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Introductory Business Guide: Singapore’s Legal Overview

Caroline Berube

HJM Asia Law & Co LLC

10.08.22 Download PDF


Legal Overview

Executive Summary

Summary

Singapore is one of Asia’s most developed, stable and growing economies.

With its worldwide renowned business friendly environment, it is no wonder that Singapore is one of the most frequently chosen locations for companies’ operations within the Asia Pacific region.

Companies and joint ventures are often established in Singapore as a headquarters for the businesses Asia Pacific operations. This is due to Singapore’s reliable and efficient legal system inherited from the British coupled with Singapore’s competitive corporate tax system.

Classification of Registered Companies

There are 3 types of company which may be created in Singapore. These include:

a. Company limited by shares

This is the most common form of company created in Singapore and is typically used for commercial activities, holding company for a group of companies in Asia or for investments.

Each shareholder of a company limited by shares is only liable to the amount unpaid (if any) on his/her agreed share capital contribution to the company.

b. Company limited by guarantee

This type of company is used for companies who wish to carry out nonprofit activities (for example, companies used for charities or other benevolent purposes).

Each shareholder of a company limited by guarantee is only liable to the amount unpaid (if any) on his/her agreed guarantee payable to the company.

c. Unlimited company

This is the rarest type of company created in Singapore.

It is a company where the shareholders liability is unlimited, unlike with a company limited by shares or guarantee.

As well as the above 3 types of local Singapore company, a foreign company can instead choose to have a presence in Singapore either as a representative office or a foreign branch.

As a representative office, a foreign company meeting the following criteria will be able to conduct market research/feasibility studies in Singapore:

  • The foreign company has been in existence for at least 3 years;
  • In its last financial year, the foreign company had a turnover of over USD 250,000; and
  • It appoints at least 1 chief representative in Singapore.

The representative office may conduct its activities for up to 3 years from the date of its registration and must renew its license annually.

Where the foreign company wishes to conduct business in Singapore in its own right then it may register itself as a Singapore registered branch office. The key difference between registering a separate Singapore company and registering a branch office will be that whilst the Singapore company will generally be deemed separate to the parent company for liability purposes, where the foreign company sets up a branch office all its acts and liabilities will be attributed to the foreign company itself.

Registered Companies and Partnerships

Foreign companies/individuals setting up a business presence in Singapore typically do so by incorporating a Singapore registered company.

As well as the Singapore company, it is also possible for other mediums of business vehicle to be created in Singapore. These include:

a. The limited partnership

A limited partnership is designed to be an investor friendly vehicle whereby the limited partners invest capital into the limited partnership and a general partner (typically an investment manager) is responsible for the day-to-day management of the limited partnership. The investors are protected in much the same way as a shareholder of a company.

b. The variable capital company

Introduced on January 14th, 2020, the variable capital company is an enhancement to the limited partnership vehicle in that a number of sub funds can be held under one corporate umbrella, namely the variable capital company.

c. The limited liability partnership

A limited liability partnership provides the benefits of a partnership whilst affording protections to the liability of a partner for the acts of his co-partners.

Typical limited liability partnerships include professional firms (such as accountants, lawyers, doctors, architects and so on).

Whilst the traditional partnership can also be registered in Singapore, this medium of business type has significantly reduced in recent times due to the limited liability which the above types of Company/partnership can offer.

Share Capital

Under Singapore law a company is neither required to issue shares with a par-value or have an authorized capital.

A Singapore company on its creation can be incorporated with a nominal share capital of SGD 1.00.

Having said that, if for example the Singapore company intends to hire manpower in Singapore then it will need to increase its share capital to an appropriate level.

A Singapore company must have at least 1 individual/corporate shareholder. There are no restrictions on local/foreign status for shareholders of a Singapore company.

Company Officers

Every Singapore company must have at least 1 locally resident director and secretary.

To meet the local residency requirement, the director and secretary must either be a Singapore Citizen, Permanent Resident or, where permitted, a Work Pass holder.

