Singapore is often referred to as an example when it comes to taxes levied on corporations because the city-state continues to reduce the taxation of companies and keeps introducing incentives in order to attract foreign investors. Singapore applies a flat tax rate to corporations that is considered one of the world’s lowest corporate taxes.
Starting January 2013, Singapore enabled a single-tier corporate tax system. This system ensures companies are only taxed once on their chargeable incomes, without the appliance of other taxes on dividends. Singapore does not levy any capital gains tax, either.
Since 1997, Singapore has continued to decrease the tax rates applied to corporations from 27% to 17%. The 17% rate is the city’s headline tax rate, but thanks to all double taxation treaties Singapore has and other exemptions also, the effective corporate tax rate is lower. All companies in Singapore may apply for tax exemptions that reduces the corporate tax to approximately 8.5% for taxable income of maximum 300,000 S$ per year, all other income exceeding this sum being charged with the 17% rate.
Singapore companies will benefit from tax incentives provided that certain conditions are satisfied. These incentives apply mostly to small and medium-sized enterprises in Singapore. The corporate tax is 0% for the first 100,000 S$ taxable income during the first three years for new incorporated companies in Singapore, that are also registered for taxation with the IRAS (Inland Revenue Service in Singapore) and has a maximum number of 20 shareholders and at least one of them holds at least 10% of the total shares.
The fiscal year for companies in Singapore to file their annual financial statements is the 31st of December. All companies must submit accounting documents, but they must also file a Form C document that represents a declaration showing the adjustment to the net profit and loss based on which the chargeable income in calculated. Many companies in Singapore request the accounting services of professionals when submitting their annual financial statements.
You can contact our specialists in company formation in Singapore for information about the taxation system and incentives for foreign investors.