Part 1: https://bbcincorp.wordpress.com/2022/03/18/singapore-corporate-tax-everything-you-need-to-know/
2. Tax Reduction for companies in Singapore
Resident companies can make use of the following schemes to legally reduce their payable tax in Singapore:
2.1. Tax exemption scheme for startups in Singapore
The start-up company scheme was introduced in 2005 with an aim to draw entrepreneurs and investors to Singapore. This scheme is targeted solely at resident companies in the embryonic stage. It backs up these qualifying businesses by offering them many partial and full tax exemptions.
Your company would be qualified for this start-up tax exemption scheme for the first 3 consecutive years as long as:
- It is incorporated in Singapore
- It is considered a Singapore tax resident
- It has no more than 20 shareholders, of which either all are individuals beneficially and directly holding the shares in their own names; or at least one individual is holding no less than 10% of the ordinary shares.
However, new start-up companies working in investment-holding or sales of and investment in property development are excluded as candidates for this tax exemption scheme.
Your newly-established company, when meeting the above-mentioned conditions, will receive a 75% tax exemption on the first S$100,000 of taxable income and another 50% tax exemption on the next S$100,000 of taxable income. It means that the effective tax rate on the first $100,000 is 4.25% and the rate on the next $100,000 is 8.50%.
| Taxable income (S$) | Effective corporate tax rates |
|---|---|
| 0 – 100,000 | 4.25% |
| 100,001 – 200,000 | 8.50% |
| Over 200,000 | 17% |
For example: Your company’s taxable income is $180.000, then with the tax exemption scheme for startups, you need to pay [100,000 x 4.25%] + [80,000 x 8.5%] = 11,050 SGD (compared to 30,600 SGD when applying the tax rate of 17%).
2.2. Partial tax exemption (PTE) scheme for Singapore companies
After the tax exemption scheme for startups expires, your company will be entitled to the Partial Tax exemption (PTE). In general, all companies can benefit from this scheme as long as they do not claim the tax scheme for start-ups.
Your company, when meeting all the criteria, would be entitled to the following exemptions:
- A 75% tax exemption on the first $10,000 of chargeable income
- Another 50% tax exemption on the next $190,000 of chargeable income
| Taxable income (S$) | Effective corporate tax rates |
|---|---|
| 0 – 10,000 | 4.25% |
| 10,001 – 200,000 | 8.50% |
| Over 200,000 | 17% |
For example: Your company’s taxable income is $180.000, then with the partial tax exemption scheme, you need to pay [10,000 x 4.25%] + [170,000 x 8.5%] = 14,875 SGD (compared to 30,600 SGD when applying the tax rate of 17%).
2.3. Tax rebate
Ever since 2013, on a yearly basis, the government has announced a tax rebate for Singapore companies. The rate is different every year and the rebate is subject to a cap. For 2020, the rebate rate was 25%.
For example: Your company’s taxable income is $180.000, by applying the partial tax exemption scheme, you need to pay 14,875 SGD (as calculated above). Then, with a tax rebate, the payable tax of your company is lowered to [14.875 – (14.875 x 25%)] = 11.157 SGD.
NOTE: Tax rebate is not extended in 2021.
2.4. Tax exemption for foreign-sourced income
According to the Inland Revenue Authority of Singapore, dividends and service income derived from foreign sources, and profits generated in foreign branches are entirely exempt from Singapore corporate tax.
Nevertheless, if you wish to remit your foreign-source income to Singapore tax-free, you should see to it that you can satisfy the following requirements:
- The foreign-sourced income has been taxed in the foreign country when it is remitted to Singapore
- The headline tax rate at the foreign source must be at least 15% when it is remitted to Singapore
- The government is convinced that the tax exemption would benefit the resident in Singapore
2.5. Tax treaties
Singapore posits that double taxation takes its toll on international trade. The reason is that it charges a taxpayer twice for the same product/service rendered. In order to address this, the city-state has entered into the Avoidance of Double Taxation Agreement with more than 80 countries and counting. These ramifications, coupled with the other tax credits, have aided in eradicating altogether this unfair tax policy.
Chances are you and your business partners in other jurisdictions can benefit from the reduced tax rates regulated in these tax treaties.
From YA2009 onwards, companies operating in countries that have not concluded DTA with Singapore can resort to unilateral tax credits.
3. Tax filing requirements for Singapore companies
It is pretty simple and straightforward to file Singapore corporate tax. Pursuant to IRAS, you would be required to prepare and submit estimated chargeable income (ECI) and corporate income tax return (Form C or Form C-S).
Estimated chargeable income (ECI) is simply the estimate of income that is subject to tax after tax-allowable expenses have been deducted. You are given a deadline of 3 months since the financial year-end of your company to file ECI. If your annual revenue is not higher than S$5 million and your ECI is Nil in the year of assessment, you are not obliged to file the ECI even if you have received notification from IRAS to do so.
Form C or Form C-S is the vehicle for you to declare your actual income. In order to complete filing Form C, you would find it necessary to attach tax computations, financial statements, and other supporting documents. Whereas form C-S is only available for qualifying small companies and is much more simplified thanks to less required fields to declare and no document submission unless required.
The due date to submit either of these 2 forms is November 30 if you choose paper filing or December 15 if electronic filing is your preference. Do note that e-filing is made mandatory for companies from YA 2020 onwards.
Source: https://bbcincorp.com/sg/articles/corporate-tax-in-singapore
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