Singapore Corporate Taxation

The headline corporate income tax rate in Singapore is 17 percent, which is calculated on the basis of the company’s chargeable income i.e. taxable revenues less allowable expenses and other allowances. Though the rate itself is one of the lowest in the world, the effective tax rate payable works out to be even lower because of the full / partial exemption regime where the first SGD200,000 of chargeable income is available for full or partial exemption. Further there is a plethora of government incentives, subsidies and schemes to reduce corporate income tax liability.

As a general rule, a Singapore company is taxed on the income earned in the preceding financial year. This means that income earned in the financial year 2018 will be taxed in 2019. To assess the amount of tax, Inland Revenue Authority of Singapore (IRAS) looks at the income, expenses, etc. during the financial year. This financial year is known as the “basis period”. The basis period is generally a 12-month period preceding the Year of Assessment.

Yes, and the current rate is 7 percent. It is a broad-based consumption tax levied at two levels – upon the import of goods (where GST is collected by Singapore Customs), and supply of goods and services in Singapore. Some supplies however, are specifically exempt from GST. This includes financial services and the sale or lease of residential properties.

Importantly, all Singapore companies and businesses with annual turnover exceeding S$1 million are required to register for GST.

The rate of withholding tax in Singapore depends on the nature of payment made to non-residents taxpayers. Some prevailing rates are as follows:

• 15% for interest, commission, fee in connection with any loan or indebtedness;
• 10% for royalty or other payments for the use of or the right to use any movable property;
• 10% for payments for the use of or the right to use scientific, technical, industrial or commercial knowledge or information or for the rendering of assistance or service in connection with the application or use of such knowledge or information;
• 17% for payments of management fees;
• 15% for rent or other payments for the use of any movable property;
• 15% for payments for the purchase of real property from a non-resident property trader.

A Singapore tax resident company exercises its control and management in Singapore.

Singapore has concluded Double Tax Agreement (DTA) with many countries. For a Singapore tax resident company to enjoy the benefits of DTA, the company has to obtain a Certificate of Residence (COR). In issuing a COR, the Inland Revenue Authority Of Singapore (IRAS) looks for the said company’s “fixed place of operations”. Generally, this refers to a place of management, an office, or a certain amount of floor space, with a degree of permanence and regular usage. Few pointers here are:

• from where the management and control of the company was exercised,
• the place of residence of the company’s executive directors, and
• location of the books and records of the company.

Companies need to submit two main corporate income tax forms to IRAS every year:

• Estimated Chargeable Income (ECI) form must be submitted within three months from the company’s financial year end except for (a) companies that fulfil the conditions under the Administrative Concession; and (b) certain entities that are not required to file ECI; and
• Corporate Income Tax Returns commonly known as Form C-S or Form C must be submitted by November 30 (or December 15, in case of e-filing), of each year except dormant companies for which IRAS has waived the requirement to file.

Every company in Singapore has the option to to determine its financial year end (FYE), which does not necessarily have to be December 31.

Tips – we recommend our clients to keep the company’s FYE within 365 days for the first 3 YAs in order to take full advantage of full tax exemption scheme available for qualifying new start-up companies.

Yes, companies in Singapore are allowed to carry forward the unabsorbed trade (rental) losses and capital allowances and approved donations (up to 5 years) to be utilised against taxable income of those future years until such losses are fully utilised.

The due date for submitting corporate income tax returns (Form C-S/ C) for Year of Assessment (YA) 2018 was:
(a) e-filing: December 15, 2018
(b) Paper filing: November 30, 2018
These dates are the same every year. Do note that Singapore companies have 11 months – if their financial year ends in December, to 22 months – if their financial year ends in January, to prepare and file their returns.

Companies must pay their tax within one month from the date of the Notice of Assessment (NOA), and GIRO is the preferred method of payment as it allows tax liability to be paid by instalments.

Also, importantly, companies can enjoy up to 10 interest-free monthly instalments when they file their Estimated Chargeable Income electronically within three months from their financial year end.

Currently, about 81 percent of corporate taxpayers file their tax returns on time in Singapore.

• When payment is not received by the due date, a 5% penalty can be imposed on the overdue tax.
• A 1% additional penalty per month may be imposed if the tax is still not paid 60 days after the 5% penalty is imposed.
• The 1% penalty is imposed for each month that the tax remains unpaid, up to a maximum of 12 months.

Companies in Singapore are required to file tax returns even if it is incurring losses.

From YA 2017, companies will qualify to file Form C-S – an Income Tax Return form simplified to three pages – if they meet all of the following conditions:

• incorporated in Singapore;
• an annual revenue of $5 million or below
• only derives income taxable at the prevailing corporate tax rate of 17%; and
• is not claiming any of the following in the YA:
  • carry-back of Current Year Capital Allowances / Tax Losses
  • group relief
  • investment allowance
  • foreign tax credit and tax deducted at source

Companies that do not meet the Form C-S qualifying conditions will need to file Form C together with their financial statements, tax computations and supporting schedules

In Singapore, taxable income refers to gains or profits from any trade or business; income from investment such as dividends, interest and rental; royalties, premiums and any other profits from property; and other gains that are revenue in nature.

Generally, deductible business expenses are those ‘wholly and exclusively incurred in the production of income’. Meanwhile, non-deductible business expenses includes personal expenses such as travel or entertainment not related to the running of the business, and capital expenses such as expenses incurred to incorporate a company and purchases of fixed assets.

A company may receive different streams of income taxable at different tax rates, i.e. the prevailing corporate tax rate and concessionary tax rates. That’s why it is important to avoid incorrect classification of non-qualifying income under the concessionary tax rate category; incorrect identification of direct and common expenses; and adoption of inappropriate bases in the allocation of common expenses and capital allowances.

There is no tax in Singapore on Capital Gains!