Singapore Company Tax FAQs - Part I

Listed below are answers to frequently asked questions on Singapore income tax for companies. Note that the information provided here is for general guidelines only and is not meant to replace professional advice. 

What tax incentives are available for new startups in Singapore?

New tax incentives for Singapore start-up private limited companies have been introduced since 2005 to support entrepreneurship and to help foster growth of SMEs. Under the new scheme, a newly incorporated company that satisfies the qualifying conditions (viz. be incorporated in Singapore, be a tax resident of Singapore and has no more than 20 shareholders of which at least one is an individual shareholder holding at least 10% of shares) will be taxed as follows:

1. For each of its first three consecutive tax years - corporate tax rate of 0% on the first S$100,000 of taxable income and 9% (partial exemption) tax rate on the next S$200,000 of taxable income. The taxable income above S$300,000 will be charged at the normal headline corporate tax rate of 17%.
2. From the fourth tax year onwards - 9% tax rate on taxable income of upto S$300,000 per annum. The taxable income above S$300,000 will be charged at the normal headline corporate tax rate of 17%.

For instance if your annual taxable income is S$500,000, then your effective corporate tax rate based on the exemption will be as follows:

First Three Years 

Fourth Year Onwards 

For more information, please visit Singapore Corporate Income Tax guide.

If I have incurred a loss or have no income for the first three years, do I qualify for tax exemption scheme for new companies in the subsequent years?

No. If during any of the first three tax years, your company incurs losses or it has no income (e.g. business has not commenced), your chargeable income and tax payable will be nil. In this case, since there is no chargeable income, your company cannot enjoy the benefit given under the tax exemption scheme for new start-up companies for that particular tax year. However, that particular tax year will still be included in determining the first three consecutive tax years. 

Can the post-tax company profits be transferred to shareholders overseas?

Post-tax company profit distribution to shareholders is normally referred as dividend income. As far as Singapore is concerned, dividends can be repatriated to shareholders' anywhere without any further tax consequences. However, dividend income may be subject to taxation in the recipient's country of residence depending on the tax policy of that country. Whether the dividend income is taxable in the overseas shareholders' country would depend on the domestic tax laws of that country and what the tax treaty between Singapore and the partcular country in question specifies.

Are profits distributed to shareholders taxed?

No. Under the current one-tier corporate tax system, tax paid by a company on its chargeable income is the final tax. All dividends paid by a company are exempt from tax in the hands of the shareholders.

Do I still need to file a tax return if my company did not make any profits for the year?

Yes. Every Singapore company is required to file a tax return on an annual basis. For more information, see Annual Filing Requirements for Singapore Companies.

What is the taxation on products and services sold to customers outside of Singapore?

This question related to Goods and Services Tax (GST) in Singapore. Exports of goods and provision of international services are zero-rated supplies. In other words the goods or services are subject to 0% GST (Goods and Services Tax). For more information, see Singapore Goods and Services Tax guide.

For how long can the losses be carried forwarded?

Where your company incurs business losses in a tax year and the adjusted losses exceeded the other sources of income or where there are no other sources of income to offset the trade losses, there will be unutilised losses from the tax year. The unutilised losses can be carried forward to offset against your company's assessable income for the subsequent tax years if it satisfies the qualifying condition. Losses can be carried forwarded indefinitely, until they are fully utilised subject to certain conditions such as no substantial change in shareholders.

Can the company pay for accommodations and car expenses of directors and other employees?

Yes, that is possible. This benefit comes under the umbrella of benefits-in-kind which refers to benefits received by employees, from the employer, in non-cash form. However, there are certain taxable implications on the company provided accommodation and company reimbursable car expenses for the director or employee in Singapore. 

Are client entertainments expenses such as business meals tax deductible?

Yes. This is a business expense, specifically incurred in entertaining clients and is tax deductible against income from the business. 

What kind of business travel expenses are tax deductible?

1. If your company pays transport allowance to the employees as part of their remuneration package, the transport allowance is a deductible expense, as it is part of staff cost.
2. Motor vehicle expenses for foreign registered cars used exclusively outside Singapore are deductible if the expenses are incurred for business purposes.
3. The private hire car expenses and hiring charges for foreign rental cars used exclusively outside Singapore are deductible if the cars are used for business purposes.
4. If your company owns Q-plate business passenger cars that were registered before 1 Apr 1998, motor vehicle expenses relating to these Q-plate cars are tax deductible. 

