Singapore

Tax residency – Companies managed and controlled within Singapore are deemed to be tax resident in Singapore. Management and control’s place is usually where the board of directors’ meetings is held.

Basis - Corporate income tax is levied on income accrued in or derived from Singapore and foreign-source income received in, remitted to or deemed to be remitted to Singapore.

Tax rate – Tax resident companies are subject to 17% tax for income accrued in Singapore, and income received in Singapore or deemed to be received in Singapore.

There are certain partial exemptions: 4.25% tax on the first SGD 10,000 and 8.5% on the second SGD 190,000. Any profits over SGD 200,000 (excluding the first SGD 200,000) are taxed at 17%.

Further qualifying start-ups partial exemptions provide for the first two financial years, the first SGD 100,000 would avail of a 75% tax exemption (i.e. 4.25 effective tax), and the second SGD 100,000 of a 50% tax exemption (8.5% effective tax rate).

Capital gains - Capital gains that do not arise from a trade are not subject to taxation. To determine whether capital gains arise from a trade or not, the Badges of Trade is used.

Dividends -  Dividends received by a resident company from another resident company are tax-exempt.

Dividends received from non-residents companies and branch profits may be exempted if received in, or remitted to Singapore, provided that profits have been subject to tax, taxed at CIT rate of at least 15% in the foreign jurisdiction. If foreign income has been tax exempt due to foreign jurisdiction's tax incentives, it may be considered to have met the condition.

Interests - Interest income derived from Singapore is taxable, and foreign-sourced interest is taxable when it is remitted or deemed to be remitted to Singapore.

Royalties – Royalty income derived from Singapore is taxable, and foreign-sourced interest is taxable when it is remitted or deemed to be remitted to Singapore.

Foreign-source income - Foreign-source income is usually exempt from taxation, provided that is not remitted to Singapore. Undistributed income of foreign subsidiaries is not subject to taxation.

When income is remitted to Singapore, if it is derived from treaty countries, a tax credit for foreign tax paid is usually available. For non-treaty countries, a unilateral tax credit is given in respect of foreign tax on all foreign-sourced income. These foreign tax credits may be pooled, subject to certain conditions.

Foreign dividends, foreign branch profits, and foreign service fee income remitted to Singapore may be exempt from tax if they fulfill certain conditions.

Withholding taxes – No withholding tax is levied on dividends paid to non-residents. Interests and royalties are subject to a 15% and 10%, respectively unless the rate is reduced due to a tax treaty.

Losses – Losses arising from taxable income may be carried forward indefinitely, subject to shareholdings in the loss-making corporation have not changed beyond 50% of the total number of issued shares and the same trade has been continued. Losses up to SGD 100,000 may be carried back for 1 year.

Inventory - There are no special rules on valuation methods for inventories in the case of a continuing business, as long as the basis is consistent from one year to another. However, a last in first out (LIFO) basis of valuation is not permitted for tax purposes. Generally, tax reporting conforms to book reporting.

Anti-avoidance rules – The Inland Revenue Authority of Singapore (IRAS) has issued transfer pricing guidelines covering the application of the arm’s length principle, documentation requirements, advance pricing agreements, requests to invoke the mutual agreement procedure under Singapore’s tax treaties and for related party loans and services.

Singapore has not enacted thin capitalization rules, nor controlled foreign companies regulations.

Labor taxes – Employers and permanent resident employees are required to make contributions to the Central Provident Fund (CPF) at 17% and 20% of the permanent resident employees’ monthly income, respectively, up to an income ceiling of SGD 6,000. Contributions are payable by Singapore citizens and permanent residents.

Tax credits and incentives – For income derived from treaty countries remitted to Singapore, a tax credit for foreign tax paid is usually available. For non-treaty countries, unilateral tax credit is given in respect of foreign tax on all foreign-sourced income. These foreign tax credits may be pooled, subject to certain conditions.

There are several tax incentives in Singapore:

• Corporations manufacturing approved products with high technological content or providing qualifying services may apply for tax exemption for five to 15 years
• Corporations engaging in new high-value-added projects, expanding or upgrading their operations, or undertaking incremental activities after their pioneer period may apply for their profits to be taxed at a reduced rate of not less than 5% for an initial period of up to ten years.
• Up to 100% tax-exemption of profits based on capital expenditure incurred for qualifying projects or activities within a period of up to 5 years.
• Incentives for internationalization of 10% concessionary tax rate on incremental income from qualifying activities for up to five years.
• Income from the commercialisation of certain IP taxed at a concessionary rate.
• Other tax incentives for financial services companies, maritime sector companies, international traders, regional headquarters and for mergers and acquisitions among others.

Compliance – On average, a Private Limited Company may require 5 payments and 66 hours per year to prepare, file and pay taxes.

Personal income tax – An individual is tax resident in Singapore if he or she spends more than 183 days in a year or engages regular employment in the country.

Residents and non-residents are subject to personal income tax on their income derived from Singapore. Foreign-source income is only taxable if it is received in the country by a resident through a partnership in Singapore. Usually, an individual is tax resident in Singapore if he or she spends more than 183 days in a year or engages regular employment in the country.

Residents are subject to a personal income tax at progressive rates up to 22% on annual income exceeding S$320,000. Non-residents income is subject at a flat tax rate of 22%. Capital gains, dividends and interests are not usually subject to taxation.

Other taxes – A monthly levy for foreign worker may apply to companies of certain industries and a training levy for all employees on their first SGD 4,500 gross monthly wage at a rate of 0.25%.

Property tax is levied on the annual value of houses, land, buildings, or tenements. Non-owner occupied residential property is taxed at graduated rates from 10% to 20%, owner-occupied residential property from 0% to 10%, and land and non-residential properties at 10%.

Stamp duties are levied on certain transactions. Transfer of stocks and shares are subject to stamp duty of 0.2% on the purchase price or market value of the shares transferred, whichever is higher. For conveyance of immovable property there is a stamp duty of 3% on the purchase price or market value, whichever is higher. There are additional stamp duties of up to 16%, depending on the type and use of the property and residency status of the owner. Leases are subject to a duty at 0.4% of the total rent.

There are excise duties good and services such as intoxicating liquors, tobacco products, motor vehicles, petroleum products and gambling.

There are no inheritance, gift and net wealth taxes in Singapore. V.A.T. standard rate is 7%.