Singapore is fast becoming the business city of choice. Its economy has been defined by its position as a small country with limited natural resources and a relatively small population, located strategically in the heart of Asia Pacific.

Singapore offers one of the most efficient corporate and personal tax regimes in the world. Singapore has stable political institutions, world-class infrastructure, well developed capital markets, highly educated work force, rich cultural traditions and economic ties with other countries. Singapore has indeed become a truly vibrant, cosmopolitan, and international global business centre.

Singapore has established avoidance of Double Taxation Agreements ("DTA") with other international jurisdiction. A DTA also makes clear the taxing rights between Singapore and her treaty partner on different types of income arising from cross-border activities. These agreements also provide for reduction or exemption of tax on certain types of income arising from cross-border activities.

MAIN TYPES OF UK BUSINESS ENTITIES

Private Limited Companies Read more

A company limited by shares is a business entity registered under the Companies Act, Chapter 50. It has a legal personality i.e. it has rights to own properties, can sue or be sued. It usually has the words ‘Private Limited’ as part of its name.

There must be at least 1 shareholder and 1 director of the company who is above 18 years old and be one of the following:

  • Singapore citizen.
  • Singapore Permanent Resident.
  • Employment pass holder.

A company may be registered as a private company if it does not have more than 50 shareholders. Otherwise, the company must be registered as a public company.

Singapore Branch Office Read more

A Singapore Branch of a foreign company is not a separate legal entity as it is considered to be merely an extension of a company incorporated outside Singapore. Therefore, its entire assets belong to its head office and its liabilities may be enforced against all the assets of the head office. Any potential claims (whether in the country of incorporation, Singapore or elsewhere) against Singapore branch or head office may, therefore, have impact on the financial of Singapore branch or head office.

Representative Office Read more

Foreign companies that are keen on exploring the viability of doing business in Singapore may wish to set up a Representative Office ("RO"). An RO has the benefit of allowing a foreign company to test out the business environment in Singapore before committing to any investment decisions. However, foreign companies wanting to maintain long term operations in Singapore will be required to incorporate as legal entities with the Accounting and Corporate Regulatory Authority ("ACRA") in Singapore.

An RO is a temporary facility provided to foreign companies to test the business environment in Singapore. It must confine its activities to market research, feasibility studies and liaison work on behalf of its parent company. The RO must not:

  • engage in any trading (including import & export) or business activities, whether carried out directly or on behalf of its parent company;
  • lease warehousing facilities. Any shipment/transhipment or storage of goods must be handled by a local agent or distributor appointed by its parent company;
  • lease its office to other establishments for a fee;
  • enter into business contract, issue invoice/receipt, open/receive letters of credit and contracts on behalf of its parent company or provide services for a fee.
  • the RO must appoint a staff from the HQ of the parent company or a Singapore employee of the parent company. The appointed representative’s main function is to represent the parent company.

Limited Liability partnership ("LLP") Read more

A LLP is a partnership with limited liability. It is a legal entity and can enter into contract and hold property. It combines the benefits and flexibility of a partnership with that of private limited companies.

The main advantages are that the personal assets of the partners are protected. Owners are not personal liable for the wrongful acts of other owners but can be personally accountable for debts and losses resulting from their own acts. Any changes to the LLP do not affect its existence, rights or liabilities.

AUDIT AND REGULATORY ENVIRONMENT

All Singapore Companies must comply with the statutory filing requirements with Accounting and Corporate Regulatory Authority (“ACRA”) and Inland Revenue Authority of Singapore ("IRAS").

Companies Act Read more

Under Singapore Companies Act ("the Act"), a private limited company is required to maintain a proper set of books that is to be presented to its shareholders at the Annual General Meeting ("AGM"). A private limited company is required to hold its first AGM within 18 months of its incorporation, subsequent AGMs must be held every calendar year and be held within a period of not more than 15 months after the last preceding AGM or within six months from the date of the financial year end, whichever is earlier.

In addition, the Act requires any Company without an overseas branch register to lodge the Annual Return together with the audited/unaudited accounts in XBRL format with ACRA within one month after the AGM.

Further, for an exempt private company (i.e. one whose shareholders are all private individuals and the total number of shareholders is less than 20), where its annual turnover is less than S$5million, it can choose whether it wants to have its accounts audited or not. For companies which are non-exempt private company (e.g. with corporate shareholder) or whose annual turnover exceeds S$5million, auditing of its accounts is mandatory.

Income Tax Act Read more

Under Singapore Income Tax Act, a private limited company is required to file an estimated chargeable income to IRAS within 3 months from the end of its financial year. The actual income tax return is due by 30th November of each assessment year.

INDUSTRY INCENTIVES

Singapore Economic Development Board (“EDB”) offers various incentives for businesses as follows:

1. Development and Expansion Incentive ("DEI") Read more

The DEI provides a reduced corporate tax rate on incremental income from qualifying activities.

2. International / Regional Headquarters Award ("IHQ / RHQ") Read more

The IHQ and RHQ provide a reduced corporate tax rate on incremental income from qualifying activities.

3. Pioneer Incentive Read more

The Pioneer Incentive provides a corporate tax exemption on income from qualifying activities.

4. Land Intensification Allowance ("LIA") Read more

The LIA provides an initial tax allowance of 25% and annual tax allowance of 5% on qualifying capital expenditure incurred for the construction or renovation/extension of a qualifying building or structure.

5. Integrated Investment Allowance ("IIA") Read more

The IIA provides an allowance based on a percentage of approved fixed capital expenditure to be incurred on productive equipment that is placed outside Singapore for an approved project. This allowance is granted on top of the normal capital allowance.

