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Singapore Corporate Tax Guide: What Are The Applicable Corporate Tax Rates In Singapore?

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Singapore has come a long way from a small third-world economy to one of the world’s biggest business hubs in a few years. Its strategic location in the heart of Asia has made Singapore an attractive destination for businesses to access the regional emerging markets of Asia and beyond. While many factors contribute towards making Singapore a trusted business hub including its skilled workforce, politically stable environment, excellent infrastructure, and a robust economy, another key factor is the transparent Corporate Tax Singapore system that aims to facilitate businesses and encourages growth and investments.

The following sections discuss in detail all the applicable corporate tax rates in Singapore as well as other tax incentives and schemes that make up the Singapore Corporate Income Tax system.

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Corporate Income Tax Rate

Since 2003, Singapore has adopted a single-tier taxation system which means that there is no double taxation for stakeholders. If a company has paid corporate tax on its chargeable income, no further tax will be charged on the dividends paid to the shareholders. Singapore corporate tax rate is set at a flat 17% rate. However, the effective corporate tax rate is usually lower than this rate since there are different tax exemption schemes and incentives that companies apply for and get reductions in their tax.

A company is taxed with the corporate income tax in Singapore on its income generated in the preceding financial year. The income that you earn in one year (Basis Period) will be assessed the following year (Year of Assessment YA) for taxes. IRAS assesses the income generated, expenses incurred, and any eligibility for tax exemptions to calculate the corporate income tax rate for that financial year. A financial year or basis period corresponds to a 12 month period preceding the year of assessment.

Furthermore, companies are required to pay corporation tax in Singapore on their financial year end. A company can choose its own financial year end depending on its operations; IRAS does not specify the financial year ends of companies.

Start-Up Tax Exemption Scheme

The Singapore government has offered a start-up tax exemption scheme for new companies that offers them some exemption on their chargeable income for the first three years of operations. This tax exemption scheme was introduced to promote entrepreneurship and to help new businesses grow.

The tax exemption applies to new companies for the first three consecutive YAs if they meet the qualifying conditions as outlined on the IRAS website.

From YA 2020 onwards, companies can enjoy:

  • 75% tax exemption on the first $100,000 of their normal chargeable income.
  • For the next $100,000 of income, a further 50% tax exemption is given.
  • Hence, $75,000 is exempted on the first $100,000 of income and a further $50,000 is exempted on the next $100,000. Therefore, the maximum exemption under this scheme for each YA becomes $125,000.

These exemptions are applicable if any of the first three consecutive years fall in or after 2020. This exemption does not apply to the chargeable income from the fourth YA.

Partial Tax Exemption Scheme

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All companies in Singapore can apply for partial tax exemption if they are not claiming the start-up tax exemption scheme. Following YA 2020, qualifying companies can enjoy the following tax exemptions:

  • 75% tax exemption on the first $10,000 of their normal chargeable income
  • For the next $190,000 of normal chargeable income, 50% tax exemption is given.
  • Therefore, for the first $75,000, an amount of $7,500 is exempted from tax while for the next $190,000, a further amount of $95,000 is exempted from tax. The maximum total exemption then becomes $102,500 for each YA.
  • A corporate tax calculator Singapore is available on IRAS website that can help you calculate corporate income taxes for a YA.

CIT Rebate For the Year of Assessment (“YA”) 2024

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In Singapore’s Budget 2024, it was announced that a Corporate Income Tax Rebate (CIT Rebate) of 50% of the total payable corporate tax will be granted to all companies for YA 2024. This step is being taken to help companies manage the increasing costs of doing business. All companies whether they are tax resident or not are eligible for this CIT rebate. Furthermore, the companies that employed at least one local employee in 2023 will also be granted $2,000 in cash payout. This payout is referred to as CIT Rebate Cash Grant. The CIT rebate and cash grant are offered according to the following scheme:

  • If a company meets the local employee condition, it will receive a CIT rebate cash grant of $2,000. Moreover, if its CIT rebate is greater $2,000, it will receive a CIT rebate capped at $40,000. However, if the CIT rebate is less than $2,000, no CIT rebate is given.
  • If local employee condition is not met, it does not receive the CIT rebate cash grant of $2,000. However, it will receive the CIT rebate capped at $40,000 irrespective of how much the CIT rebate was.

The CIT rebate cash grant is offered to small businesses as a means to support them in case they do not qualify for any CIT rebate. The CIT rebate cash grant will be non taxable and companies will receive their cash payout by the third quarter of 2024.

