Corporate Tax

Corporate Tax Compliance Services in Singapore

In 2003, Singapore introduced a Single Tier system for filing all tax requirements. In the single-tier corporate tax system, no form of double taxation is levied on the company’s services. The tax rate is levied on the profits of companies registered or incorporated in Singapore. The current corporate rate in Singapore is 17% charged on the revenues earned by the business. However, small and medium-sized enterprises (SMEs) can enjoy a lower tax rate of 8.5% on the first USD 300,000 for chargeable income. The tax rate is the lowest in the world, making it an attractive location for business. The tax is only levied once on the revenue or profits earned. No form of capital gains tax is charged on the properties in Singapore. Dividends that are offered to shareholders are exempt from any form of tax. Singapore’s corporate Tax system has abolished the system of double taxation.

The companies in Singapore must file their tax returns annually with the Inland Revenue Authority of Singapore (IRAS), and failure to comply with the tax regulation may incur penalties and fines.

Importance

Companies must file corporate taxes in every jurisdiction with the respective revenue authorities to understand Singapore’s tax intricacies. It includes a role in generating revenue for the government. It offers a favourable tax environment and other incentives, so non-compliance with filing taxes may result in penalties and fines. Moreover, companies filing taxes would get additional incentives in tax schemes. The tax is essential in Singapore crucial for several reasons:

• It ensures that the company is complying with the tax regulations.
• Filing tax returns annually ensures the company’s smooth and seamless integration.
• The Singapore Government uses the revenue to fund various public services and initiatives, such as education, healthcare, infrastructure and social welfare.
• The tax allows a single tier system of taxation to avoid double taxation. Singapore is an attractive destination for foreign investments. The low tax rate, incentives, and benefits make it a competitive regional business hub.
• Complying with the Accounting Corporate Regulatory Authority (ACRA)^[1] and Inland Revenue Authority of Singapore (IRAS) rules is essential for businesses operating in Singapore.
• It helps to ensure that businesses operate legally and maintain financial records of the tax filed. Besides ACRA and IRAS, it must comply with the Singapore Companies Act.
• Singapore offers several tax benefits and incentives to encourage business; businesses can receive additional taxation benefits. Tax exemption for the newly incorporated companies in their first three consecutive assessment years.

Regulatory Authority

• The regulatory authorities in Singapore for Corporate Tax are the Inland Revenue Authority of Singapore (IRAS) and the Accounting and Corporate Regulatory Authority (ACRA).
• IRAS is responsible for setting up tax systems for different entities in Singapore.
• IRAS carries out all tax processes within Singapore’s jurisdiction, including the collection of taxes, and enforces tax policies, including goods and services tax (GST).
• On the other hand, the Accounting and Corporate Regulatory Authority (ACRA) maintains a national business registry and ensures regulatory requirements such as registration, governance and financial reporting. The Singapore Companies Act provides the minimum tax requirement for all Singapore businesses. A newly incorporated business in Singapore is eligible for tax exemptions in Singapore.

Eligibility Criteria

• Any business registered in Singapore is considered a tax resident and must pay minimum corporate tax.
• All businesses that are registered in Singapore are required to pay 17% corporate tax in Singapore.
• A business in Singapore has to be considered a tax resident in Singapore to levy tax on its worldwide income. A tax resident in Singapore is a company that carries out business in Singapore if its control and management are exercised in Singapore.
• A non-resident company that carries out business through a branch office is considered a tax resident in Singapore.
• If the services are provided in Singapore to an international company, it is considered a resident in Singapore to file tax to the IRAS.
•  If the services are provided outside by a foreign company, and the remuneration is received through a Singapore bank account, then for corporate tax treatment, the company is considered a tax resident of Singapore.
• If the services or remuneration is not received in Singapore, then no corporate tax can be levied on the company.

