Singapore Tax Guide

Singapore Tax Guide

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AWARA GROUP – YOUR BUSINESS BRIDGE WITH RUSSIA AND ASIA

CORPORATE INCOME TAX (CIT, OR CORPORATE PROFIT TAX)

The tax rate is 17 percent.

Assessment Year (YA). The taxable income of a company is assessed on basis of the accounts of the preceding financial year, for example:

If your financial year-end is 31 Dec of each year, the basis period for YA 2014 is 1 Jan 2013 to 31 Dec 2013. This means that for YA 2014, the company’s income from 1 Jan 2013 to 31 Dec 2013 will be assessed to tax.

Companies may choose to follow a financial year different from the calendar year

Read more about the Assessment Year here.

Tax rebate

Singapore presently offers a general tax rebate to all companies from the Corporate Income Tax.

The tax rebate for Assessment Years 2013 to 2015 is 30 percent corporate income tax rebate but capped at SGD 30,000 per year. The rebate is partial at 75% for the first SGD 10,000 of the income and 50% for the next SGD 290,000 of income.

Start-up tax rebate. A special tax exemption can be granted on the income of a qualifying company up to SGD 100,000 and 50% rebate for next SGD 200,000 of income.

Tax residency, tax base and tax filings

A company is considered a resident of Singapore for tax purposes if the place of control and management of its business is Singapore (even if not registered in Singapore). Commonly the fact that the directors meet in Singapore would mean that the company qualifies as a resident of Singapore.

In Singapore, income is generally subject to tax on a territorial and remittance basis.

Any company is required to file an income tax return on income derived from, accrued in, or received in Singapore. Certain income from foreign-sources may qualify for an exemption from Singapore taxation.

Dividends

Singapore ensures that company earnings are not taxed twice by declaring all dividends non-taxable. Dividends are not subject to any withholdings either.

Dividends received in Singapore by a Singapore holding company are taxable in Singapore upon remittance into Singapore. In this case the tax suffered at source is deducted from Singapore tax (but not exceeding the amount of tax payable in Singapore).

In certain cases the foreign source income may be tax-exempt in Singapore.

Capital gains tax

There is no capital gains tax in Singapore.

However, where a gain is considered to be revenue in nature, for example, equity investments, such gain could be subject to tax in Singapore. There is currently (1 June 2012 to 31 May 2017) a safe-harbor rule under which gains from disposal of ordinary shares under certain conditions (minimum shareholding 20%, held at least for 24 months, minimum 20% shareholding prior to disposal) are exempt from tax. Capital losses are not tax deductible.

Losses carry-forward

Accounting losses can be carried forward indefinitely to offset against future profit.

Businesses (including sole-proprietors) can also elect to carry back their current year unutilized trade losses and capital allowances of up to SGD 100,000 to the immediate year of assessment preceding the current year of assessment. Any unutilized capital allowances and trade losses in excess of the SGD 100,000 limit would continue to be available for carry-forward under normal rules.

Losses can also be carried back their current year unutilized trade losses in an amount of up to SGD 100,000 to the immediate year of assessment preceding the current year of assessment.

Group Relief and Consolidation of Group of Companies

Group relief is available in Singapore, but not tax consolidation as such. Under certain conditions a company is aallowed to transfer its current year unutilized losses, capital allowances, and donations to offset the taxable profits of other companies in the same group.

A group means a Singapore incorporated company and all of its Singapore subsidiaries if one is at least 75 percent owned by the other or if both are at least 75 percent owned by another Singapore company.

Controlled foreign corporation (CFC)

There is no CFC regime in Singapore that would address the issue of limiting artificial deferral of tax by using offshore low taxed entities.

Withholding taxes

A withholding tax (source tax) is charged at source when payments for certain kinds of services are paid from Singapore to abroad (payments made to non-residents). For a given type of service, following rates apply (but a relevant double taxation treaty may offer different rules).