6. Mergers & Acquisitions ("M&A") Scheme Read more

The M&A Scheme provides an allowance of 5 percent of the value of acquisition, subject to a maximum of $5 million for each year of assessment. It also provides deductibility of transaction costs and stamp duty relief. EDB's approval is required for the waiver of the condition that the ultimate holding company for the group must be incorporated and tax resident in Singapore.

7. Finance & Treasury Centre ("FTC") Tax Incentive Read more

The FTC Tax Incentive provides a reduced corporate tax rate on fees, interest, dividends and gains from qualifying services and activities. It also provides a withholding tax exemption on interest payments on loans from banks and approved network companies for FTC activities.

8. Aircraft Leasing Scheme ("ALS") Read more

The ALS provides a reduced corporate tax rate on income accruing in or derived from Singapore from leasing of aircraft or aircraft engine and prescribed activities. It also provides automatic withholding tax exemption on qualifying payments on qualifying foreign loans for the purchase of aircraft or aircraft engines.

9. Research Incentive Scheme for Companies ("RISC") Read more

The RISC awards grants to develop research and development capabilities in strategic areas of technology.

10. Initiatives in New Technology ("INTECH") Read more

The INTECH Scheme awards grants to encourage capability development in applying new technologies, industrial R&D and professional know-how.

11. Land Productivity Grant ("LPG") Read more

The LPG seeks to support companies which are interested to optimize land use through domestic or overseas relocation.

PRINCIPAL TAXES

Corporate Tax

Currently, company with at least one individual shareholder who holds at least 10% of the shares enjoys the following benefits:

  • Full tax exemption of the first chargeable income of S$100,000 per year of assessment, for the first three years of assessment
  • Partial tax exemption of the next chargeable income of S$200,000, which 50% of the chargeable income is tax exempt, each year of assessment
  • The corporate tax rate is 17% (with effect from Year of Assessment 2010). Hence, the tax payable for the chargeable income of the first S$300,000 is S$17,000 (which the effective tax rate is 5.67%).

However in the Singapore Budget announced by Deputy Prime Minister and Minister for Finance on 25 February 2013, the full tax exemption for the first chargeable income of S$100,000 is no longer available for companies incorporated from 26 February 2013 with its principal activities as investment holding. This means that if the companies are set up to own and rent properties, these companies will not entitle to the full tax exemption for the first chargeable income of S$100,000. Notwithstanding this, these investment holding companies are entitled to partial tax exemption as follows:

  • For the first S$10,000 of chargeable income - 75% of its chargeable income is tax exempted
  • For the next S$290,000 of chargeable income - 50% of its chargeable income is tax exempted

For non-exempt private limited company, i.e. company with a corporate shareholder, the company also enjoys partial tax exemption as follows:

  • For the first S$10,000 of chargeable income - 75% of its chargeable income is tax exempted
  • For the next S$290,000 of chargeable income - 50% of its chargeable income is tax exempted

This partial exemption continues to be available for all companies (including the newly set-up exempt private company after its 3rd year) until it is being revoked by the government.

Based on the chargeable income of the first S$300,000, the tax payable is S$25,075 (which effective tax rate is 8.36%).

Indirect Tax (Sales Tax)

Goods and Services Tax ("GST") was introduced in Singapore on 1 Apr 1994. Currently, GST registered companies are required to charge and account for GST at 7% on all local sales of goods and services unless the sale can be zero-rated or exempted under the GST law. Read more

It is compulsory for businesses to come forward to register for GST when their taxable turnover exceeds S$1million per year. Businesses that do not exceed S$1million in taxable turnover may register for GST voluntarily.

This GST that they charge and collect is known as output tax, which has to be paid to IRAS. GST incurred on business purchases and expenses (including import of goods) are known as input tax.

Personal Income Tax

You need to pay income tax on all income you have earned / received in Singapore.

Overseas income which was received in Singapore (including those paid into a Singapore bank account) on or after 1 Jan 2004 is not taxable. This does not apply to overseas income received in Singapore through partnerships in Singapore. Read more

Income tax is assessed based on a preceding year basis. For example, for Year of Assessment (YA) 2012, you will be taxed on the income earned in year 2011.

Different tax rates apply to tax resident and non-resident individuals.

You will be treated as a tax resident for a particular Year of Assessment (YA) if you are a:

  • a Singaporean who normally resides in Singapore except for temporary absences; or
  • a Singapore Permanent Resident (SPR) who has established your permanent home in Singapore; or
  • a foreigner who has stayed / worked in Singapore (excludes director of a company) for 183 days or more in the year before the YA.

Otherwise, you will be treated as a non-resident of Singapore for tax purposes.

Tax rates for resident individuals from YA 2012 onwards

Chargeable Income 

Rate (%)

Gross Tax Payable ($)

First $20,000
Next $10,000

0
2

0
200

First $30,000
Next $10,000

-
3.50

200
350

First $40,000
Next $40,000

-
7

550
2 800

First $80,000
Next $40,000

-
11.5

3 350
4 600

First $120,000
Next $  40,000

-
15

7 950
6 000

First $160,000
Next $  40,000

-
17

13 950
  6 800

First $200,000
Next $120,000

-
18

20 750
21 600

First $320,000
Above $320,000

-
20

42 350

For YA 2013, a personal tax rebate of up to a maximum of $1,500 is granted as follows:

  • 30% rebate for taxpayers below 60 years of age as at 31 Dec 2012
  • 50% rebate for taxpayers 60 years of age and above as at 31 Dec 2012.

Tax rates for non-resident individuals

Employment income

Your employment income is taxed at 15% or resident rate, whichever gives rise to a higher tax amount.

Director's fees, consultation fees & all other income

The director's fees, consultation fees and all other income that you received will be taxed at 20% from YA 2005 onwards.

Capital Gains Tax

Capital gains in Singapore are not taxable.