Tax is a sensitive matter that requires quite a lot of deliberation. Even though a country’s primary revenue is generated from taxes it collects from its citizens, everyone wants to pay the least amount possible. A country’s economy depends upon the Tax Return system and the revenue it collects. In Singapore, taxation is governed by Inland Revenue Authority of Singapore. With matters related to taxation one should always consult the best.
Singapore Corporate Tax Guide
At AccTrust Advisory, we provide prompt and to-the-point solutions. If you are searching for the best Singapore corporate tax guide then you have came to the right place. With us you do not need to worry about any errors and omissions. We provide personalized services and ensure that your tax amount for Year of Assessment (YA) is calculated correctly. We have years of experience as tax consultants and will be able to help you save tax. Come to us and all your tax related worries will be taken care off. Our services include computation of tax liability, tax return filing, corporate tax planning, tax consultancy etc.
Understanding the Tax System
In Singapore, tax is source based. It is levied on income accrued, earned and received in the territory. It is progressive in nature, that is, more the income, more the tax rate. Tax is levied through a single point system to avoid double taxation. There are two types of taxes, viz. direct and indirect. The bifurcation is based on the channel with which its collected. The tax system on the whole is quite transparent.
Corporate Income Tax
Every company registered or operating in Singapore is covered under the tax system and is liable to pay tax on its income. Since YA 2010 the corporate tax rate has been increased to 17% irrespective of the fact whether it’s a foreign or local company. According to Income Tax Act, every income earned by a company is taxable except
- Capital gains
- Income earned by foreign branch, subsidiary, etc. of a resident company
- Gains earned on disposal of equity investments
- Shipping income earned by a shipping company
The Income Tax Act also offers tax exemption schemes wherein tax is payable at a lower rate. Such schemes are:
- For new start-up companies: 100% exemption on first $100,000 and additional 50% on subsequent $200,000 of normal chargeable income for the next three YAs.
- Partial tax exemption scheme: 75% exemption on first $100,000 and a further 50% exemption on subsequent $290,000 of normal chargeable income.
- Rebate on Corporate Income Tax: 30% rebate up to $30,000 per Year of Assessment (YA) for YA 2013-2015 and 50% rebate up to $20,000 per YA for YA 2016-2017.
Individual Income Tax
Income tax on individuals is taxed at the rate of 0-20%. However, the rate from YA 2017 has been increased from 20% to 22%. The rate varies according to the residential status of a person. A person who is a citizen of Singapore who resides in the country or a foreigner who has stayed or worked in the country a total of 183 days or more in a previous year are residents as per Income Tax Act. Rest all are considered non-residents. The Act exempts tax on capital gains and inheritance received. Tax is only levied on income earned in Singapore. If income is earned overseas while working there, then except in case of certain exceptions it is not taxable.
Individuals have to file returns by 15th of April every year. They can do so either manually or through electronic mode. The tax department sends tax bills to every individual between April and September every year. In case of an objection you can file it online within 30 days of receiving the bill.
Goods and Service Tax (GST)
Goods and Service Tax is an indirect tax that is levied on sale of goods and services. It is a value added tax that is also levied on import of goods. It is collected by the Singapore Customs Department. The tax was introduced to reform the tax system and prevent tax evasion. Goods and Service Tax came into effect from 1st April, 1994 onwards. Initially the rate with which the tax was introduced was 3%. Unlike VAT system GST has only single rate for sale all types of goods and services, except for lease and sale of residential property and financial services. It is also not levied on import of precious metals and export of goods and services. Every business entity having a taxable turnover of more than $1 million for the last 12 months must register for Goods and Service Tax.
With effect from 1st July, 2007 onwards the rate was increased to 7%. To counter the increase rate and help the lower income-group households, several supermarkets absorbed the 2% increase for a period ranging from 1-6 months.
Some experts think that GST is regressive in nature as the rate is similar for every income group person. Because of similar rates low-income households have to pay more tax as compared to rich. But some argue that thats not the case as it is an indirect tax that is distributed equally among all.
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