There are many reasons why investors turn to doing business in Singapore. A key motivation is the ease of setting up and running a business, and another core deciding factor is Singapore’s tax system. Singapore’s tax system is renowned for its attractive corporate and personal income tax rates, tax relief measures, absence of capital gains tax, single-tier tax system, and extensive network of double taxation treaties.
Individuals, including corporations, partnerships, trustees, and groups, carrying on any trade, profession, or business in Singapore are subject to tax on all profits arising in or derived from Singapore (excluding profits from the sale of capital assets) and certain foreign-sourced income from such trade, profession, or business. This article will provide an overview of Singapore’s tax system and tax rates.
Table of Contents
Current Tax Rates in Singapore
Corporate Income Tax Rates
| Income | Tax Rate |
| Corporate profits below S$300,000 | Effective tax rate of 8.5% |
| Corporate profits above S$300,000 | 17% |
| Corporate capital gains accrued | 0% |
| Shareholder dividend distributions | 0% |
| Foreign-sourced income not remitted to Singapore | 0% |
| Foreign-sourced income remitted to Singapore | 0 – 17% depending on the situation |
Personal Income Tax Rates
| Income | Tax Rate |
| < S$20,000 | 0% |
| S$20,000 – S$30,000 | 2% |
| S$30,000 – S$40,000 | 3.5% |
| S$40,000 – S$80,000 | 7% |
| S$80,000 – S$120,000 | 11.5% |
| S$120,000 – S$160,000 | 15% |
| S$160,000 – S$200,000 | 18% |
| S$200,000 – S$240,000 | 19% |
| S$240,000 – S$280,000 | 19.5% |
| S$280,000 – S$320,000 | 20% |
| S$320,000 – S$500,000 | 22% |
| S$500,000 – S$1,000,000 | 23% |
| > S$1,000,000 | 24% |
| Capital Gains Tax | 0% |
| Tax rate on dividends received from a Singapore company | 0% |
Singapore’s Income Tax System: Key Points Explained
- Singapore follows a territorial basis of taxation. In other words, companies and individuals are primarily taxed on income sourced from Singapore. Foreign-sourced income (branch profits, dividends, service income, etc.) will be taxed when remitted or deemed remitted into Singapore, unless the income was already taxed in a jurisdiction with a headline tax rate of at least 15%. While the concept of income source seems simple, its actual handling is often complex and contentious. There is no universal rule that can be applied to every situation. Whether profits arise in or are derived from Singapore depends on the nature of the profits and the transactions that generate them.
- Singapore’s corporate income tax rate is capped at 17%. With its competitive corporate tax rate, Singapore continues to attract significant foreign investment. Singapore adopts a single-tier corporate tax system, where the tax paid by a company on its profits is not imputed to the shareholders (i.e., dividends are tax-free).
- Singapore’s personal income tax rates start from 0% and are capped at 24% for residents (for income above S$1 million), with a flat rate between 15% and 24% for non-residents.
- To enhance the resilience of taxation as a source of government revenue, the Goods and Services Tax (GST) was introduced in 1994. The current GST rate is 8%. The balanced mix of GST and income tax reduces the impact of adverse changes in economic conditions on revenue volatility and enhances the resilience of Singapore’s fiscal structure.
- Interest, royalties, rent for movable property, management and technical fees, and director’s fees paid to non-residents (individuals or companies) are subject to withholding tax in Singapore.
- For personal income tax, the tax year is the calendar year, i.e., January 1 to December 31. The deadline for filing personal tax returns is April 15/18. For corporate tax, a company is free to decide its financial year. The deadline for filing corporate tax returns is November 30. Taxes are paid on a preceding year basis.
- Singapore does not impose capital gains tax. Correspondingly, capital loss expenses are not allowed as deductions.
- Singapore has signed more than 50 comprehensive bilateral tax treaties to help Singaporean companies minimize their tax burden.
Types of Taxes in Singapore
- Income Tax – Levied on the income of individuals and companies.
- Property Tax – Levied on property owners based on the expected rental value of the property.
- Estate Duty – Abolished as of February 15, 2008.
- Motor Vehicle Taxes – Taxes other than import duties levied on motor vehicles. Motor vehicle taxes are imposed to curb car ownership and road congestion.
- Customs and Excise Duties – Singapore is a free port with relatively few excise and import duties. Excise duties are mainly levied on tobacco, petroleum products, and alcohol. Additionally, very few products are subject to import duties. Duties are primarily on motor vehicles, tobacco, alcohol, and petroleum products.
