An Overview of the Singapore Tax System
Explore the ins and outs of Singapore’s tax system for businesses with our comprehensive guide! Learn about the general principles of taxation, tax periods and rates, as well as valuable tax deductions available for both new and established companies. Don’t miss out on optimizing your company’s tax strategy.
Corporate Income Tax
Singapore has a territorial principle of taxation. This means that companies registered in Singapore are taxed only on net income arising in Singapore or transferred to Singapore, as well as on certain types of foreign income. In general, income generated outside Singapore and not transferred to Singapore is not subject to income tax.
General Principle of Taxation
Such taxable income includes:
- Income or profit from any trade or business;
- Investment income such as interest and rent;
- Royalties, bonuses and any other income from property;
- Income transferred to Singapore from foreign sources is taxed in accordance with the applicable Foreign Income Benefit. Part of foreign income transferred to Singapore can be completely exempt from income tax, for example:
- Income from shipping (defined in clauses 13A and 13A of Singapore Income Tax);
- Dividends from foreign sources, income of a foreign branch of the company and income from services, if such a company is dormant in the country of residence;
- Income from the placement and sale of shares.
Tax Periods and Rates
Income tax is charged on income earned by a company during the reporting period ending in the year preceding the year of filing the tax return. The tax year (Year of Assessment) will always be the next year after the close of financial statements. The company’s financial year is usually set at 12 months.
- Example 1: The financial year of a company is set from June 1, 2018 to May 31, 2019. Tax returns are due November 30, 2020.
- Example 2: The financial year of a company is set from January 1, 2019 to December 31, 2019. Tax returns are due November 30, 2020.
The tax rate (corporate income tax) is 17%. This is the maximum rate at which the net income, after deduction all costs and expenses, the Singapore company will be charged. In practice, the effective rate is almost always lower, mainly due to 3 factors:
- Tax deductions for new companies
- Tax deductions for all other companies
- Tax deductions (rebates) for a specific year of taxation.
Below are tax rates in accordance with these three points
Tax Deductions for New Companies
Singapore tax regime for all newly registered companies automatically provides a significant reduction in tax rates. Currently, the maximum exemption is 75% of the net taxable income. The table below shows tax reduction rates and the effective tax rate depending on the income brackets for new companies (registered within three years from the applicable tax season):
| Amount of taxable income, Singapore dollars |
Automatic tax deduction, % |
Effective tax rate, % |
|---|---|---|
| First 100,000 (fr 1 till 100,000) |
75% |
4.25% |
| Next 100,000 (fr 100,001 till 200,000) |
50% |
8.5% |
| Above 200,000 (from 200,001 and above) |
0 |
17% |
Tax Deductions for All Other Companies
Any Singapore company which was registered more than 3 years ago will receive a certain automatic tax deduction depending on the volume of taxable income:
| Amount of taxable income, Singapore dollars |
Automatic tax deduction, % |
Effective tax rate, % |
|---|---|---|
| First 10,000 (fr 1 till 10,000) |
75% |
4.25% |
| Next 190,000 (fr 10,001 till 200,000) |
50% |
8.5% |
| Above 200,000 (from 200,001 and above) |
0 |
17% |
Want to know how much tax your company will pay?
Use our Corporate Tax Calculator to instantly calculate how much tax your company will pay depending on the net profit:
Other Taxes for Companies in Singapore
GST
In addition to corporate income tax, companies may be required to collect and pay Goods and Services Tax (GST), which is currently 7% and will be increased to 8% from the 1st January 2023. Companies must start collecting GST if they sell goods or services on the domestic market and the sales volume reaches 1 million Singapore dollars (for more information about GST read here).
Withholding tax
In certain cases, when paying to non-residents, companies may also be required to pay withholding tax, which may vary from 10 to 22% (you can read more here).