Subject to the Singapore company’s constitution, a Singapore company can have as many local or foreign based directors as it wishes.

Company Constitution

All companies created in Singapore must have a written constitution.

The constitution is a contract between the company and each shareholder and typically contains specific rules which the company and shareholders must abide by, including but not limited to:

  • Convening, conduct and voting at board/shareholder meetings;
  • Conditions for transferring of shares or issuing new shares in the company;
  • Use of the company’s common seal to instruments and deeds made for and on behalf of the company;
  • Classes of shares (where, for example, preference shares are issued in the company); and
  • Priority to dividends, capital and surplus assets on a winding up of the company.

A company can either choose to adopt a model constitution prescribed under the Singapore Companies Act or, alternatively, draft its own bespoke constitution. Most companies in practice, for cost and convenience, choose to adopt the model constitution.

Although a company can choose to limit its powers by providing for an exhaustive list of objects set out in the Constitution, there is no requirement to do so and every company will otherwise have full power to carry on and undertake any type of legal business or activity.

Company Meetings

A Singapore company’s decisions are taken by either the board of directors or shareholders of the company.

Whilst most decisions can be taken either by a majority of the board of directors/shareholders approval, certain key decisions must be approved by a ¾’s majority by the shareholders of the company, including:

  • Altering the Singapore company constitution;
  • Voluntarily winding up the Singapore company;
  • Approving certain share transactions including share buy-backs and capital reductions; and
  • Change in the Singapore company’s name.

In addition to board meetings/general meetings, a Singapore company must hold an annual general meeting within 6 months from each year’s financial year end to approve the financial statements of the company, directors remuneration and other related business.

Registration of Company in Singapore

All Singapore incorporated companies must be registered with the Ac- counting and Corporate Regulatory Authority.

On submission of all required information/documentation, a Singapore company will be incorporated within the same working day.

Commencement of Business

Once a Singapore company has been registered, depending on the scope of business intended to be conducted by the company, it will be necessary for the Singapore company to attend to the following matters:

1. Opening of Singapore bank account

There are many local and foreign banks with offices in Singapore. This allows, for example, a parent company with an existing banking relationship with an overseas based bank to tack that relationship with the overseas bank’s office in Singapore.

2. Tax Registration

Where the Singapore company will be, for example, providing services or goods in Singapore, then the Singapore company may be required to register itself for Goods and Services Tax (GST). GST is charged gene- rally at a flat rate of 7% on all taxable supplies in Singapore.

3. Hiring of local/foreign employees

Where a Singapore company intends to hire either local and/or foreign employees it will need to register a central provident fund account (for payment of employee/employer pension-type contributions) and apply for relevant work passes for foreign employees with the Ministry of Manpower.

Taxation

Singapore has a territorial based tax system with a competitive corporate income tax rate of 17%.

Dividends declared by a Singapore company to its shareholders are exempt from taxation in Singapore.

Furthermore, Singapore does not tax capital gains. However, this is subject to Inland Revenue Authority of Singapore’s determination of what amounts to a capital gain. The factors to consider include the frequency and volume of transactions, interval between purchase and sale and manner of financing the purchase of assets.

Transfers of shares in a Singapore company are subject to a stamp duty tax of 0.2% of the purchase price of net asset value of the transferred shares (whichever is the higher).

A locally incorporated Singapore company can however avail itself of tax exemptions, which include:

  • The Partial Tax Exemption

Inland Revenue Authority of Singapore Partial Tax

Exemption on Corporate Income Tax

No Chargeable Income Exemption % Exempt Amount
1 First SGD 10,000 75% SGD 7,500
2 Next SGD 190,000 50% SGD 95,000

Total: SGD 102,500

  • Small Companies Tax Exemption

Inland Revenue Authority of Singapore Small Companies Tax Exemption on Corporate Income Tax

NO Chargeable Income Exemption % Exempt Amount
1 First SGD 100,000 75% SGD 75,500
2 Next SGD 100,000 50% SGD 50,000

Total: SGD 125,000

  • Double Tax Treaty Relief

Singapore has entered into a total of 85 treaties for the avoidance of double taxation with other countries. These double tax treaties may provide for efficient tax structuring for both a foreign company and its Singapore subsidiary.

