Singapore Tax System

Investors turn to Singapore for establishing their operations for several reasons. The ease of setting up and operating businesses is a prime motivator. Another central determinant is Singapore's tax regime - well-known for its attractive corporate and personal tax rates, tax relief measures, absence of capital gains tax, one-tier tax system, and extensive double tax treaties. 

Persons, including corporations, partnerships, trustees and bodies of persons carrying on any trade, profession or business in Singapore are chargeable to tax on all profits (excluding profits arising from the sale of capital assets) arising in or derived from Singapore and certain foreign-sourced income from such trade, profession or business.

The purpose of this guide is to provide a general overview of Singapore's tax system. For specific information on corporate taxes, see Singapore Corporate Income Tax guide. For specific information on personal taxation, see Singapore Personal Income Tax guide. To calculate your estimated Singapore taxes and to compare how they stack up against those in your home country, refer to our online tax calculator.

Singapore Tax: Key Points

1. Tax Jurisdiction - Singapore follows a territorial basis of taxation. In other words, companies and individuals are taxed mainly on Singapore sourced income. Foreign sourced income (branch profits, dividends, service income, etc.) will be taxed when it is remitted or deemed remitted into Singapore unless the income was already subjected to taxes in a jurisdiction with headline tax rates of at least 15%. Although the concept of locality of the source of income seems simple, in realty its application often can be complex and contentious. No universal rule can apply to every scenario. Whether profits arise in or are derived from Singapore depends on the nature of the profits and of the transactions which give rise to such profits.
2. Corporate Tax Rate is capped at 18%. By keeping corporate rates competitive Singapore continues to attract a good share of foreign investment. Effective 2010, corporate income tax rate will be further reduced from 18% to 17% to help maintain Singapore's competitiveness. Singapore follows a single-tier corporate tax system, where tax paid by a company on its profits is not imputed to the shareholders (i.e. dividends are tax free). For a comprehensive account of corporate taxation in Singapore, refer to Singapore Corporate Income Tax guide.
3. Individual Tax Rate start at 0% and is capped at 20% (above S$320,000) for residents and a flat rate of 15% for non-residents. As an example, if you are tax resident in Singapore and your personal income for the year was S$160,000, your income tax liability will be S$15,5000. For more details, see Singapore Personal Income Tax guide.  
4. Goods and Services Tax - To increase the resilience of taxes as a source of government revenue, Goods & Services Tax (GST) was introduced in 1994. The current GST rate is 7%. The balanced mix of tax on consumption and income reduces the vulnerability of revenue intake to adverse changes in economic conditions and strengthens the resilience of Singapore's fiscal position. For more details, see Singapore Goods and Services Tax (GST) guide.
5. Withholding tax - Interest, royalties, rentals from movable properties, management and technical fees, and director's fees paid to non-residents (individuals or companies) are subject to withholding tax in Singapore.  For more info, see Singapore Withholding Tax guide.
6. Tax Year - For personal taxes, the tax year is the normal calendar year i.e. January 1 - December 31. Deadline for filing personal tax return is April 15, 2009. For corporate taxes, a company is free to to decide on its financial year. Deadline for filing corporate tax return is October 31. Taxes are paid on a preceding year basis. 
7. Tax on capital gains and losses - Singapore has no capital gains tax. Capital loss expenses are correspondingly not allowed as deductions.
8. Tax treaties - Singapore has concluded more than 50 bilateral comprehensive tax treaties to help Singapore companies minimize their tax burden. For more information, see Singapore Tax Treaties guide.
9. Tax deductions and allowances - Operating expenses incurred in the production of income are generally tax deductible. For more info, see Calculating Singapore Income Tax Liability guide.
10. Tax treatment of losses - Losses arising from the carrying on of a trade or profession are deductible and may be set off against income from other sources. The balance may be carried forward indefinitely subject to certain conditions. Capital losses are not deductible.
11. Group relief for losses - A company's current year's non-utilised capital allowances and losses may be transferred for tax purposes to another company in the same group.
12. Tax treatment of stock options - Stock option gains in general are taxed as employment income. However, there are various schemes available to reduce the tax burden.
13. Tax amendments - The Singapore Government believes in a progressive tax regime and suitable amendments are made to the Income Tax Act from time to time, to increase the competitiveness of Singapore's tax environment. For more info, see Singapore Tax Rates - Recent Amendments. 

