Business Tax in Singapore
The taxes due to the Inland Revenue Authority of Singapore (IRAS) by corporations and businesses operating in Singapore, and information on Withholding Tax, GST, Corporate Income Tax, Stamp Duty and Property Tax, as well as ECI filing...
The primary taxes paid by businesses in Singapore are Corporate Income Tax (CIT) and Goods and Services Tax (GST). Other important taxes to consider are Withholding Tax, Stamp Duty and Property Tax. The Singaporean government uses the tax system to further its social objectives, and routinely establishes allowances and rebates that encourage certain types of economic behaviour.
The Inland Revenue Authority of Singapore (IRAS) website has full and up-to-the-minute information about major tax developments, the Singapore corporate tax structure, reporting obligations, assessments, payments, record-keeping and updating company particulars.
- The companies section of the IRAS website
Corporate Income Tax (CIT)
Under Singapore's tax laws, a "company" means any company incorporated or registered under any law in force either inside or outside Singapore. A company will be taxed on any income earned in Singapore or received in Singapore from outside the country, regardless of that company's tax residence status in Singapore.
The tax residence status of a company in Singapore depends on where the control of management of its business is carried out: a company is considered resident in Singapore if it is controlled or managed in Singapore. A resident company is entitled to the benefits conferred under the Avoidance of Double Taxation Agreements (DTAs, known elsewhere as DTTs) that Singapore has concluded with treaty countries.
- A list of DTA treaties and treaty countries from IRAS
For companies considered resident in Singapore, tax is payable at a flat rate of seventeen percent on normal chargeable income, though exemptions to this apply. These exemptions often come about as part of targeted political programmes, such as the partial CIT exemption for start-up companies first granted in 2005. There is also a system of rebates, allowances, and deductible expenses, many of which are designed to encourage entrepreneurship, foreign investment and exporting.
GST (Goods and Services Tax)
GST is a value-added tax on goods and services. It is levied on most goods and services traded within Singapore, as well as imported goods and services, but is not levied on exports. The standard rate of GST is seven percent. A business must register for GST if at any time at the end of a quarter their taxable turnover exceeds S$1 million. Businesses effectively pay two kinds of GST: output tax, which they collect on goods and services that they sell; and input tax, which they pay on goods and services that they buy. Output GST is paid by the company to IRAS, and input GST is paid to the seller at the point of sale. Rebates on input GST can be claimed on certain expenses.
Failing to pay GST to IRAS in an accurate or timely manner can lead to financial penalties, or even imprisonment.
- Further information from IRAS on how GST affects the running of a business, and how to invoice customers
- Information on input GST rebates
- More information on the responsibilities and penalties involved in paying GST
The rules on GST change frequently, so it is advisable to get up-to-date information from the GST pages of the IRAS website.
Other Taxes Paid by Businesses
Companies that make payments to non-resident directors, companies, contractors, entertainers, and other non-residents must hold back a portion the payments in question, and submit it to IRAS in the form of Withholding Tax. Under the terms of a DTA, the non-resident recipient may then be able to claim exemption from further tax on these payments in their country of residence.
While Withholding Tax is set at a flat rate of fifteen percent, calculations can become complex as they include the effect of expenditure. For example, if a company pays a salary to a non-resident director, and that company then provides the director with a travel ticket and ten days of hotel accommodation, the hotel bill and travel tickets are subject to Withholding Tax along with the director's salary.
- More information on Withholding Tax
In Singapore, both companies and private individuals have to pay Stamp Duty on certain documents. The party responsible for paying Stamp Duty depends on the document: for example, the tenant in a rental property pays Stamp Duty on a tenancy agreement. Stamp Duty is calculated at varying rates depending on the document involved, and usually as a percentage of a transaction cost rather than as a fixed fee. Stamp Duty is paid on property sale and transfer, rental transactions and share transfers.
- Full information on transactions subject to Stamp Duty and rates payable
Property tax is levied annually on the ownership (rather than the purchase) of property. The value taxed is the Annual Value (AV) of the property, which is the estimated rental income that the property would bring in a year if it were to be rented out. In 2013, the rate of Property Tax is a flat 10 percent. However, as of 2014, the amount levied will vary according to the type of property in question, and will operate within a banded system. For example, in 2014, private rental property will be taxed at 10 percent of its AV on the first S$30,000, at 11 percent on the next €15,000, and so on. Before buying a property, the purchaser has certain reporting obligations to IRAS. Concessions are available.
- Detailed information on Property Tax
- Information from IRAS for those considering purchasing a property
Tax Declarations and Estimated Chargeable Income (ECI)
All companies have to submit their Estimated Chargeable Income (ECI) within three months of the end of their financial year, even if their ECI is zero. ECI is not a tax: it refers to the estimated annual revenues that IRAS will deduct tax from. If the actual figure at year end differs from the ECI, IRAS will either automatically issue a refund for an overpayment, or will request additional amounts with a Notice of Assessment (NOA) for an underpayment. When calculating overpayments and underpayments, IRAS bases its calculations on the company's annual statement of actual incomes, which is reported using Form C or Form C-S.
Note that the time period in which the monies declared under ECI must be paid to IRAS varies, and does not correspond to the period in which the ECI declaration must be filed. Early submitters and online submitters benefit from longer payment periods. ECI can be filed either via the myTax Portal, or by submitting a paper form to IRAS.
- Full details on ECI from IRAS
Charities and Taxes
Any organisation that exists solely for charitable activities must apply to the Commissioner of Charities (under the Ministry of Culture, Community and Youth) for registration under the Charities Act.
- For the Singapore Government's Charities Portal
Some organisations are authorised to receive tax deductible donations. To do so, the organisation must be an approved Institution of a Public Character (IPC). Cash donations to IPCs are not taxed as long as the donor derived no benefit from the donation; IRAS has allowed donors a tax deduction of 2.5 times the amount of donations made between 2009 and 2015. The donor should give their name and identity number (NRIC, FIN or UEN) to the IPC, who will pass it to IRAS. The tax deduction will then be made automatically in the donor's income tax assessment.
- The IRAS website has more information on tax-deductible charity donations
Business Sector Information
Specific tax rules apply to the newly self-employed, taxi drivers, hawkers, commission agents, tradesmen, medical practitioners, lawyers, tax intermediaries, tuition centre operators, entertainers, beauticians and therapists, childcare centre operators, maid agents, and newly GST-registered businesses. Comprehensive notes on each sector are available on the IRAS website.
- IRAS contact telephone numbers
Corporate Income Tax and ECI: 1800 356 8622
GST: 1800 356 8633
Stamp Duties: 6351 3697
Main Line: 6356 8233
Hotlines Open: 08:00-17:00
- The Accounting & Corporate Regulatory Authority (ACRA) website has a list of useful brochures concerning all aspects of setting up or closing down a business in Singapore
- Find reputable Financial Services, Accountants, Expat & General Insurance, Expat Tax, Wills & Trust Planning & USA Preferred Tax Accounts in Singapore through our local business.
Tax law is complex and every effort has been made to offer information that is current, correct and clearly expressed. The information in this summary is intended to be no more than a general overview of the position and certain details have been deliberately omitted. The contents of this page should not be taken as an authoritative statement of Singapore tax law and practice. Neither the author nor the publisher are responsible for the results of actions taken on the basis of information contained in this summary, nor for any errors or omissions. This text is not intended to render legal, accounting or tax advice. Readers are encouraged to seek professional advice concerning specific matters before making any decision.
Picture courtesy of Singapore Tourism Board