Mergers and Acquisitions

As at the end of 2020, approximately USD 59,180,000,000 worth of M&A transactions were conducted in Singapore.

M&A transactions typically proceed either on the basis of share deals or, where the business of a

company is partially or wholly sold to a new company, then by way of an asset sale.

Singapore law provides a large commercial degree of flexibility in terms of how the parties negotiate the terms of the proposed merger or acquisition transaction. However, the terms of any deal are likely to engage certain Singapore legislation, including the Companies Act, Employment Act and, potentially, the Competition Law and Code on Takeovers and Mergers.

Dissolution of Companies

The 3 main ways in which a Singapore company can be dissolved include:

  • Striking off a company;
  • Voluntary winding up a company; or
  • Compulsorily winding up a company.
    1. Striking off a company

This method of dissolving a company requires the company to settle all its actual and contingent liabilities such that the company is in a ‘zeroized’ asset/liability position.

The company can then apply to be struck off which can take anywhere between 3 to 4 months from the date of application.

    1. Members/Creditors Voluntary Winding Up of Company

The shareholders/creditors of a company by way of 75% approval can approve a voluntary winding up of a Singapore company.

Once approved, a Singapore liquidator must be appointed to oversee the administration/distribution of the winding up of the company’s assets/liabilities.

The assets left after winding up must then be distributed to the following classes of persons in the following order of priority:

    • Preferential Creditors, including:
      • Liquidator;
      • Employeed
    • Ordinary creditors; and
    • The shareholders.

Caroline Berube

Contact

Singapore
HJM ASIA LAW & CO LLC
49, Kim Yam Road,
Singapour 239353
Tel. +65 6755 9019
Fax +65 6755 9017
www.hjmasialaw.com
Caroline Berube
singapore@hjmasialaw.com

Tax overview

Introduction

Singapore was ranked No. 2 in the world for its ease of doing business by The World Bank in 2020. Singapore’s strong market economy and economic performance over the years is testimony to the nation’s open and outward oriented development strategy. The country, which is Triple-A rated, has more than USD 1.9 trillion in assets under management and a market capitalisation of USD 751 billion.

Singapore offers many outstanding advantages: a highly qualified workforce, a strategic location in Asia, a stable political environment, low tax rates, business friendly legislation, significant investment incentives, world-class infrastructure with top-ranking port and airport, strong alliances with other ASEAN member states, a high quality of life with world-class international schools and a state-of-the-art medical environment.

Company Registration

All new businesses, regardless of its legal form, must be registered through the Accounting and Corporate Regulatory Authority (ACRA) of Singapore.

Registration of a Singapore business or company is carried out through online registration. The whole registration process can be done without the need to submit any physical forms or documents and is usually completed within hours (subject to the approval of the name and KYC requirements).

Taxation Arrangements

There are no setting-up costs in terms of taxation in Singapore except for a small fee for registering the business/company with ACRA.

Taxation of Companies

Corporate Income Tax (CIT)

Singapore has one of the most attractive corporate tax regimes in Asia, with low and transparent tax rates and an efficient tax filing/reporting system.

Singapore has a single-tier territorial based flat rate corporate income tax system. Effective tax rates as one of the lowest in the world and the general “business friendliness” of Singapore are the two important factors contributing to the economic growth and foreign investment into the city-state.

Taxable profit is taxed at a flat rate of 17% on its chargeable income regardless of whether it is a local or foreign company. Nevertheless, the effective corporate tax rate could be lowered by the following incentives introduced by the government of Singapore:

    • Tax Exemption Schemes

Qualifying start-ups in Singapore can enjoy a tax exemption of up to SGD 125,000 on the first SGD 200,000 of income for their first three consecutive years of their tax return. To qualify for the start-up tax exemption, companies must be incorporated in Singapore and must not exceed 20 shareholders, where at least one shareholder must be an individual who holds a minimum of 10% of shares or all of the shareholders are individuals.