- Goods and Services Tax (GST) is also known as consumption tax. The tax is paid when money is spent on goods or services, including imports. This indirect tax is also known as Value Added Tax (VAT) in many other countries.
- Betting Taxes are duties levied on private lotteries, betting, and sweepstakes.
- Stamp Duty is levied on commercial and legal documents related to stocks and shares, as well as immovable property.
- Others – The two main types are the Foreign Worker Levy and the Airport Passenger Service Charge. The Foreign Worker Levy is imposed to regulate the employment of foreign workers in Singapore.
Singapore’s Tax Administration Authority
Singapore’s Income Tax Act is the governing statute for corporate and personal tax matters.
The Inland Revenue Authority of Singapore (IRAS) was established in 1960, previously known as the Inland Revenue Department. It consolidated all major tax agencies into a single body, making the administrative and tax processes more streamlined and better managed. IRAS has also emerged as an efficient tax administrator and a service-friendly tax collector.
IRAS is responsible for collecting income tax, property tax, Goods and Services Tax (GST), estate duty (abolished since February 15, 2008), betting taxes, and stamp duties. As the primary tax administration agency for the Ministry of Finance, IRAS plays a role in the formulation of tax policy by providing policy input, as well as the technical and administrative implications of each policy. IRAS also actively monitors developments in the external economic and tax environment to identify areas for policy review and change. It aims to foster a competitive tax environment that encourages enterprise and growth. Other non-revenue functions performed by IRAS include representing the government in tax treaty negotiations, providing property valuation advice, and drafting tax legislation.
A Brief History of Taxation in Singapore
Early Beginnings
Income tax was a subject of controversy before World War I and was briefly introduced during World War I and World War II to increase war revenue. However, the tax was unpopular and faced opposition from many, so it was never put on the agenda.
The end of World War II highlighted the need for new infrastructure and new sources of revenue, providing the impetus for the reintroduction of income tax.
In 1947, under the British colonial government, Singapore introduced income tax. The Income Tax Act was implemented in 1948. The act was based on the Model Colonial Territories (Income Tax) Ordinance of 1922, which was developed for British colonies at the time. As a result, Singapore’s tax laws share a common historical origin with those of Malaysia, Australia, New Zealand, and South Africa.
The 1960s
After gaining independence in 1965, Singapore pursued a policy of rapid industrialization and building an export-oriented industrial base to stimulate growth and employment. Consequently, in the 1960s, tax incentives encouraged labor-intensive industries. The Economic Expansion Incentives Act was introduced in 1967, offering companies that managed to increase exports up to 90% tax exemption on the increased export income. Interest on foreign loans for Singaporean industrial companies was also tax-exempt.
The 1970s
In the 1970s, the growth of the service sector was high on the government’s agenda. Tax policy played a role in the financial sector, and from 1973, interest on Asian dollar bonds was exempted from tax. The shipping industry also received a significant boost, with tax exemption granted for the operating and chartering income of Singaporean vessels. Furthermore, tax measures were introduced to support urban redevelopment. Various property taxes were also gradually abolished. Tax policy in the 1970s was also influenced by social needs. Central Provident Fund (CPF) contributions became tax-deductible, along with several other tax relief measures.
The 1980s
As Singapore became more developed, it became a more expensive place to do business in the 1980s. Measures to reform the economy were introduced to make Singapore more competitive. Changes to government policies, incentives, and taxes began to be discussed. The late 1980s marked a significant shift towards lowering corporate and personal taxes. In 1987, the corporate income tax rate was reduced from 40% to 33%.
The 1990s
This period saw significant changes in tax policy. This was reflected in a move towards lower direct taxes, with a greater emphasis on indirect taxes. The trend towards indirect taxation led to the introduction of the Goods and Services Tax (GST) in 1994. It is a tax on domestic consumption, applicable to all goods and services supplied in Singapore, except for financial services and residential properties. It was during this period that the trend of lowering corporate and personal income tax rates accelerated.
After the 21st Century
This marked the beginning of a phase of innovation and entrepreneurship. The government took many measures to attract foreign talent and investment, and tax rates were further reduced. Currently, the corporate income tax rate is capped at 17%, and the personal income tax rate is capped at 24%. Group relief and the single-tier corporate tax system were introduced during this period.
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