Taxation System in Singapore
As per Income Tax Act of Singapore, the corporate tax is imposed on the income of that is a) earned from Singapore; or b) received in Singapore from outside Singapore (subject to certain exemptions).
The first part deals with the income that has a source in Singapore. The second part is the income with a source outside Singapore but received or deemed received in Singapore.
Singapore is often cited as the leading example of countries that continues to reduce corporate income tax rates and introduce various tax incentives to attract and keep global investments.
Singapore has a single-tier territorial based flat-rate corporate income tax system. Effective tax rates as one of the lowest in the world and the general “business friendliness” of Singapore are the two important factors contributing to the economic growth and foreign investment into the city-state.
With a low headline corporate tax rate of 17%, generous tax exemptions for small-to-midsize companies, and industry-specific tax incentives, Singapore is well positioned to maintain its economic competitiveness in today’s global environment.
The Government of Singapore provides a comprehensive package of tax concessions and incentives to businesses whose business activities reflect the direction in which the state plans to steer economic development.
Singapore withholding tax (also known as tax deduction at source in many other countries) is applicable to certain types of payments to non-resident individuals and companies.
In general, withholding tax is the tax charged to a non-resident company or individual that derives income from a Singapore source for services provided or work done in Singapore.
Goods and Services Tax (GST) is similar to Valued Added Tax (VAT) in other countries and is a relatively new form of tax in Singapore.
GST was implemented on 1st April 1994 in Singapore. The GST Act is modeled on the UK VAT legislation and New Zealand GST legislation. The Inland Revenue Authority of Singapore (IRAS) acts as the agent of the Singapore government and administers, assesses, collects and enforces payment of GST.
Personal income tax rates in Singapore are one of the lowest in the world.
In order to determine the Singapore income tax liability of an individual, you need to first determine the tax residency and amount of chargeable income and then apply the progressive tax rate to it.
Singapore is rapidly gaining eminence as a trust jurisdiction internationally. With Asia driving the global economy, Singapore’s wealth management industry is witnessing a phenomenal boom; and along with that, the trust business market is also on the rise.
Singapore’s indigenous millionaires as well as foreign High Net Worth Individuals (HNWI) are finding Singapore trusts as their preferred vehicle for managing their wealth, thanks to the compelling advantages of Singapore as a trust jurisdiction.
Non-resident Singapore companies include: Representative Offices (ROs) that are registered with International Enterprise Singapore. Companies that are incorporated outside Singapore such as Singapore branch office setups.
According to Singapore income tax law, employees will be liable to Singapore tax on all income earned during the employment period in Singapore, irrespective of the fact that the income is not paid in Singapore and that the employer is a non-resident Singapore company.
In Singapore, accounting standards are known as Singapore Financial Reporting Standards (SFRS) and are based on the IFRS.
All companies with financial period starting on or after 1 January 2003 have to comply with SFRS. Accrual-based accounting is one of the main principals of Singapore accounting standards.