Chargeable Income % Exempted from Tax Amount Exempted from Tax
First SGD 100,000 75% SGD 75,000
Next SGD 100,000 50% SGD 50,000

The maximum exemption for each YA is SGD 125,000 (SGD 75,000 + SGD 50,000)

Companies that have not previously claimed the tax exemption above can claim the Partial Tax Exemption for Companies (PTE). This allows for an exemption of up to SGD 102,500 on the first SGD 200,000 of chargeable income.

Chargeable Income % Exempted from Tax Amount Exempted from Tax
First SGD 100,000 75% SGD 7,500
    Next SGD 190,000 50% SGD 95,000

The maximum exemption for each YA is SGD 102,500 (SGD 7,500 + SGD 95,000)

    • Development and Expansion Incentive (DEI)

DEI is available to companies that are planning to increase or upgrade their operations in Singapore or expand into globally leading industries. Under DEI, all income earned from qualifying activities is either tax exempted or taxed at a rate of 10% for a period of 5 years.

Companies are required to meet certain criteria to qualify:

    • New job creation that adds new skills, expertise and seniority to the Singapore workforce;
    • Total business expenditure that adds to the Singapore economy;
    • Commitment to adding new capabilities in terms of new technology, skillsets, and know how.
    • Investment allowance

Under an investment allowance, companies can receive a tax credit of up to 100% of the capital expenditures incurred for qualified projects during a tax year. Normally, Singapore permits the investment allowance for a period of 5 years; however, certain cases can extend up to 8 years. The types of projects that qualify for an investment allowance include:

    • Manufacturing new products or increasing production of an existing product;
    • Projects requiring specialized engineering or technical services;
    • Projects focused on R&D;
    • Construction operations;
    • Projects to reduce water consumption;
    • Projects that promote the tourist industry in Singapore (other than a hotel);
    • Operations involving space satellites;
    • Maintenance, repair and overhaul services to any aircraft; and
    • Projects that improve energy efficiency.
    • Double Tax Deduction for Internationalisation (DTDi)

To encourage Singapore companies to go global and internationalize their products or operations, companies may benefit from the Double Tax Deduction Scheme for Internationalisation (DTDi), with a 200% tax deduction on eligible expenses for international market expansion and investment development activities such as:

    • Overseas business development trips/ missions;
    • Overseas investment study trips/ missions;
    • Overseas trade fairs;
    • Local trade fairs approved by ESG or STB;
    • Virtual trade fairs approved by ESG;
    • Product/ service certification approved by ESG;
    • Overseas advertising and promotional campaigns;
    • Design of packaging for overseas markets; and
    • Advertising in approved local trade publication.
    • Claiming and carrying forward of capital allowances

A company may claim capital allowances (tax relief on any physical or tangible capital assets acquired by the company) in the form of further tax deductions to cover the cost of writing off any machinery or plant acquired for the purposes of its business. The amount of capital allowances claimable annually may be calculated as the cost price of the asset divided by the number of years taken to completely write it off.

As a general rule, computers, prescribed automation equipment and as- sets costing up to SGD 5.000 can be written off in 1 year, while all other assets eligible for capital allowances can be written off over the course of 3 years. Any unutilized capital allowances can be carried forward indefinitely to subsequent years if there are no substantial changes in the company’s shareholdings or principal business activities.

Goods and Services Tax (GST)

The value added tax system in Singapore, modelled off the UK VAT legislation and New Zealand GST legislation, is called Goods and Services Tax (GST). GST aims at taxing the supplies of goods and services in Singapore and import of goods into Singapore.

The current GST rate in Singapore is 7%. This rate would be increased to 9% sometime between 2021 and 2025.

