Singapore Corporate Tax 101 | Article – HSBC VisionGo
There are several reasons why investors choose to turn to Singapore to establish their operations - the ease of setting up and operating businesses is the prime motivator. Another central determiner is Singapore’s tax regime, which is well-known for its attractive corporate tax, tax relief measures, absence of capital gains tax, one-tier tax system, and extensive double tax treaties. In the following, we will share the overview of corporate tax in Singapore:
General Rule for All Companies
A company is taxed on the income earned in the preceding financial year. For example, the income earned in the financial year 2020 will be taxed in 2021.
The Year of Assessment (YA) is the year in which your income is taxed. Using the example above, 2021 will be the YA.
When assessing the tax amount, IRAS looks at the income, expenses, etc. during the financial year, which is also known as “the basis period”.
The financial year is generally a 12-month period preceding the YA.
Note that financial years may vary between companies.
Corporate Tax Rate
With effect from YA 2010, a company is taxed at a flat rate of 17% on its chargeable income regardless of whether it is a local or foreign company.
Tax Exemption Scheme for New Start-Up Companies
Singapore has tax exemption for newly incorporated Singapore start-up companies for the first three consecutive YA.
YA 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*.
YA 2019 and before
- Full exemption on the first $100,000 of normal chargeable income*; and
- A further 50% exemption on the next $200,000 of normal chargeable income*.*Normal chargeable income refers to income to be taxed at the prevailing corporate tax rate.
Companies will qualify for the tax exemption if they satisfy these three conditions:
- The company must be incorporated in Singapore;
- The company must be a tax resident in Singapore for that 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.
But what if you are not a start-up but wish to enjoy tax relief? Here’s Partial Tax Exemption for Companies (PTE) for you:
All companies including companies limited by guarantee can enjoy the following tax exemption:
YA 2020 onwards
- 75% exemption on the first $10,000 of normal chargeable income; and
- A further 50% exemption on the next $190,000 of normal chargeable income.
YA 2010 to 2019
- 75% tax exemption on the first $10,000 of normal chargeable income; and
- A further 50% exemption on the next $290,000 of normal chargeable income.
More information can be found from IRAS
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