– Interest, commission, fee or other payment in connection with any loan or indebtedness – 15%

– Royalty or other lump sum payments for the use of movable properties – 10%

– Payment for the use of or the right to use scientific, technical, industrial or commercial knowledge or information – 10%

– Rent or other payments for the use of movable properties – 15%

– Technical assistance and service fees – rate at the prevailing corporate tax rate (17%)

– Management fees – rate at the prevailing corporate tax rate (17%)

Learn more details about the Singapore withholding tax regime here.

Lower rates may apply when there is a double tax treaty (DTT) in force. See below.

Double Taxation Treaties (DTT)

Countries with which Singapore has concluded Double Taxation Treaties:

Albania	Isle of Man	Panama
Australia	Israel	Papua New Guinea
Austria	Italy	Philippines
Bahrain	Japan	Poland
Bangladesh	Jersey	Portugal
Belgium	Kazakhstan	Qatar
Brunei	Korea	Romania
Bulgaria	(Republic of) Kuwait	Russia
Canada	Latvia	Saudi Arabia
China	Libya	Slovak Republic
Cyprus	Lichtenstein	Slovenia
Czech Republic	Lithuania	South Africa
Denmark	Malaysia	Spain
Egypt	Malta	Sweden
Estonia	Mauritius	Switzerland
Fiji	Mexico	Taiwan
Finland	Mongolia	Thailand
France	Myanmar	Turkey
Georgia	Netherlands	Ukraine
Germany	New Zealand	United Arab Emirates
Hungary	Norway	United Kingdom
India	Oman	Uzbekistan
Indonesia	Pakistan	Vietnam
Ireland

At present date, Singapore is in negotiation with following countries to conclude a DTT:

Ecuador, Laos, Luxembourg, Rwanda, San Marino, Seychelles, Sri Lanka but are not in force at the time of writing.

Source: IRAS

The IRAS can attack any attempts to take advantage of beneficial withholding tax rates under any relevant tax treaty provisions by applying the general anti-avoidance provision.

Anti-avoidance rules

The IRAS may disregard or vary an arrangement and make adjustments (including the computation or re-computation of gains or profits or imposition of liability to tax) to counteract any tax advantage obtained or obtainable by a person, where the tax authority is satisfied that the purpose or effect of any arrangement is to directly or indirectly:

– alter the incidence of any tax that is payable or would otherwise have been payable by any person

– relieve any person from any liability to pay tax or to make a return under the Singapore Income Tax Act

– reduce or avoid any tax liability imposed or that would otherwise have been imposed on any person by the Singapore Income Tax Act.

The above does not apply to any arrangement carried out for bona fide commercial reasons and that does not have tax avoidance or reduction as one of its main purposes.

There are specific anti-avoidance provisions have been enacted to deal with specific situations such as sale of assets between related parties at below market value or where transactions between related parties are not at arm’s length.

Advance rulings from tax authority

Taxpayers can obtain advance rulings from the IRAS. Such rulings are private and confidential.

Tax Incentives

Tax incentives for intellectual property rights (IPR). For the tax years 2011 to 2015, companies can claim tax allowances / deductions for acquisition or licensing costs (from 2013), or costs for protection of intellectual property as follows:

• 400 percent tax allowance / deduction for the first SGD 400,000 of qualifying expenditure incurred per year
• 100 percent tax allowance / deduction for the balance of expenditure.

Any capital allowances in excess of the income from all sources of a person (i.e. unutilized capital allowances) for any year of assessment can be carried forward to offset against income of that person for subsequent years of assessment, subject to both the continuity of ownership and the same business tests.

Businesses (including sole-proprietors) can also elect to carry back their current year unutilized trade losses and capital allowances of up to SGD 100,000 to the immediate year of assessment preceding the current year of assessment. Any unutilized capital allowances and trade losses in excess of the SGD 100,000 limit would continue to be available for carry-forward under normal rules.

Singapore has an R&D tax incentive regime which provides for enhanced R&D deductions. The R&D incentive regime applies to all industry sectors and businesses of all sizes (regardless of ownership) provided that they can demonstrate projects meeting the definition of ‘R&D’ for tax purposes.

