Singapore Corporate Tax Frequently Asked Questions
If you’re considering forming a new company in Singapore, or already have your Singapore business established, you are bound to have questions on how to make it run as smoothly as possible. At Hawksford we’ll give you the answers and support your business growth.
If the primary activity of a company is stock trading, will trading capital gains 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.
Is a tax credit available for income earned in countries without a tax treaty with Singapore?
Yes. You can get a unilateral tax credit for the foreign taxes paid on the following income under Section 50A of the Singapore Income Tax Act:
- Income derived from any professional, consultancy and other services rendered in any territory outside Singapore.
- Dividends or
- Profits derived by an overseas branch of a Singapore resident company.
For claiming the above unilateral tax credit, you must be a tax resident in Singapore and must also satisfy all other conditions set by the tax authority.
Can tax exemption be carried forward to subsequent years if there is no profit in first 3 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.
What is the corporate tax rate in Singapore?
Singapore has a flat corporate income tax rate of 17%. For annual profits of up to S$300,000, tax incentives are available that make the effective corporate tax rate below 9% provided all eligible criteria set by the authority are met. For example:
Newly incorporated companies with individual shareholders will be taxed as follows:
- The first S$100,000 in annual profits will be tax exempt for the first three years.
- The next S$200,000 in annual profits will be taxed at 8.5%.
- Profits above S$300,000 will be taxed at the flat rate of 17%.
In order to qualify for the above full tax exemption, one of the criteria is the company must be a tax resident in Singapore.
Newly incorporated companies with corporate shareholders will be taxed as follows:
- The first S$300,000 in annual profits will be taxed approximately at 8.5%.
- Profits above S$300,000 will be taxed at the flat rate of 17%.
What is the due date for filing corporate taxes?
The deadline for filing final corporate tax return in Singapore is November 30. The tax return is filed on a prior year basis i.e. you will need to file tax return for the financial year that ended in the previous calendar year.
Keep in mind however that each company is required to file an Estimated Tax Return within 3 months of the end of its financial year.
Is a Singapore company required to file audited accounts?
Companies that meet the following criteria are not required to have their accounts audited and can file unaudited accounts:
With effect from 01 July 2015:
If your company qualify as “small company”, audit is not mandatory. Otherwise the Company will have to appoint a Singapore auditor.
A company qualifies as a small company if:
(a) it is a private company in the financial year in question; and
(b) it meets at least 2 of 3 following criteria for immediate past two consecutive financial years:
(i) total annual revenue ≤ $10m;
(ii) total assets ≤ $10m;
(iii) no. of employees ≤ 50.
For a company which is part of a group:
(a) the company must qualify as a small company; and
(b) entire group must be a “small group”
to qualify to the audit exemption.
For a group to be a small group, it must meet at least 2 of the 3 quantitative criteria on a consolidated basis for the immediate past two consecutive financial years.
Where a company has qualified as a small company, it continues to be a small company for subsequent financial years until it is disqualified. A small company is disqualified if:
(a) it ceases to be a private company at any time during a financial year; or
(b) it does not meet at least 2 of the 3 the quantitative criteria for the immediate past two consecutive financial years.
Where a group has qualified as a small group, it continues to be a small group for subsequent financial years until it does not meet at least 2 of the 3 the quantitative criteria for the immediate past two consecutive financial years.
All other companies are required to file audited accounts.
Are capital gains taxable for Singapore companies?
Capital gains in Singapore are tax exempt.
Are dividends to shareholders taxable for Singapore companies?
There is no dividend tax for Singapore companies. Once you have paid corporate income tax on the profits of your company, the post-tax profits can be distributed to shareholders tax free.
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,and must 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:
- For each of its first three consecutive tax years - corporate tax rate of 0% on the first S$100,000 of taxable income and approximately 8.5% effective 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%.
- From the fourth tax year onwards - approximately 8.5% effective tax rate on taxable income of up to 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$500,000, then your effective corporate tax rate based on the exemption will be as follows:
First Three Years
Taxable Income (SGD) Tax Rate 0 - 100,000 0% 100,001 - 300,000 8.5% 300,001 - 500,000 17%
Fourth Year Onwards
Taxable Income (S$) Tax Rate 0 - 300,000 8.5% 300,001 - 500,000 17%
The tax exemption is open to all new companies satisfying all conditions as mentioned above except for companies whose principal activity is that of investment holding and developing properties for sale, investment or both.
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 in Singapore. Whether the dividend income is taxable in the overseas shareholders' country would depend on the domestic tax laws of that country and the tax treaty between Singapore and the particular country in question.
Is company profit distribution 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 exempted from tax in the hands of the shareholders in Singapore
Do we still need to file a tax return if our 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 GST policy 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 company 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 Shareholding test when there is no substantial change in its shareholders and their shareholdings as at the relevant dates as determined by authority.
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. There however are certain taxable implications on both company and employees for the benefits-in-kind provided by the company.
What kind of business travel expenses are tax deductible?
Generally, deductions are allowed for business expenses that are wholly and exclusively incurred in the production of income and the deduction must not be prohibited under the Income Tax Act.
- 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 whose directly working with the company.
- Motor vehicle expenses for foreign registered cars used exclusively outside Singapore are deductible if the expenses are incurred for business purposes.
Note however that many of these benefits may have tax implications on the employee side.
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.