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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
(For more details, see Singapore Corporate Tax Guide)
Income | Tax Rate |
---|---|
Tax rate on corporate profits for up to 300,000 SGD | Effective tax rate at 8.5% |
Tax rate on corporate profits above 300,000 SGD | 17% |
Tax rate on capital gains accrued by the company | 0% |
Tax rate on dividend distribution to shareholders | 0% |
Tax rate on foreign-sourced income not brought into Singapore | 0% |
Tax rate on foreign-sourced income brought into Singapore | 0 – 17% subject to conditions |
(For more details, see Singapore Individual Tax Guide)
Income | Tax Rate |
---|---|
Tax rate on first 20,000 | 0% |
Tax rate on next 10,000 | 2% |
Tax rate on next 10,000 | 3.5% |
Tax rate on next 40,000 | 7% |
Tax rate on next 40,000 | 11.5% |
Tax rate on next 40,000 | 15% |
Tax rate on next 40,000 | 18% |
Tax rate on next 40,000 | 19% |
Tax rate on next 40,000 | 19.5% |
Tax rate on next 40,000 | 20% |
Tax rate on above 320,000 | 22% |
Tax rate on capital gains | 0% |
Tax rate on dividends received from Singapore company | 0% |
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.
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.
Debated since before World War I, income tax was 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.
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.
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.
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%.
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.
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 17% for companies and 20% for individuals. This period witnessed the introduction of group relief and the one-tier corporate tax system.
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