GST exemptions apply to the provision of most financial services, the supply of digital payment tokens, the sale and lease of residential properties, and the importation and local supply of investment precious metals. On the other hand, Goods that are exported and international services are zero-rated.

A business is required to register for GST if its annual taxable turnover exceeds SGD 1,000,000. A GST-registered business  is  required  to  file GST returns on a quarterly basis.

Overseas suppliers with an annual global turnover exceeding SGD 1,000,000 and supply digital services to customers in Singapore (B2C) exceeding SGD 100,000, are required to register for GST in Singapore. Once registered for GST under Overseas Vendor Registration (OVR) regime, the overseas suppliers are required to charge and account for GST on B2C supplies of digital services made to customers in Singapore.

Capital Gains

Capital gains is not subject to tax unless the purpose of the transaction is of profit-seeking purpose.

Gains from the disposal of ordinary shares are not subject to tax if the company has held at least 20% of the ordinary shares in the investee company for a continuous period of at least 2 years prior to the disposal. However, such exclusion does not apply to gains derived by an insurance company or disposal of shares in certain companies that trade or hold immovable properties. This benefit will be extended to unlisted shares in companies in the business of trading, holding, or developing immovable properties in Singapore or abroad with effect from 1 June 2022.

Dividend income

Singapore has adopted a one-tier taxation system, under which shareholders will not be taxed on dividends paid by a Singapore resident company.

Customs and excise duties

Singapore has very minimal import restrictions. Nevertheless, customs and excise duties have been imposed on intoxicating liquors, tobacco products, motor vehicles, and petroleum products based on certain prescribed rates.

Property tax

Property tax is payable annually based on the annual value of the property. Property tax rates on non-residential properties, such as commercial and industrial buildings and land, is fixed at 10%. Whereas the property tax rates on residential properties are applied on a progressive scale (depending on the annual value bands), with an own occupier tax rates ranging from 0% to 16% and non-owner occupier tax rates ranging from 10% to 20%.

Stamp duties

Stamp duties are levied on both written documents and electronic instruments relating to immovable properties, leases, and stocks and shares. Stamp duty exemption/relief is available on certain transactions such as corporate restructuring and mergers, subject to conditions.

    • Immovable properties

Buyer of the properties are subject to a maximum of 4% buyer’s stamp duty (BSD) on the market value or the transaction price, whichever is higher. On certain circumstances, there will be additional BSD of up to 30% and seller’s stamp duty (SSD) of up to 15% on the price or market value of the property.

Additional conveyance duty (ACD) for buyers and sellers who are significant owners engaging in transfers of equity interest in property holding entities that own (directly or indirectly) primarily Singapore residential properties would be payable on top of the share duties.

    • Leases

Leases with average annual rents less than SGD 1,000 are exempt from stamp duty.

For leases of up to four years, they are subject to 0.4% stamp duty of the total rent or whereas for leases longer than four years, 0.4% of four times the average annual rent for the period of the lease.

    • Stocks and shares

Instruments effecting the transfer of stocks and shares are subject to stamp duty of 0.2% on the purchase price or net asset value of the shares transferred, whichever is the higher.

However, shares traded on stock exchange are scripless shares and are eligible for remission of stamp duty hence are not subject to stamp duty.

Withholding Tax on payments to non-resident Companies and Individuals

Singapore has adopted a withholding tax law to ensure the collection of tax payable to non-residents on income derived in Singapore. A percentage of the payment (of a specified nature) made to a non-resident company or individual must be withheld and paid to Inland Revenue Authority of Singapore. Ship charter fee payments are not subject to WHT.

Unless a lower treaty rate and exemptions apply, interest on loans and rentals from movable property are subject to WHT at the rate of 15%. Royalty payments are subject to WHT at the rate of 10%. Technical assistance and management fees for services rendered in Singapore are taxed at the prevailing corporate rate of 17%.

