Corporate Taxation
A corporation is generally liable for Singapore income tax on all income accruing in, or derived from Singapore, as well as foreign sourced income remitted or deemed remitted into the country.
Foreign dividends, branch profits and service income (attributable to a foreign permanent establishment of the Singapore tax resident company) received by a Singapore tax resident company are exempt, provided these are derived from a jurisdiction operating corporate tax rates of at least 15% and have been subjected to tax in that jurisdiction.
Income is taxable in Singapore if the source of income comes from Singapore. Branches of foreign corporations are usually viewed to be carrying on business in Singapore and are as such, considered to have derived Singapore sourced income.
In addition, the Income Tax Act deems interest and other charges related to indebtedness, royalties, rents, technical fees and management fees to be derived from Singapore if these are either borne by a Singapore resident entity or permanent establishment or are deductible against Singapore-sourced income. Foreign companies receiving such payments from Singapore may be subject to withholding taxes.
Generally, resident and non-resident companies are treated in the same manner except that non-resident companies may not benefit from double taxation agreements that Singapore has entered into with other countries.
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Transfer Pricing
Transfer pricing (TP) is the pricing of goods, services and intangibles between related parties. IRAS endorses the arm’s length principle as the standard to guide transfer pricing.
Anti-Avoidance Legislation
In line with developments in other countries, the Singapore Income Tax Act gives the tax authorities wide powers to counteract any scheme of arrangement to avoid tax.
Remittances
A Singapore tax resident company can enjoy tax exemption on its foreign-sourced dividend income, foreign branch profits and foreign-sourced service income remitted or deemed remitted into Singapore if the following conditions are met:
Taxation of Foreign Corporations
The income of a branch of a foreign company is generally assessed in the same way and subject to the same tax rate as that of a locally incorporated subsidiary. The Comptroller requires transactions between the branch and head office to be conducted at arm’s length basis.
Capital Gains Tax
Dividend and Corporate Distributions
There is no dividend withholding tax.
Withholding Taxes
In the case of non-resident recipients, tax may be collected by deduction at source.
Tax Return and Compliance
The chargeable income of a company for each fiscal year is based on the result of its financial year ended in the preceding fiscal year.
Groups
A loss-making company may elect to transfer its current year unutilised losses and capital allowances to set off the taxable profiles in another Singapore company in the same group.
Losses
Tax losses may be carried forward to set off against income of future years subject to the shareholders’ continuity test. The test requires there to be no substantial change (i.e. more than 50%) in the ultimate beneficial shareholders and their shareholdings in the entity.
PIC Bonus
In addition to the existing PIC scheme, a PIC bonus of up to a total of $15,000 from YA 2013 to YA 2015 will be granted to businesses such as sole proprietorships, partnerships and companies that have spent a minimum of $5,000 in PIC (net of grants and subsidies), with active business operations in Singapore and have employed at least 3 local employees (Singapore or Singapore permanent residents with Central Provident Fund (CPF) contributions) excluding sole-proprietors, partners under contract for service and shareholders who are directors of the company. The PIC Bonus is taxable.
PIC + Scheme for Small and Medium Enterprises
The above scheme is available to Small and Medium Enterprises (SME) for expenditure incurred in YA 2015 to YA 2018.
Productivity and Innovation Credit (PIC)
Productivity and Innovation Credit (PIC) provides enhanced tax deductions/allowances (net of grant or subsidy) for investments in a broad range of activities along the innovation value chain.
Corporate Income Tax Rebate
To relieve business costs, a 50% and 20% corporate income tax rebate of tax payable will be granted in YA 2017 and YA 2018 respectively. The capped amounts for YA 2017 and YA 2018 will be $25,000 and $10,000 per YA respectively.
Tax Deductible Expenditure
Singapore income tax is imposed on the net income of a corporation after deducting expenditure and capital allowances.
Tax Rate
The corporate tax rate is 17%.
Year of Assessment (YA)
Year of Assessment refers to the year in which income tax is calculated and charged as defined by the IRAS for individuals and companies.
Tax Residency
A company is tax resident in Singapore if the control and management of its business is exercised in Singapore. As a general rule, the place where the Board of Directors manage and control the company’s business and hold board meetings is the place where the company is tax resident.