Group Relief

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Another part of the corporate tax scheme in Singapore is the Group Relief. Under this scheme, companies that have organised themselves as multiple holding companies and subsidiaries are allowed to transfer their current year unutilised trade losses, donations and unutilised capital allowances from one company to the other within the group. Hence, the IRAS Group Relief scheme treats multiple companies as a single company, thereby reducing the overall tax burden for the whole group of companies. For the companies to qualify for this scheme, they must both:

  • Be incorporated in Singapore
  • Have the same financial year end
  • Belong to the same group of companies with 75% shareholding threshold.

Merger & Acquisition (“M&A”) Allowance Scheme

The Singapore Corporate Tax Structure also allows another allowance scheme referred to as the Merger & Acquisition (“M&A”) Allowance Scheme. This scheme allows a company that has acquired the ordinary shares of another company some allowances. This M&A allowance is granted to the acquiring company during the period 1 Apr 2010 to 31 Dec 2025. The M&A allowance rate is 25% of the value of the acquisition and is capped at $10 million. To qualify for the allowance, the value of acquisition must have a maximum cap of $40 million. This allowance cannot be deferred and the company must meet the conditions to remain eligible for the allowance for each YA during the 5-year period.

Industry-Specific Tax Incentives

Under the Singapore Income Tax Act, there are certain industry-specific tax incentives offered to companies to support their growth and contribute towards Singapore’s economy. These specific tax incentives are targeted towards the following industries:

  • Financial Services Industry
  • Banks
  • Fund Management Industry
  • Global Trading Companies
  • Shipping and Maritime Industry
  • Tourism Industry
  • Event Organisers
  • eCommerce Industry
  • Approved Ventures
  • Insurance Companies
  • Headquarters Activities
  • Processing Services Company
  • Legal Firms
  • Research & Development, Innovation, and Product Development Activities

Singapore Tax Treaties

With Singapore being a politically neutral ground, double tax treaties (DTTs) has been established with more than 80 countries worldwide to prevent double taxation of corporate incomes. Notable treaties include- Portugal, France and Sweden in the European nations. In Asia, Singapore has a limited tax treaty with Hong Kong, as well as DTTs with Vietnam and Indonesia. Furthermore, double tax treaties have also been forged with Middle Eastern countries like Saudi Arabia, Turkey and Egypt. These treaties promote international trade and investments while avoiding double corporate tax obligations, to foster an ideal environment for cross-border businesses. This helps businesses to expand their trade and investment opportunities by avoiding paying double corporate tax on their chargeable incomes.

This relief from double taxation is offered in the form of tax credits, tax exemptions, or reduced withholding tax rates. Through the Double Tax Agreement, the Singapore government has created bilateral agreements with many countries to help businesses avoid double taxation.

Double Tax Deduction For Internationalisation Scheme

Another key incentive of the Singapore corporate tax system is the Double Tax Deduction For Internationalisation Scheme. Companies wishing to expand their operation overseas can enjoy double tax deductions on qualifying expenses from 1 Apr 2012 to 31 Dec 2025. This scheme helps facilitate market expansion and investment development activities. Under the scheme, the automatic double tax deduction is capped at $100,000 per each YA for qualifying expenses during the period from Apr 2012 to YA 2018. However, this double tax deduction is capped at $150,000 per YA for expenses incurred from YA 2019 to 31 Dec 2025.

Conclusion

Singapore business organisations can use various incentives and benefits to reduce their tax burden and tap into a thriving business landscape to attract global investors. Since the country has the most beneficial business environment globally, businesses are mainly pouring in and setting up offices all over Singapore.

The tax exemptions and incentives imposed on capital gains and dividends should be enough to put Singapore on the map as the perfect destination for new start-up companies. As one of the most favourable tax jurisdictions in Asia, most companies will find Singapore’s low headline tax rate more than acceptable.

With so many benefits and incentives, it’s hard to find a reason not to relocate your business to Singapore. The country is among rare business benefactors that allow companies to avoid the burden of paying extra taxes on foreign-sourced income for registering and incorporating in Singapore.

Low company tax rate Singapore, numerous benefits, and a favourable corporate climate make the city-state the leading destination for countless companies. Although hiring tax professionals to calculate your corporate taxes isn’t mandatory, we recommend utilizing professional assistance to ensure full compliance with Singapore taxation laws. Startup Business Consultant Singapore offers corporate tax filing and company incorporation services to ensure compliance with regulations in Singapore. Speak with us today!