Introduced in the country in 1947, the tax code in Singapore represents a heritage from the rule of the British Empire, being modeled after the Model Colonial Territories Income Tax Ordinance of 1922. As years went by, the tax policy in Singapore adapted to the global developments, the tax code in Singapore being continuously refined and developed.
Currently, the tax code in Singapore is ruled by the Income Tax Act (ITA), the Economic Expansion Incentives Act (EEIA), the Goods and Services Tax (GST) Act and the Stamp Duties Act.
The main provisions of the Singapore Income Tax Law
The Tax Code is the most important law governing the imposition of levies in Singapore. It is made of several parts, each with its own provisions in order to cover all possible scenarios related to the taxation of local and foreign citizens and companies.
Here are some of the main provisions of the Tax Code in Singapore:
- The Income Tax Act and its imposition on various types of incomes,
- Exemptions from the income tax for certain types of activities,
- Deductions available under the income taxes paid in Singapore,
- Capital allowances granted by the Inland Revenue Authority,
- Acknowledgment of certain incomes and their taxation,
- The income tax rates applicable to all types of revenues.
The Income Tax Law is a very complex set of acts which provides for how Singapore nationals and foreigners are taxed which is why if you need assistance in such matters you request the services provided by our accounting firm.
The tax authority in Singapore
In order to collect taxes, Singapore needed a governing authority which is the Inland Revenue Authority (IRAS). As a matter of fact, the first chapter of the Income Tax Law provides for the nomination of the IRAS and its attributions.
According to the law, IRAS was enabled in 1960 when was first called the Inland Revenue Department. It encompasses various agencies in charge of collecting and administering all types of taxes in order to provide unified services to all taxpayers in Singapore.
At the moment, the IRAS is one of the most efficient tax administrators in Southeast Asia which is also one of the main reasons for which the city-state is one of the most appealing destinations in the regions when it comes to taxation.
The IRAS is in charge of collecting the following taxes:
- the income and corporate taxes,
- the property,
- the goods and services tax,
- the real estate tax,
- the betting levies,
- the stamp duties.
The IRAS also plays an important role in proposing policies and administration regulations that lead to a better collection of taxes. Moreover, the specialists working in the IRAS can also represent Singapore in treaty negotiations, property valuations and tax legislation.
If you need assistance in registering with the IRAS, our accountants in Singapore are at your service.
Main taxes in Singapore
The main taxes of the taxation code in Singapore are as follows:
• Income tax;
• Real estate tax;
• Motor vehicle tax;
• Customs and excise duty;
• Goods and Services Tax (GST);
• Betting and casino taxes.
The income tax in Singapore is subdivided into the corporate income tax, applicable for businesses, and personal income tax, for private persons.
Here is our infographic on the main taxes in Singapore:
Tax base determination in Singapore
According to the Singapore tax code, taxation in the city-state is made based on the resident status of payers. This principle applies to both natural persons and companies and implies several aspects.
In the case of individuals, taxation is determined on whether a person is a Singapore tax resident or not. In order to be deemed as resident for taxation reasons, a natural person must:
- have a permanent residence permit for Singapore;
- live and/or work in Singapore for at least 183 days within a calendar year.
It should be noted that different tax considerations are applicable to foreign company directors who can benefit from special provisions included in Singapore’s double taxation treaties.
Natural persons considered citizens or permanent residents of Singapore will be imposed with the income tax on their worldwide income. Non-residents will be taxed only on the income obtained in Singapore. Another important aspect to consider in the case of non-resident citizens is that if they work in a Singapore company for less than 60 days in a calendar year, they will be exempt from the income tax in the city-state.
The IRAS offers many tax incentives to individuals and if you have any questions on how to obtain them, you can rely on our accountants in Singapore who can provide assistance on various matters.
Corporate income tax in Singapore
The corporate income tax in Singapore is due yearly. According to the Inland Revenue Authority of Singapore (IRAS) the rate for corporate income in this country is levied at a flat rate of 17%, no matter if the company is local or foreign.
The income gained from foreign activities by a Singapore company can require dual taxation, under certain circumstances. These companies may claim a Foreign Tax Credit (FTC) due to the same income. An accounting expert in Singapore can provide more details on this matter.
Personal income tax in Singapore
The personal income tax in Singapore, just like the corporate tax income, is due on a yearly basis. Its rates are progressive, applicable for both local and tax residents, with taxes that range from 0% to 20% since Year of Assessment 2007.
The personal income tax code in Singapore is founded on the source principle, under which sole income earned in the source, namely in Singapore, or those received from abroad however brought into the country, are being taxed.
