Country Tax Guide www.bakertillyinternational.com
Facts and figures as presented are correct as at 15 August 2014. Corporate Income Taxes Singapore has a territorial tax system. Resident companies, defined as those whose management and control are exercised in Singapore, and non-resident companies are generally subject to tax on: income earned or accrued in Singapore, and foreign source income remitted to Singapore, subject to the terms of any relevant double tax treaty. The corporate income tax rate is 17%. Companies are generally exempt from corporate income tax on 75% of the first S$10,000, and 50% of the next S$290,000, of chargeable income. Qualifying, newly incorporated companies are entitled to a corporate income tax exemption on the first S$100,000, and on 50% of the following S$200,000, of chargeable income in each of their first three consecutive trading years. This incentive is not granted to companies incorporated after 25 February 2013 if their main business activity relates to investment holdings or property development for sale, investment, or both. For the 2013, 2014 and 2015 years of assessment, companies receive a 30% corporate income tax rebate, subject to a cap of S$30,000. Income received by non-resident companies that is subject to a final withholding tax cannot benefit from the rebate. There is no alternative minimum tax in Singapore. Dividends paid by resident companies are generally tax exempt in the hands of shareholders. Capital gains are not subject to tax in Singapore. Trading losses may generally be carried forward indefinitely and offset against future income if there has been no substantial change in shareholders and shareholdings on the relevant dates (the shareholding test). The relevant dates for trading losses are 31 December of the year in which the loss was incurred and 1 January of the year in which the loss is to be utilised. Unutilised donations may be carried forward for up to five years, subject to the shareholding test and relevant dates as applicable to trading losses.
Country Tax Guide Singapore Unused capital allowances may generally be carried forward indefinitely and offset against future income if the shareholding test is satisfied on the relevant dates, and there has been no change in the company s main trading activities between the relevant dates (same business test). The relevant dates for unused capital allowances are 31 December of the year in which the capital allowance arose and 1 January of the year in which it is to be utilised. Current year trading losses and unused capital allowances up to a combined total of S$100,000 may generally be carried back for one year, subject to satisfaction of the shareholding test and same business test (as above). The current year trading losses, unutilised donations and unutilised capital allowances of one company may generally be utilised for tax purposes by another company in the same group with the same accounting year end. Two companies are part of the same group if at least 75% of the shares of one Singapore company are held by another Singapore company, or at least 75% of the shares in each of two Singapore companies are owned by a third Singapore company. Consolidated returns are not available in Singapore, even for companies eligible for group relief. The tax year ends on 31 December. Companies may use a different accounting period. Income tax is assessed in the year following the accounting year end. Companies are generally required to submit an estimate of their chargeable income to the Inland Revenue Authority of Singapore (IRAS) within three months of their accounting year end. This requirement does not apply to companies whose annual revenue does not exceed S$1m if their estimated chargeable income is nil. Tax returns are due for filing by 30 November of each year (15 December for small companies, as defined, using Form C-S and filing electronically). For a large company with an accounting year ending on 31 December 2014, the estimate of chargeable income is due by 31 March 2015 with the tax return being due by 30 November 2015. Corporate income tax is assessed by the IRAS and a notice of tax due is issued to the taxpayer. Corporate income tax must generally be paid within one month of the issue date of the notice, or in monthly instalments (maximum of 10) for companies that filed their estimate of chargeable income by the required deadline, subject to approval by the IRAS.
Personal Taxes Resident and non-resident individuals are generally subject to income tax in Singapore on all income accrued in, or derived from, Singapore. Any income arising from sources outside Singapore and received in Singapore by a resident or non-resident individual is generally exempt from income tax. Resident individuals are taxed at the following rates: Chargeable Income Rate (%) Every dollar of the first S$20,000 0 Every dollar of the next S$10,000 2 Every dollar of the next S$10,000 3.5 Every dollar of the next S$40,000 7 Every dollar of the next S$40,000 11.5 Every dollar of the next S$40,000 15 Every dollar of the next S$40,000 17 Every dollar of the next S$120,000 18 Every dollar exceeding S$320,000 20 Resident individuals that were non-resident for the preceding three years of assessment may be eligible for the Not Ordinarily Resident (NOR) scheme. Subject to qualifying conditions, the NOR scheme provides beneficial tax treatment for a period of five years. Tax benefits include non-taxation on the proportion of Singapore employment income corresponding to the number of days spent outside Singapore for business purposes, and a tax exemption on the employer s contribution to an overseas pension fund in respect of the employee. An individual benefiting from the NOR scheme is not required to remain resident in Singapore for the five year NOR duration. Another special tax scheme, the Area Representative scheme, is available to qualifying employees of a foreign employer that are based in Singapore for regional duties. In respect of employment income accrued in or derived from Singapore, nonresident individuals are generally taxed at a flat rate of 15%, or at the tax rates applicable to resident individuals, whichever results in the higher tax burden. Subject to certain exceptions, the short-term employment income (60 days or less) of non-residents may be exempt from tax. All other income of nonresidents, including directors fees, is generally taxed at the rate of 20%.
