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Step 5: Taxation

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Singapore has one of the most competitive tax regimes in the world and a number of interesting tax incentive schemes to attract investors. However, any research prior to where to establish a business operations would not be complete without a thourough investigation of the tax impact. This should reflect the following:

  • the tax aspects of the investor's home country
  • the tax aspects in the country where the investment is made
  • how the above tax regimes interact
  • the tax impact to the individual taxation of executives

 Singapore adopts a 'territorial' basis of taxation, i.e. companies and individuals are taxed on Singapore sourced income. Foreign source (‘offshore' ) income is not taxable until received in or remitted into Singapore.

 Tax exemption applies on foreign-sourced dividends, foreign branch profits, and foreign-sourced service income of the following conditions are met:

 The headline tax rate of the foreign country from which the income was received is at least 15%

  • The foreign income was subject to tax in the foreign country from where it was received

 A company is a tax resident of Singapore if the control and management of its business is exercised in Singapore. Foreign income earned by a Singapore company may be subjected to taxation twice - once in the foreign country, and a second time when the foreign income is remitted into Singapore.

Singapore has signed several Double Taxation Agreements (DTA) which serve to relieve double taxation of income and provide for reduction or exemption of tax on certain types of income.

See here for List of Singapore's DTAs.

Taxation Guide

Singapore Income Tax Rates Tax
Incentives Schemes For Investors
Tax Rates and Exemptions For Companies
Tax Rates and Exemptions For LLP
Tax Rates and Exemptions LP
Tax Rates and Exemptions For Partners
Tax Rates and Exemptions for Sole Proprietors
Withholding Tax
GST

Singapore Income Tax Rates

Tax Info valid since 2007 - Resident Rates
Chargeable Income in SGD on the first Tax Rate %
0- 20,000 0
20,001 - 39,000 3.5
30,001 - 40,000 5.5
40,001 - 80,000 8.5
80.001 - 160,000 14
160,001 - 320,000 17
more than 320,000 20

Non-residential individuals are taxed at 15% or resident rate (see above) whichever gives rise to a higher tax amount.

Director's fees, consultation fees & all other income are taxed at 20%.

IRAS Tax Calculator

Tax Incentive Schemes for Investors

Below are Singapore's current investment tax incentive schemes explained:

  • Tax Concessions for Research and Development (R&D)
  • Pioneer Scheme for Manufacturing or Services provides tax exemption on income from qualifying activities - suitable for Manufacturing, Services, GHQ
  • Development and Expansion Incentive provides reduced tax 5% or 10% on incremental income from qualifying activities - suitable IP Hub, Manufacturing, Service,s RHQ/IHQ*
  • Investment Allowance provides allowance of 30% or 50% of approved fixed capital expenditure on top of normal 100% capital allowance - suitable for Manufacturing
  • Approved Holding Company Status provides certainty of capital gains treatment for disposal of approved subsidiaries of at least 50% shares held for at least 18 months - suitable for RHQ/IHQ with holding function
  • RHQ/IHQ with holding function provides reduced tax 5% or 10% on fees, interest, dividends and gains from qualifying services/activities and Withholding Tax Exemption on interest payments on loans from banks and network companies for Finance and Treasure Center activities - suitable for Finance and Treasure Center
  • Approved Royalties Incentive provides reduced WHT 0% or 5% on royalty payments to access advanced technology and know-how -suitable for Finance and Treasury Centers and Manufacturing
  • Approved Foreign Loan provides reduced WHT 0% or 5% on royalty payments to access advanced technology and know-how - suitable for Manufacturing
  • S19B writing-down allowances for IP acquisition provides automatic 5-year write-down if legal and econ IPR are acquired EDB's approval is required if only econ IPR is acquired - suitable for IT Hub
  • S19C writing-down allowances for R&D cost-sharing provides 1-year write-down for R&D cost-sharing payments - suitable for Manufacturing and IT Hub

* Regional Head Quarter, International Head Quarter

See here for interpretation of headquarter status

10 Reasons for setting up a headquarter in Singapore