The Goods and Services Tax in Singapore
One of the main contributors to the economy is the Goods and Services Tax, or simply known as the GST. This is equivalent to the value added tax in European countries and its imposition is based on the same principles as in the respective countries.
The GST is an indirect tax and it is levied on all goods and services sold, respectively supplied in Singapore, as well as on the products imported into the city-state. As an indirect levy, the GST will be imposed by Singapore companies on consumers upon the sale or supply of various goods and services. In order to collect it, companies need to register with the IRAS and the Customs Authority.
Singapore companies must meet certain requirements in order to register for GST and these can be provided by our accountants.
Our accounting firm in Singapore can offer various services to companies, among which GST registration and compliance assistance.
Stamp duties in Singapore
There are several stamp duties that can be collected in Singapore, among which:
- stamp duties on properties,
- stamp duties on holding companies owning real estate property,
- stamp duties on shares.
When it comes to real estate, the stamp duty must be paid upon the purchase, the sale and rental of a property. In order to pay it, a person must have a bank account in Singapore from which the amount can be debited immediately. The person will be issued the stamp duty certificate after the payment.
In the case of natural persons buying or selling properties in Singapore, the stamp duty must be paid no later than 14 days after the transaction is completed or 30 days in case the documents must be sent from another country.
When it comes to holding companies, these must pay the stamp duty when buying or selling or disposing of real estate located in the city-state. When it comes to payment dates, the same requirements apply just like in the case of a natural person.
When it comes to the acquisition or disposal of shares, these too are subject to the payment of the stamp duty.
The payment of stamp duties on various types of properties can be explained by our accountant in Singapore who can also provide information on the timeframe related to paying it.
Withholding taxes in Singapore
Among the important taxes that are paid all around the world, withholding taxes are also imposed in Singapore. There are important provisions in the Tax Code when it comes to taxes that are withheld when making certain payments.
In Singapore, withholding taxes are imposed when payments are made to a non-resident individual or company for incomes related to:
- various services provided in Singapore,
- interests, royalties and rental of various goods,
- payment to directors, professionals, sportspersons, entertainers,
- distributions made to Real Estate Investment Trust (REIT) participants.
Dividend payments can also be subject to withholding taxes imposed under certain circumstances. However, it is useful to note that Singapore has numerous double taxation agreements under which withholding taxes benefit from special conditions.
If you need more information on the provisions of the Tax Code related to withholding taxes, our accountants in Singapore are at your disposal.
Taxation of foreign investors in Singapore
Singapore is one of the most appealing states in Southeast Asia and one of the reasons is its taxation system. The Singapore authorities know how important foreign investments are for the economy, which is why they have enabled numerous tax incentives for overseas businesspersons.
The following taxes need to be paid by foreign investors in Singapore:
- income obtained from economic activity or profession;
- employment income;
There are also several tax benefits linked to the taxation of foreign investors in Singapore. One of the best examples is the fact that dividends are not taxed in the city-state. Individuals also benefit from exemptions on gross income derived from royalties payments which can amount up to 90%. Also, interests obtained from money deposits are exempt from taxation in Singapore. There is no capital gains tax in the city-state.
If you need more information on taxation in the city-state, our accountants in Singapore are at your service. You can also rely on us for bookkeeping services in Singapore.
Other taxes levied in Singapore
As mentioned above, the Singapore tax code provides for several taxes that are imposed on both individuals and companies. Among these, customs and excise duties are imposed on products such as petroleum-related goods, tobacco, motor vehicles and alcoholic beverages. However, there are no export taxes here.
Real estate is taxed yearly in Singapore and the levy is imposed at progressive rates calculated on annual value and also takes into account if the property is rented or not, however, this tax is considered quite low compared to other jurisdictions, especially when used by the owner.
Another tax imposed in Singapore is the stamp duty which is levied on real estate and company shares transfers.
You can also rely on us on audit services in Singapore.
The main tax rates in Singapore
The income tax in Singapore is imposed at progressive rates when it comes to individual income, while the corporate tax is imposed at a fixed rate. Here are the main aspects to consider:
- the personal income tax is levied at rates ranging between 0% and 22%;
- the corporate tax is imposed at the rate of 17%, however, lower rates apply to certain companies;
- the GST is imposed at a standard rate of 7%, but lower rates also available;
- Singapore also has more than 50 double tax treaties under which tax deductions and exemptions are available.
Our accountants in Singapore can assist you with the procedure of paying taxes in the city-state. For more detailed information regarding the tax code in this country, as well as the appropriate taxations and compliancy, we invite you to get in touch with our accounting firm in Singapore.