Country Tax Guide Singapore Capital gains are not subject to tax in Singapore. There are no inheritance, estate or gift taxes in Singapore; however, stamp duty may apply (see Stamp duty below). There is no wealth tax in Singapore. Employment Related Costs and Taxes Payroll taxes A general payroll tax is not collected in Singapore. However, employers may be subject to a skills development levy in respect of their employees at the rate of 0.25% on an employee s salary of up to S$4,500 per month, or S$2, whichever is greater. Employers are also required to pay a foreign worker levy in respect of employees working under a work permit, subject to possible exemptions. The levy ranges from S$250 to S$950 per month depending on certain factors, including the business sector and the employee s skill level. Social security taxes Employers and employees are generally required to make social security contributions to the Central Provident Fund (CPF), which covers retirement, healthcare, home ownership, family protection and asset enhancement. Contribution rates for employers and employees vary depending upon a number of factors, including salary and wage minimums and ceilings, age and residency/citizenship. Fringe benefits Fringe benefits provided to employees are generally treated as part of the employee s salary and are generally taxed accordingly. Certain tax reductions and exemptions to full taxation may apply, including in relation to the air travel of employees for work and home visits.
Withholding Taxes on Payments Abroad The following withholding tax rates generally apply to payments made to nonresident companies and non-resident individuals, subject to possible exemptions and reductions under Singapore legislation or under a double taxation agreement: % Dividends 0 Interest 15 Rental income 15 Fees for technical services 17* Fees for management services 17* Royalties 10 * Where such payments or directors fees are made to non-residential individuals, the withholding tax rate is generally 20%. Exceptions include payments to non-resident professionals or public entertainers, where the withholding tax rate is 15%. Goods and Services Tax (GST) GST is levied on the supply of goods and services in Singapore and on the importation of goods into Singapore. Trading entities which are required to be registered for GST must generally charge their customers GST of 7% on the value of their supplies. The registration threshold for GST purposes is an annual turnover exceeding S$1m. Businesses not reaching this threshold may apply to register for GST voluntarily. Some supplies are zero rated, including exports of goods and international services. Certain supplies are GST exempt, including sales and leases of unfurnished residential property, imports and supplies of investment grade gold, silver and platinum, and certain financial services. Registered traders may recover the GST with which they themselves are charged on their purchases of goods and services if all qualifying conditions are satisfied.
Country Tax Guide Singapore Other Taxes Property tax An annual property tax generally applies to the owners of immovable property in Singapore based on the assessed value of property. The assessed value is the estimated annual rental value of the property. The progressive tax rates for residential properties are 10% to 19% (0% to 15% for owner-occupied properties). The top rates of 19% and 15% will be increased to 20% and 16% respectively from 1 January 2015. Residential land, commercial buildings and industrial buildings are generally subject to property tax at the rate of 10%. Stamp duty Stamp duty is generally levied on certain instruments of transfer, including sales and certain transfers of immovable property and sales of stocks and shares. Stamp duty rates vary depending on, for example, the nature of the document and the value of the property. Excise tax Excise taxes are imposed on certain goods, including tobacco, alcohol and petroleum products. Gambling activity duties and casino taxes Duties ranging from 25% to 30%, generally apply to a number of gambling activities, including totalisator or pari-mutuel betting, sports betting, sweepstakes and private lotteries. Casinos operating in Singapore are subject to tax on their gross gaming revenue at the rate of 5% or 15%, depending on the type of player.
Tax Incentives for Businesses Research and development (R&D) expenditure Singapore provides tax incentives for R&D activities. These currently include tax deductions for R&D expenditure in respect of eligible projects. The National Research Foundation (which is part of the Prime Minister s office) is responsible for developing R&D strategies and policies and for funding R&D activities. The Research Incentive Scheme for Companies (RISC) funds R&D activities that are based on technology. Pioneer incentive Companies that qualify for the pioneer industry incentive are exempt from corporate income tax for a period of up to 15 years. The Singapore Minister of Finance may grant pioneer status to an industry, service or product based on the product investment levels and the skills and technology employed. Development and expansion incentive Companies engaged in a qualifying activity (including certain manufacturing activities, engineering and technical services, and industrial design development or production) may apply to the Minister of Finance for approval as a development and expansion company. Such companies benefit from a reduced corporate income tax rate, as low as 5%, on its expansion income from qualifying activities for a period not exceeding 10 years, which may be extended by the relevant Minister to a maximum total period of 40 years. Regional/international headquarters award The regional/international headquarters award grants a reduced corporate income tax rate for the qualifying income of businesses that establish their headquarters management activities in Singapore. A considerable amount of headquarter activities must be conducted in Singapore, which can include general management and administration, strategic business planning and development, and technical support services.
Country Tax Guide Singapore Integrated investment allowance (IIA) The IIA grants a capital allowance (in addition to the standard allowances) based on the percentage of expenditure incurred on approved equipment that is placed outside of Singapore in respect of an approved project. Productivity and innovation credit (PIC) The PIC applies to businesses that invest in productivity and innovation during the tax years applicable to years of assessment 2011 to 2018 in the following six areas: R&D, intellectual property right registration, intellectual property right acquisition, acquisition or leasing of certain automation equipment, employee training and certain design projects. The deduction amount is 400% of qualifying expenditure, up to a maximum of S$400,000 per investment area (up to a maximum of S$600,000 per investment area for qualifying SMEs for years of assessment 2015 to 2018). Mergers and acquisitions scheme (M&A scheme) The M&A scheme grants an allowance equalling 5% of the value of an acquisition or merger, up to a maximum of S$5m per year. Other benefits of the scheme include relief from stamp duty and a possible double deduction of transaction costs. Financial services There are several incentives available to those operating in the financial services sector. These include the Finance and Treasury Centre Incentive which grants reduced corporate income tax rates for certain qualifying income, and the Financial Sector Incentive scheme which grants reduced corporate income tax rates for certain qualifying income for companies in the financial sector. Other tax incentives Incentives are also administered by other agencies, including International Enterprise Singapore, the Infocomm Development Authority, the Maritime and Port Authority of Singapore, and the Singapore Tourism Board.