Event

Singapore Company and Personal Tax System

  • December 4, 2019

In general, Singapore levies taxes on the principle of territoriality. The income of companies and individuals in Singapore or derived from Singapore, or income received or deemed to be received in Singapore, is taxable income in Singapore and is subject to tax in Singapore.

If the income is sourced from outside Singapore and is not received or deemed received in Singapore, it is not taxable in Singapore.

Major taxes and rates

Singapore’s current main taxes are: corporate income tax, personal income tax, Goods & Services tax, real estate tax, stamp duty, vehicle tax, etc. There is no Capital Gain tax in Singapore

 

1. Corporate income tax

Singapore implements a uniform corporate income tax policy for domestic and foreign enterprises. All expenses or profits invested in Singapore are subject to income tax, unless specifically provided for in the income tax bill. These exempt income packages include dividends on shares and trust funds as well as interest on fixed deposits.

Both local and foreign companies must pay taxes on income earned in Singapore and overseas income received in Singapore. In Singapore, taxpayers are classified into resident companies and non-resident companies based on whether the company’s control and management functions are in Singapore.

A company will be treated as Resident company ,if the company “s control and management are in Singapore ,even the company is not incorporated in Singapore.

Generally speaking, the corporate tax bases of resident companies and non-resident companies are basically similar. However, resident companies can enjoy the following tax benefits, but non-resident companies are not entitled

  • Resident companies are entitled to the preferential treatment stipulated in Singapore’s double taxation avoidance agreements (DTA) with other countries.
  • Tax exemptions will be applied to dividends received by resident companies from overseas, profits of their overseas branches, and service income from overseas.
  • Newly established resident companies can enjoy tax relief for up to three years.

 

2. Personal income tax

The amount of personal income tax payable varies according to the taxpayer (tax resident or non-tax resident) and the level of income. Singapore implements a progressive tax rate system. Except for personal income tax deductions, personal income tax rates remain between 0-22%.

Individuals are considered resident if:

  • Singapore Permanent Resident (SPR) newly settled in Singapore; or
  • New residence for more than 183 days (including 183 days) in a calendar year; or
  • I have been working in Singapore for three consecutive years, even if I have stayed in Singapore for less than 183 days in the first and third years.

 

Other than that, they are considered non-tax residents during the year of assessment.

Tax residents must pay taxes on the income they earn in Singapore. Income received outside Singapore due to employment by a Singapore company must also be taxed in accordance with the law.

However, overseas income earned by individual residents is not taxable.

Tax residents are entitled to personal income tax deductions for child support, vocational training, insurance and CPF contributions.

Non-tax residents are exempt from personal income tax if they have been employed in Singapore for a total of 60 days in a calendar year, with the exception of non-resident individuals who serve as directors, entertainers and internships. Non-tax residents are only subject to income tax on income earned in Singapore, at a rate of 15%, or based on the resident
personal income tax rate, whichever is higher, but they cannot apply for personal income tax relief.

 

3. Goods and Services Tax

Singapore’s Goods and Services Tax (GST) is a tax levied on imported goods and all new goods and services provided. It is equivalent to the value-added tax of some countries, and the tax is borne by the final consumer. burden. Taxpayers engaged in the provision of goods and labor services and with an annual turnover of more than S $ 1 million should register for consumption tax. For taxpayers registered for consumption tax, the amount of consumption tax payable is the difference between the output tax minus the input tax paid for the purchase of goods or services.

Since July 1, 2007, Singapore’s GST rate is 7%. Sales and leases of residential property and most financial services are exempt from GST. The excise tax rate on exports of goods and services is zero.

 

4. Property Tax

Real estate tax is a tax imposed on all real estate such as houses, buildings and land. All owners of real property are subject to real property tax on their real property. Real property tax is paid annually. The annual real property tax is paid in January each year. The tax base is the annual value of real property. The annual value of real estate is estimated based on the annual
rental income of real estate. The estimated rental income does not include rental furniture, installations and service charges.

The same base applies to real estate for rent, own use or vacancy. The Singapore Inland Revenue Department reviews the annual value of real estate annually to determine if changes are needed. If the annual value of real estate changes, the tax office will notify the taxpayer. The current property tax rate is 10%. Individuals living in their own homes are subject to a 4% tax reduction.

 

5. Stamp Duty

Stamp duty is a tax imposed on written documents related to real estate and shares. The documents related to real estate include the sale, exchange, mortgage, trust, and lease of real estate; the documents related to shares include the distribution, transfer, gift, trust, and mortgage of shares. For documents signed in Singapore, stamp duty shall be paid within 14 days from the date of signing the document; for documents signed outside Singapore, stamp duty shall be paid within 30 days of receipt of the document in Singapore.