Singapore Corporate Tax
Singapore is transparent and has economic substance. And tax efficient. Tens of thousands of businesses, including large multinational companies, choose to establish a presence in Singapore for this, amongst many other reasons. The headline Singapore Corporate Tax Rate is 17%. Corporate tax is levied on profits. Singapore has adopted a one-tier corporate tax system. This means that shareholders of a Singapore resident company, will not be taxed by the Singapore tax authorities, on dividends paid on or after 1 Jan 2008.
Effective Tax Rate
Although the headline rate is 17%, the effective tax rate may actually be lower as there are various attractive exemptions and incentives available to startups, as well as businesses looking to move their operations to Singapore.
Start-up company partial tax exemption
Qualifying companies will be afforded the following tax exemption for the first three consecutive YAs (Years of Assessment), where the YA falls in 2020 onwards:
- 75% exemption on the first $100,000 of normal chargeable income; and
- a further 50% exemption on the next $100,000 of normal chargeable income.
Taxable income above S$200,000 will be taxed at the headline corporate tax rate of 17%.
Refer to IRAS explanation on the startup tax exemption for more information
Qualifying Criteria for the start-up tax exemption
There are certain qualifying criteria to be met, in order for this exemption to apply.
- the company must be incorporated in Singapore;
- the company must be a tax resident in Singapore for the relevant YA;
- The company’s total share capital is beneficially held directly by no more than 20 shareholders throughout the basis period for that YA where all of the shareholders are individuals or at least one shareholder is an individual holding at least 10% of the issued ordinary shares of the company. This means that wholly owned subsidiaries of another company will not qualify for this partial tax exemption.
The tax residency of a Singapore company would depend on where the business is controlled and managed. Typically, the location of the company’s board of director’s meetings, during which strategic decisions are made, is an important factor in determining where management and control of the company is exercised.
Refer to IRAS explanation of how tax residency of a corporation is determined for more information.