Types

General Corporate Tax

The general corporate tax in Singapore is 17%. This rate applies to all tax residents in Singapore on their worldwide income. The IRAS levies the tax on all entities which have their business registered in Singapore. However, there is no double taxation levied on the business’s revenues. Smaller businesses or start-ups can claim partial tax exemptions on their taxable income. It is important to note that each scheme’s eligibility criteria ensure tax savings on their taxable income to maximise their tax savings.

Personal Income Tax

In Singapore, Personal income Tax is levied on an individual who is a tax resident in the country. This tax would apply to investors and employees receiving a taxable salary. The amount of tax applicable to income below SGD 20,000 is 0%. Income, which is more than this amount, is charged accordingly as per the tax rates under the IRAS. Individuals must comply with Singapore’s income tax requirements to avoid penalties and legal consequences.

Goods and Services Tax

The Goods and Services Tax (GST) is a consumption tax charged on the supply of goods and services in Singapore. In Singapore, the tax is levied on the supply of goods and services set to 7%, which is added to the selling price of goods and services at the point of sale. Compliance with the GST requirements in Singapore is essential to avoid penalties and legal consequences.

 Property Tax

 In Singapore, property tax is levied on all residential, commercial, and industrial properties. Property tax falls within the Singapore Corporate Tax regime. Property tax levied on all residential properties ranges from 0% to 20%. Currently, the property tax rates are set at 10%. Capital gains tax from the property sale is exempted in Singapore. Various reliefs and exemptions are available to property owners in Singapore to reduce their property tax liabilities.

Withholding Tax

A withholding tax is imposed on non-residents in Singapore from income generated there. The tax is withheld by the payer of the income and remitted to the IRAS. The tax is only applicable and charged to companies or individuals. Suppose when a non-residential company receives money or carries out a business for a Singaporean company and generates some revenue, this source of income must be withheld. There are specific criteria for withholding tax:

• The income must generate from Singapore.
• The businesses must be carried out in Singapore.
• The company must be termed a non-resident to pay the withheld tax rate of 15%.
• A person is considered a non-resident in Singapore if he has stayed outside Singapore for more than 183 days.

Beneficial Owner/ beneficial control

 A beneficial owner includes an individual who has ultimate control of the organisation over a company or asset; then, it is essential to understand the meaning of control. If the non-resident shareholders majorly control a foreign company, it is considered a non-resident for taxation in Singapore. It is essential for transparency and accountability, particularly for anti-money laundering and counter-terrorism.

Bilateral and Multilateral Taxes

The Government of Singapore has entered various bilateral and multilateral treaties with countries to facilitate cross-border trade and investment and promote a stable and predictable business tax environment. It ensures there is no double taxation in the respective countries. Avoiding double taxation is one of the essential factors of this form of taxation.

Corporate Tax Process in Singapore

A company tax liability in Singapore must be classified as a tax resident in Singapore for the assessment year. A company must prepare tax computations based on its financial statement and file returns with the IRAS. For taxation, the year of assessment will be the previous year which is 12 months. For example, the tax has to be paid for 2023, and then the year of assessment will be 1 April 2021 to 31 March 2022.

• The company must verify whether any exemptions are applied under the Singapore Tax Regime.
• The company must carry out the corporate tax of 17% without exemptions.
• To calculate the tax for an entity, the number of taxable revenues must be less than the number of deductible costs. Costs incurred in providing the goods and services are categorised as deductible costs. The IRAS allows a deduction for a specific exemption.
• A company must incur deductible expenses when filing itstax.
• The company is allowed to claim a certain amount of allowances. These are mentioned as capital allowances.
• The tax returns have to be filed before the IRAS. The online and offline procedure sometimes varies.

Conclusion

Corporate tax in Singapore is designed to encourage investment, innovation and entrepreneurship with low tax rates. It provides various tax incentives, reliefs and a network of bilateral and multilateral tax treaties. Singapore provides a business-friendly environment for companies to thrive. Singapore’s corporate is transparent, and the Gov. continuously refines the tax policies.

Read our Article: A discourse on Corporate Tax Planning