Note however than many of these benefits may have tax implications on the employee side.

Are donations tax deductible?

Generally, donations are not deductible expenses as they are not incurred in the production of income, unless the donations are made to an approved Institution of a Public Character (IPC) or the Singapore Government which benefit the local community. Only in this case donations are tax deductible. With effect from 2003, any unutilised donations can be carried forward to set-off against the income for the subsequent tax year up to a maximum of 5 years if there is no substantial change in shareholders. 

Are the bad debts tax deductible?

You may claim a deduction for bad debts and specific provisions for doubtful debts arising from trade transactions, provided that the income tax authority is satisfied that the debts had become bad during the period of claim and the debts were previously included as your company's trading receipt. When making a claim, please furnish the following information in the company's tax return:

• Name and address of each debtor
• Amount owing by each debtor
• Nature and dates of the transactions which gave rise to each debt
• Confirmation that the debts had been reflected as trading receipts in the accounts of the company
• Reasons for considering each debt as irrecoverable
• Actions taken to recover each debt and forward the relevant supporting documents. If no action was taken, state reasons
• Amount recovered to date and how reflected in the accounts
• Whether the debtor is related to the company, its directors or shareholders. If so, state nature of the relationship 

Are employee benefits such as healthcare benefits, commissions, etc tax deductible?

Yes, commissions and healthcare benefits (reimbursements on medical and dental treatments for the employee, spouse and children) are tax deductible. 

What is the tax policy towards R&D expenses?

Companies are entitled to 250% tax deduction for the first S$300,000 of qualifying expenditure of R&D done in Singapore per YA, and 150% deduction for the balance expenditure. Businesses with a low taxable income, can choose to convert up to S$300,000 of the tax deductions and allowances credited to them into a cash grant, up to a maximum of S$21,000 each year. 

If the primary activity of my company is investment and stock trading, will the capital gains from the trades be tax free?

An investment/stock dealing company is a company whose primary business activities is to buy and sell investments or shares with a view to making a profit. The investments and shares are the trading stocks of the company. Hence any gain from the sale of these investments is taxable under S10(1)(a) of the Income Tax Act. 

What is the taxation policy towards property rental income?

Rent received from the letting of property in Singapore is subject to income tax. Your rental income includes rent of the premises, maintenance, furniture and fittings. After deductions for allowable expenses, the net amount is taxable. Generally, you can only claim expenses incurred during the period of tenancy. Expenses incurred outside the period of tenancy cannot be claimed. However, if you can show intention to let out the property, income tax authorities may consider the expenses. 

Examples of deductible rental expenses: interest on your mortgage loan; property tax; fire insurance on your property; commission paid on getting a subsequent tenant; cost of renewing a lease or getting a new tenant (except for the first tenant); repairs and maintenance (eg. painting, pest control, and monthly maintenance charges to management corporations). 

Examples of non-deductible rental expenses: mortgage or bank loan repayments; agent's commission; advertising; legal costs for getting the first tenant; depreciation of furniture and fixtures; costs of renovation, additions, and alterations to your property (eg. extension of car porch, construction of drains, cementing of walls and floors, and installation of window grilles). 

What is the taxation policy towards royalty income?

Royalty income is the income received for the right to use copyrights, patents and trademarks. Royalty income accruing in or derived from Singapore as well as earned from outside Singapore and received in Singapore, is taxable. 

What can I do if I disagree on the tax assessment sent to me by Singapore income tax authorities?

You can appeal against the tax assessment by writing in to the tax authorities within 30 days from the date of the service of the Notice of Assessment, stating precisely the grounds of your objection. Please note that despite objection to the assessment, tax must be paid within one month from the date of the Notice. 

Is there tax credit for income earned in countries that do not have tax treaties with Singapore?

Yes. You can now get a unilateral tax credit for the foreign taxes paid on such income under Section 50A of the Singapore Income Tax Act.

1. Income derived from any professional, consultancy and other services rendered in any territory outside Singapore.
2. Dividends or
3. Profits derived by an overseas branch of a Singapore resident company. 

Unilateral tax credit under Sec 50A would also apply to foreign sourced royalty from non-treaty countries, provided the royalty is not

1. borne directly or indirectly by a person resident in Singapore or a permanent establishment in Singapore or
2. deductible against any Singapore sourced income 

For more details, please visit Guide to Singapore's tax treaties and double tax agreements.