Singapore's low taxation regime is one of the main reasons why entrepreneurs from all over the world choose to base themselves in this Asian country.
The local government has implemented a series of tax-related incentives with the objective of promoting business growth in the island state. Below you will find an overview of Singapore's taxation system.
Quick facts about the Singaporean taxation system
- In recent years, the tax system in Singapore has been modified so that it now generates a large percentage of revenues from indirect taxes. Therefore, investors and entrepreneurs can expect to benefit from low taxes on corporate profits and personal income.
- Taxes must be paid to the Inland Revenue Authority of Singapore, a regulatory body that belongs to the Ministry of Finance.
- Income earned abroad (whether it is personal or corporate) is not subject to taxation in Singapore.
- Tax status depends on whether an individual is a resident of Singapore or not. Anyone who stays in the country for 183 days during a tax year is considered a resident for tax purposes.
- There is no inheritance or capital gains tax in Singapore. Dividends paid out to shareholders aren't taxed either.
- Double taxation treaties exist with most European countries.
- The deadline for tax returns is 15 April. Forms are sent out to taxpayers during February and March, and tax returns can be submitted online too. Tax bills (called Notice of Assessment) are sent in September, and full payment is required within 30 days of receipt.
As of 2013, the headline corporate tax rate in Singapore is set at 17 per cent. However, several incentives and exemptions apply. The majority of newly registered companies benefit from a zero per cent tax rate on the first S$100,000 for up to three years following incorporation. Moreover, tax reliefs are available on income of up to S$300,000, which is taxed at 8.5 per cent. The headline tax rate of 17 per cent applies to income above S$300,000.
Businesses whose turnover over the last 12 months has exceeded S$1 million must register to pay Goods and Services Tax (GST) within 30 days of reaching the S$1 million threshold. The current flat rate applicable to Goods and Services Tax is 7 per cent. Financial services and revenues generated from residential land are exempt from GST.
Personal income is taxed on a scale that ranges from o to 20 per cent. The annual tax exemption allowance is set at S$22,000. Tax rates on annual income that exceeds S$320,000 are capped at 20 per cent.
Income between S$22,000 and S$30,000 is taxed at 2 per cent.
The rates then gradually increase as follows:
- 3.5 per cent for income between S$30,000 and S$40,000
- 7 per cent for income between S$40,000 and S$80,000
- 11.5 per cent for income between S$80,000 and S$120,000
- 15 per cent for income between S$120,000 and S$160,000
- 17 per cent for income between S$160,000 and S$200,000
- 18 per cent for income between S$200,000 and S$320,000