Payments made to non-resident public entertainers and professionals are also subject to a final tax of 15% on their gross income. For public entertainers, this appears to be a final tax unless the qualify to be taxed as Singapore tax residents. The WHT rate on payments to non-resident entertainers was reduced to 10% until 31 March 2022. On the other hand, non-resident professionals may elect to be taxed at the prevailing tax rate for non-resident individuals of 22% on net income if this results in a lower tax cost.

Treaties on double taxation

Singapore has so far concluded tax treaties with more than 80 countries including major economies in the Americas, Europe and Asia to help businesses in relieving double taxation and to encourage and facilitate the trade and investment opportunities across-borders.

Foreign Tax Credit

When a company receives foreign income in Singapore, it may be taxed twice on the income. A tax credit will be given for the foreign tax suffered by a taxpayer against the domestic tax imposed on the same income. The amount of tax credit relief is normally restricted to the lower of the paid/payable tax in the foreign and home country. This is known as the ordinary credit method vis-a-vis the full credit method, where the tax paid in the country of source is allowed as a credit in full.

The company must satisfy all of the following conditions in order to claim FTC:

  • The company is a tax resident in Singapore for the relevant basis year (ie. the control and management of its business is exercised in Singapore);
  • Tax has been paid or is payable on the same income in the foreign jurisdiction; and
  • The income is subject to taxation in Singapore.

There are two ways Singapore companies may avoid double taxation:

    • Double Tax Relief (DTR)

A DTR is the relief provided for under an Avoidance of Double Taxation Agreement (DTA) to reduce double taxation, in the form of a tax credit. It allows the Singapore tax residents to claim a credit for the amount of tax paid in the foreign jurisdiction against the Singapore tax that is payable on the same income. A DTR will be granted if the foreign tax was paid in accordance with the DTA provisions and is capped at the lower of the foreign tax paid and the Singapore tax that would have been payable on the same income.

The claim for DTR should be made while filing annual income tax returns (Form C) and should be shown in the company’s tax computation.

Documents supporting the claim need not be submitted with the Form C. However, the following information/ documents must be prepared and retained (e.g. Jurisdiction in which foreign tax was paid, Nature of the income, Date of withholding tax receipt/ voucher and other documentary proof).

    • Unilateral Tax Credit (UTC)

Unilateral tax credits are also granted on all foreign-sourced income received in Singapore-by-Singapore tax residents from jurisdictions that do not have double tax agreement with Singapore.

Tax Exemption

Tax Exemption for Foreign-Sourced Dividends, Branch Profits, and Service Income

A Singapore tax resident company can enjoy tax exemption on its foreign-sourced dividends, foreign branch profits, and foreign-sourced service income that is remitted into Singapore if the following conditions are met:

  • The highest corporate tax rate (headline tax rate) of the foreign country from which the income was received is at least 15% and
  • the foreign income had been subjected to tax in the foreign country from which they were received. The rate at which the foreign income was taxed can be different from the headline tax rate.

Furthermore, tax exemption will be granted to all foreign sourced income earned/accrued outside Singapore to resident non-individuals and resident partners of partnerships in Singapore.

To enjoy the tax exemption on the specified foreign income, the company need not submit documents (such as dividend vouchers, notices of assessment issued by the relevant foreign jurisdiction etc) with the income tax returns to substantiate that the specified foreign income qualifies for the exemption. Instead, the company only need to declare in the appropriate section of the income tax returns that the specified foreign income qualifies for the tax exemption and furnish the following particulars:

  • Nature and amount of income (i.e. foreign-sourced dividend, foreign branch profits or foreign-sourced service income);
  • Country from which the income is received;
  • Headline tax rate of the country from which the income is received; and
  • Amount of foreign tax paid/payable in the country from which the income is received.

Tax Exemptions for Individuals

For tax resident individuals in Singapore, all foreign income received in Singapore will be exempt from tax if the Comptroller is satisfied that the tax exemption is beneficial to the individuals.

