader,
- fee paid to a non-resident public entertainer or athlete.
No withholding tax is required for royalty payments made to a non-resident for:
- shrink-wrap software,
- downloadable software for end user,
- site license,
- software bundled with computer hardware.
Legal Forms of Companies
Private Company limited by shares: The majority of companies in Singapore are private companies limited by shares. The name suffix is “Pte Ltd” or “Private Limited”. A private company may have max. 50 shareholders.
Exempt Private Company (EPC):
An Exempt Private Company (EPC) is a company with less than 20 individual shareholders and with no corporate shareholder. An EPC does not need it accounts to be audited if revenue is less than S$5million for the financial year.
Public Company limited by guarantee:
A public company limited by guarantee is one which carries out non-profit making activities that have some basis of national or public interest, such as for promoting art, charity etc. There is no share capital.
Public Company limited by shares:
A public company limited by shares is one where the number of shareholders can be more than 50. The company may raise capital by offering shares and debentures to the public. A public company must register a prospectus with the Monetary Authority of Singapore before making any public offer of shares and debentures.
Company Law: Company Act Chapter 50, as revised as per 31st October 2006.
Minimum capital requirement: Minimum paid capital is SGD 1,00. There is no concept of “Authorized Capital” for Singapore companies.
Restrictions: Singapore companies may not offer financial services, insurance services or other businesses that require a license, unless a respective permission is given.
Taxation: The general corporate tax rate in Singapore is 17 %.
The first SGD 100.000 of profit is tax-exempted. The profit from SGD 100.001 to 300.000 is 50 % tax exempted.
Double Taxation Agreements: Singapore has signed Double Taxation Agreements with more than 60 states.
Annual tax filing: Statutory.
Annual Audit: Statutory. However, there is an exemption:
Companies meeting the below conditions automatically qualify as “Exempt Private Company”(EPC) and do only have to submit a declaration of solvency:
- the total number of shareholders does not exceed 20, and
- all shareholders are individuals, and
- the annual turnover does not exceed SGD 5.000.000. or
- the annual profit does not exceed GSD 2.500.00, or
- the company is dormant.
EPCs still have to maintain bookkeeping records and have to file for tax.
Annual License Fees: Yes.
Registered Company address: Registered company address must be in Singapore.
Company secretary: At least one natural person who is resident of Singapore and meets the legal requirements must be appointed as company secretary. In case that a director is also shareholder of a company, he cannot act as company secretary.
Directors: A Singapore company must have at least one director. Corporate directors are not permitted. The directors do not need to be Singapore citizens. At least one of the directors must reside in Singapore. A shareholder may also be director of the same company.
Shareholders: Minimum one, natural or legal person possible. Max. 50. Shareholders may also be director of a company.
Confidentiality: The records of the Registrar are public. Confidentiality can be achieved through the appointment of trustees.
Disclosure of the ultimate beneficial owner: Confidentiality can be achieved through the appointment of trustees. However, ultimate beneficial owners must be proven the basis of documents for the opening of bank accounts.
Directors publicly known: Yes, the records of the Registrar are public. Anonymity can be achieved through the appointment of trustee director.
Shareholders publicly known: Yes, the records of the Registrar are public. Anonymity can be achieved through the appointment of trustee shareholder.
Bearer Shares: No.