Taxes in Singapore: what taxes are paid by a Singapore company

In this article, we will determine what taxes exist in Singapore, in what cases they are payable, and what responsibility is provided for their evasion.

The tax system in Singapore is based on the territorial principle, according to which taxes are paid on profits arising/received in the territory of Singapore.

Income tax

In Singapore, income tax is 17% - this is the standard tax rate when the company's profit exceeds 300,000 USD. But the state provides companies with tax benefits that are applied when the company's profit is up to 300,000 USD. Singapore also has different tax credits for business expenditures such as rent, accounting fees, employee salaries, etc.

The state provides tax incentives for start-up companies that have just begun to operate, so they actively use the tax breaks provided for by the state. For example, starting from 2020, newly created companies in Singapore will receive a 75% exemption from the first 100,000 USD in the first three years of operation. Further, the company receives a 50% tax exemption in the amount of up to 100,000 USD. Newly registered companies are also entitled to a further partial tax exemption, which in fact means about 8.5% of the tax rate on taxable income of up to $100,000 per year.

Also, from January 1, 2003, Singapore adopted a single-level corporate income tax system, which means there is no double taxation for interested parties. The tax paid by the company on its taxable income is the final tax, and all dividends paid by the company to its shareholders are exempt from further taxation.

There is no capital gains tax in Singapore. Examples of capital gains include profits from the sale of fixed assets, profits from foreign exchange transactions with capital, etc.

Good and Services Tax - GST

The most complicated tax is the good and services tax (GST). In other countries, GST is known as value-added tax or VAT. GST is a widespread consumption tax levied on imports of goods (collected by Singapore Customs - a government agency under the Ministry of Finance), as well as virtually all deliveries of goods and services in Singapore. Typically, delivery is either taxed or exempted. A taxable offer is a proposal with a standard or zero ratings. Only a standard source is subject to GST at a rate of 7%. Exceptions to the payment of GST apply to the provision of most financial services, the sale, and rental of residential real estate, as well as the import and local supply of investment precious metals. Goods that are exported and international services are rated zero.

Profits tax

Should a company withhold taxes on employee salaries? Or should employees pay taxes themselves?

Income tax for individuals is calculated on a progressive scale at a rate from 0% to 22%. In addition to salaries and bonuses, there are also additional payments and benefits for employees, such as housing and stock options, which will also form part of the taxable income from employment. Foreign income earned outside Singapore, local dividends and bank interest are not taxed in Singapore.

Income is accrued based on the previous year ended December 31. Employees must file an income tax return by April 15 of the following year.

The tax will depend on who the individual lives with and how many people he has in tow. Companies in Singapore have the right to declare the income of their employees, but this is not an obligation, but a right, at the discretion of the company.

All Singapore companies are required to keep records, and copies must be kept in the Singapore office. The company is required to file financial statements and a tax return at the end of the financial year with the Singapore Internal Revenue Office. Depending on the number of employees and the amount of capital, a company may be required to submit audited statements. If there are less than 50 employees, in most cases an audit is not required. The financial report is submitted via the Internet once a year. For companies with vigorous activity, we recommend conducting bookkeeping monthly.

Inland Revenue Authority of Singapore (IRAS) is the government’s main tax administrator (tax authority). IRAS collects taxes, which account for about 70% of government operating income, which supports the government’s economic and social programs to achieve quality growth and inclusive society. IRAS also represents the government in tax negotiations, drafts tax legislation and advises the government on property valuation.

IRAS checks tax returns and imposes fines when there are errors, omissions or inconsistencies. IRAS takes into account individual circumstances when there is no evidence of any intention to evade taxes. Liability may be as follows: a fine of up to 200% of the amount unpaid for tax; a fine of up to 5,000 USD and/or imprisonment for a term of up to three years.

In Singapore, there are different types of tax crimes for which criminal liability is provided. Depending on the type and severity of the crime, a sanction is determined. Sanctions include fines and/or imprisonment depending on the nature of the crime. In cases where an error/omission /inconsistency in the tax return was made with the intention of evading payment of taxes, the taxpayer may, in accordance with the Law on Income Tax, face up to 400% of the fine on the amount of tax; a fine of up to 50,000 USD and/or up to five years of imprisonment.

It can be concluded that Singapore is famous for its reputational capacity for business since the system is stable, clear and affordable in its implementation for both small and large businesses.