If an individual is a Singapore tax resident receiving the following foreign income from countries which Singapore has yet to conclude an Avoidance of Double Taxation Agreement (DTA), a unilateral tax credit for the foreign taxes paid on such income under Section 50A of the Singapore Income Tax Act will still be granted:

  • Income derived from any professional, consultancy and other services rendered in any territory outside Singapore;
  • Dividends; or
  • Profits derived by an overseas branch of a Singapore resident company.

Unilateral tax credit under Section 50A would also apply to foreign sourced royalty from non-treaty countries, provided the royalty is not:

  • Borne directly or indirectly by a person resident in Singapore or a permanent establishment in Singapore; or
  • Deductible against any Singapore sourced income.

Dividend

There is no withholding tax on payment of dividends by Singaporean companies or repatriation of profits by branches. Dividends paid by a Singaporean tax-resident company are exempt from income tax in the hands of shareholders, regardless of whether the dividends are paid out of taxed income or tax-free gains.

Whether they are taxable in the recipient country would depend on the domestic tax laws of that country and what the treaty specifies.

Treatment of losses carried forward

Where company suffers net losses in any basis year, it may carry these losses forward to subsequent years to be deducted against future in- comes provided that there is no substantial change in the company’s shareholdings between the last day of the year in which the losses were incurred, and the first day of the basis year in which the losses are to be deducted. This allows for

a temporarily loss-making company to reduce future taxes payable.

Obligations of the employer

Social security

The Central Provident Fund (CPF) is a social security savings scheme that covers health care, retirement, and home ownership and it is applicable to Singapore Citizen or Permanent Resident only.

The contribution rate varies depending on the age and the salary. The maximum amount of CPF contribution payable on Ordinary Wages is based on a monthly salary ceiling of SGD 6,000. Voluntary contributions can be paid in addition to the mandatory contributions.

The employee’s share of CPF contribution is deducted from their salary by the employer during the monthly payroll processing. The employer is then required to pay the employer’s and employee’s share of CPF contributions monthly for all applicable employees at the prescribed rates.

Taxation at source

Personal income tax rate in Singapore is one of the lowest across the globe.

In general, individuals are liable to Singapore income tax only on income accruing in or derived from Singapore. However, individual need to pay income tax for income derived from sources outside Singapore if:

  • The individual receive income through a partnership in Singapore; or
  • Individuals working outside Singapore whose overseas employment is incidental to their Singapore employment; or
  • Individuals working outside Singapore on behalf of the Singapore Government.

Income tax rates depend on an individual’s tax residency status. To be treated as a tax resident, the individual must be either:

  • Singapore Citizen (SC) or Singapore Permanent Resident (SPR) who resides in Singapore except for temporary absences; or
  • Foreigner who has stayed / worked in Singapore (excludes director of a company) for 183 days or more in the year preceding the basis year.

For resident individuals, they are subject to progressive tax rates starting at 0% and ending at 22% for above SGD 320,000. Any income below SGD 20,000 is not subject to tax.

For non-resident individuals, they are taxed at the flat rate of 15% or the resident rates whichever results in a higher tax amount on their employment income. Meanwhile, director’s fees and other income are taxed at the prevailing rate of 22%.

Conclusion

Singapore is one of the most favorable tax jurisdictions in the world. With one of the lowest tax rates, various tax exemption and incentives, which greatly benefit Singapore companies. Furthermore, the tax exemption on capital gains and dividends ensures that shareholders benefit more from their investments.

Finally, the Singapore government’s effort to sign Avoidance of Double Taxation Agreements allow companies to establish in Singapore and expand internationally without the burden of paying extra taxes on foreign-sourced income. Coupled with highly talented workforce and advanced infrastructures, it is of no wonder that many international firms have chosen to set their foot in Asia through Singapore.

Jason Lee

Contact

Singapore
CA.sg PAC
33A Chander Road
Singapore 219539
www.ca-sg.com
Tel. +65 62 20 20 08
Fax +65 62 97 93 09
jason@ca-sg.com
Jason Lee

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