Types of Taxes in Singapore

1. Income Tax is chargeable on income of individuals and companies.
2. Property Tax is imposed on owners of properties based on the expected rental values of the properties.
3. Estate Duty has been abolished since February 15, 2008.
4. Motor Vehicle Taxes are taxes, other than import duties, that are imposed on motor vehicles. These taxes are imposed to curb car ownership and road congestion.
5. Customs & Excise Duties - Singapore is a free port and has relatively few excise and import duties. Excise duties are imposed principally on tobacco, petroleum products and liquors. Also, very few products are subject to import duties. The duties are mainly on motor vehicles, tobacco, liquor and petroleum products.
6. Goods & Services Tax (GST) is a tax on consumption. The tax is paid when money is spent on goods or services, including imports. This kind of indirect tax is also known as Value Added Tax (VAT) in many other countries.
7. Betting Taxes are duties on private lottery, betting & sweep-stake.
8. Stamp Duty is imposed on commercial and legal documents relating to stock & shares and immovable property.
9. Others - The two main taxes are the foreign worker levy and the airport passenger service charge. The foreign worker levy is imposed to regulate the employment of foreign workers in Singapore.

Singapore Tax: Governing Authority

The Income Tax Act of Singapore is the governing statute regarding corporate and individual taxation matters.

The Inland Revenue Authority of Singapore (IRAS), was formed in 1960 and was formerly known as the Inland Revenue Department. It integrated all the key revenue collection agencies into one body, enabling the administration and collection processes to become more streamlined and better managed. IRAS has also made its mark as an efficient tax administrator and a service-friendly tax collector.

The IRAS is responsible for collecting income tax, property tax, goods & services tax, estate duty (abolished since 15 Feb, 2008), betting taxes and stamp duties. As the main tax administrator for the Ministry of Finance, IRAS plays a role in tax policy formulation by providing policy inputs, as well as the technical and administrative implications of each policy. IRAS also actively monitors developments in external economic and tax environment to identify areas for policy review and changes. It aims to foster a competitive tax environment that encourages enterprise and growth. The other non-revenue functions performed by IRAS include representing the government in tax treaty negotiations, providing advice on property valuation and drafting of tax legislation.

Singapore Tax: Brief History

Early beginnings
Debated since before World War I, income tax had been introduced briefly during World War I and II to raise revenue for the war effort. But the tax was unpopular, and with many opposing the need for it, income tax stayed off the agenda.

The end of World War II highlighted the need for new infrastructure and fresh sources of revenue, giving renewed impetus to the introduction of income tax.

In 1947 Income Tax was introduced in Singapore under the British colonial government. In 1948 the Income Tax Act was imposed. The Act was based on the Model Colonial Territories Income Tax Ordinance 1922, which was devised for British colonies at that time. Therefore, Singapore's tax laws share common historical roots with those of Malaysia, Australia, New Zealand and South Africa.

1960s
With Independence in 1965, Singapore promoted a policy of rapid industrialisation and building an export oriented industrial base, to stimulate growth and employment. Hence in the 1960s labour-intensive industries were encouraged by tax incentives. The Economic Expansion Incentives Act was introduced in 1967. Companies which managed to grow their exports enjoyed as much as a 90% tax exemption on the increased export income. Interest paid on foreign loans granted to a local industrial company was tax exempt.

1970s
In the 1970s growth of the service sector was high on the government's agenda. Tax policy played its part in the financial sector with the exemption of interest on Asian dollar bonds from 1973. Shipping was also actively promoted. Income from the operation and charter of Singapore ships drew tax exemptions. Tax measures to support urban redevelopment were also introduced. Different property taxes were also phased out. Tax policies in the 1970s were also influenced by social needs. Contributions to the Central Provident Fund were tax deductible and other tax relief measures were introduced.

1980s
As Singapore became more developed, it became a more expensive place for businesses in the 1980s. Measures to revamp the economy, with the aim of making it more competitive was introduced. Changes to government policies, incentives and taxes were considered. The late 1980s marked a significant shift towards lowering both corporate and individual taxes. In 1987 corporate tax rates were lowered from 40% to 33%.

1990s
This period witnessed major changes in tax policies. There was a shift towards lower direct taxes and the focus was on indirect taxes. The trend towards indirect taxation resulted in the introduction of the Goods and Services Tax (GST) in 1994. It is a tax on domestic consumption and applies to all goods and services supplied in Singapore except for financial services and residential properties. It was in this period that the trend of lowering corporate and individual tax rates accelerated.

2000 and beyond
This has been the phase of innovation and entrepreneurship. A number of measures were, and are being introduced to attract foreign talent and investment. Tax rates were further lowered and currently capped at 18% (17% from 2010) for companies and 20% for individuals. This period witnessed the introduction of group relief and the one-tier corporate tax system.