GuideMeSingapore

“Obama’s tax policy is driving companies – and the jobs they create – out of the country”, according to this Forbes article.

Under the present system of corporate taxation in the US, a foreign subsidiary of a US corporation is subject to US tax only on income it repatriates to the U.S. As per US President’s Obama’s proposal, foreign subsidiaries of US corporations will soon have to pay corporate taxes in the US on all their income abroad, whether or not they repatriated it. The rationale? To curb US companies from moving parts of their operation to low tax countries. However, the proposal may turn out to have the exact opposite effect! Peter Robinson, author of the Forbes article on US’s corporate taxes, couldn’t have phrased it any better – “American companies with foreign operations are drawing up plans to turn themselves into foreign companies with American operations.” To take advantage of this situation, low tax countries like Singapore are all out to woo US companies to set up operations on their shores.

Singapore’s corporate income tax rate stands at less than 9% for profits up to S$300,000 and flat 17% above S$300,000. Whereas in the US, the combined federal and state corporate tax rate imposed is nearly 40%. Corporate shareholders pay individual income tax on dividends in the US, while in Singapore, tax paid by a company on its profits is the final tax and all dividends paid to its shareholders are exempt from further taxation. Singapore resident companies also enjoy the benefits of being taxed only on income that arises from Singapore or remitted into Singapore. Foreign-sourced dividends and foreign branch profits are not taxable. If President Obama’s proposal comes into effect, US companies will find themselves at a disadvantage as they would be taxed on their world-wide income.

An easy comparison of taxes between Singapore and US can be done using GuideMeSingapore.com’s online tax calculator.

With Singapore offering better business prospects with its tax friendly policies, will we see more US companies transforming themselves into Singapore companies?

Interested in doing business in Singapore? Find out how to setup a Singapore company.