For the years 2011 to 2015, companies can claim enhanced tax allowance / deduction for qualifying expenditure on R&D as follows:

• 400 percent tax deduction for the first SGD 400,000 of qualifying expenditure incurred per year
• 150 percent tax deduction for the balance of expenditure.

Capital allowances are available for capital expenditures incurred on the acquisition of plant and machinery used for the purposes of a trade or business. There is also a LandIntensification Allowance (“LIA”), which is granted to businesses on the construction or renovation of qualifying buildings or structures.

Allowances are also granted for capital expenditure incurred on the acquisition of qualifying intellectual property items

Stamp duty

A stamp duty applies to transactions relating to transfer of shares registered in a share register kept in Singapore and Singapore immovable property.

The stamp duty on transfer of shares is payable at the rate of 0.2% on the value of the shares or the consideration, whichever is the higher.  The stamp duty on transfer of assets is payable at the rates of 1% to 3% on the value of the real property or the consideration, whichever is higher.

A buyer’s stamp duty of up to 15% may be applicable to residential properties acquired by foreigners, companies, and Singapore permanent residents, as well as Singapore citizens. A seller’s stamp duty of up to 16% may be imposed where residential properties are sold within 4 years of purchase. A seller’s stamp duty up of to 15% percent also applies to industrial properties sold within 3 years of purchase.

Indirect tax

Singapore collects an indirect tax from sales of goods and services, Goods and Services Tax (GST). It is also levied on the import of goods. The only exemptions are for the sale and lease of residential properties, the importation and local supply of investment precious metals and the provision of most financial services. Export of goods and international services are zero-rated. The GST is similar to Value Added Tax (VAT) of other countries.

The standard rate for the GST is 7%. Certain goods and services are zero-rated or exempt from GST.

Exempt supplies include financial services, residential land and investment precious metals.

Read more about the Goods and Services Tax of Singapore here.

Personal income tax (Individual income tax)

A resident is taxed for personal income at rates ranging from zero percent to 20%.

Income from employment of a non-resident is taxed at a flat rate of 15% or at resident tax rates, whichever is higher. Other income of a non-resident individual is generally taxed at 20% unless a double taxation treaty provides any relief.

All gains or profits, including all benefits (whether in money or otherwise), derived by an employee in respect of employment exercised in Singapore are taxable, unless they are specifically exempt or are covered by an existing administrative concession.

Social security tax

There is no social security tax in Singapore.

But there is the Central Provident Fund (CPF), which was introduced as a compulsory retirement benefit scheme for employees in Singapore. Only Singapore citizens and Singapore permanent resident employees, and their employers, are required to contribute to the CPF.

Every employer must register with CPF board and make monthly CPF contributions on its own behalf and on behalf of its employees. Employee’s share of the contributions isrecovered through salary deductions. Only employees who are Singapore citizens or Singapore permanent residents are required to contribute to CPF at a rate of up to 20%.Graduated rates may apply for first 3 years when employee first attains permanent residence. Employer’s statutory contribution rate to CPF is currently 16% (proposed to beincreased to 17% effective from 1 January 2015), subject to a monthly ordinary wage ceiling of $5,000 and total annual wage ceiling of $85,000.

Customs Duties

Singapore is effectively a duty-free port with import duties only on a limited number of items, being petroleum products, motor vehicles, tobacco products, and liquor. The rates of duties are either specific or set in relation to the value of imported goods. All exports are duty-free. Excise duties are imposed on intoxicating liquors, tobacco products, motorvehicles, and petroleum products.

Inheritance or gift tax

There is no inheritance or gift tax in Singapore.

Property tax

Property tax is payable annually at the beginning of the year for all immovable properties.

The property tax is calculated on an annual basis as a percentage of the gross annual value of the property as assessed by the property tax department;

The rates are progressive and are as follows (for year 2014): 0% to 15% for owner-occupied residential property; 10% to 19% for non-owner-occupied residential property; and10% for non-residential property.

Special tax regimes

Singapore has special tax regimes to provide tax exemptions or reduced tax rates for some industries or sectors including:

• Banking
• Fund Management
• Shipping
• Leasing