10 things you should know about Tax in Singapore

1. Corporate tax

While Singapore has one of the lowest corporate tax rate of 17% in Asia, most companies pay an effective tax rate of up to 8.3% on the first S$200k of their taxable income. Companies with qualifying activities (eg. fund management, banking, regional headquarters, treasury centre, oil trading, M & A, R & D, etc) and subject to meeting certain conditions, can apply for applicable tax incentives available in Singapore. 

2. Group relief 

A Singapore company is allowed to transfer excess current year trade losses, tax depreciation, and approved donations to another company within the same group if certain conditions (eg. 75% ownership requirement) are satisfied.

3. Personal tax

Generally, non-resident persons are taxed on Singapore sourced income if they exercise employment in Singapore for more than 60 days in a year unless they are directors, public entertainers, trainers, etc. Depending on tax residence status of the individual, one can be taxed on Singapore sourced or offshore income that is remitted into Singapore (with certain exceptions) up to a max of 22%. Employers (local or foreign) have reporting obligations as well.

Individuals can legitimately reduce the personal tax bill through tax planning.

4. Withholding tax

Certain payments to non-residents attract Singapore withholding taxes. The onus is on the payors to deduct the tax and pay to the Inland Revenue Authority of Singapore (“IRAS”) by the 15th of the second month from the date of payment to the non-residents, failing which late payment penalties up to 20% of the tax which should be withheld will be applicable.

5. Capital gains tax 

There is no capital gains tax in Singapore. However, if an individual enters into a series of capital transactions, IRAS may take the view that the individual is carrying on a business and assess that person to income tax accordingly.

6. Transfer pricing for related party transactions

All related party transactions must be at arm’s length. A 5% surcharge on any price adjustment made by IRAS will be applicable on the Singapore company if the rule is not complied with. In addition, Singapore companies with annual revenue exceeding SG$10 million must prepare transfer pricing documentation (with certain exceptions) failing which a penalty up to S$10,000 may be imposed by the IRAS.

7. GST

7% GST is applicable on the supply of goods and services made in Singapore by a taxable person in the course or furtherance of one's business. This rate would be increased to 9% sometime between 2021 and 2025. 

The only exemptions from GST are prescribed financial services (including life insurance), the sale or rental of residential properties, and the import and local supply of investment precious metals (IPM). Zero-rating only applies to the export of goods and international services.

8. Stamp duty

Singapore imposes stamp duty on acquisition/transfers of real properties, leases, mortgages, stock and shares. Different rates apply to different instruments.

9. Country by country (CbC) reporting

For income years beginning on or after 1 January 2017, Singapore-headquartered multinational enterprises with global revenues exceeding SGD 1,125 million have to submit to the IRAS an annual CbC report in every tax jurisdiction where they operate. The IRAS will exchange CbC reports with jurisdictions with which Singapore has entered into bilateral agreements for the exchange of CbC reports.

10. CFC Rules, Thin capitalization, Inheritance, net wealth/worth, estate and gift taxes

Singapore does not impose inheritance, net wealth/worth, estate and gift taxes. There are also no thin capitalization and Controlled Foreign Companies (CFC) rules in Singapore.