Tax Highlights
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Singapore determines tax residency by place of control and management, not by the jurisdiction of formation.
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Tax resident companies are taxed at a 17% income tax rate.
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Tax resident companies can benefit from tax exemptions, which allow companies to reduce their taxable base. These exemptions are
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New Start-Up Company: 75% tax exemption on first SGD100,000 net income plus 50% tax exemption of next SGD100,000 net income.
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Partial exemption: 75% exemption on its first SDG 10,000 net income, plus 50% exemption on its next SGD 190,000.
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Tax resident companies that do not remit or receive their foreign-sourced income will not pay taxes in Singapore.
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Companies formed in Singapore that are not considered tax residents will not pay taxes in Singapore on their foreign-sourced income.
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Capital gains tax is tax-exempt in Singapore.
Singapore Offshore Companies can be used in several ways when it comes to tax planning purposes.
Singapore companies can set up different tax strategies, there are tax-resident companies in Singapore that can elect to be taxed at a 17% corporate income tax rate but benefit from several tax exemptions, or they can be tax resident companies not taxed in Singapore as long as they do not remite their income to Singapore.
Singapore companies can also be non-resident companies if they are not managed in Singapore. In this scenario, companies will not be taxed on their foreign-sourced income, even if the company remits the earnings to Singapore.
Tax Residency in Singapore
Singapore corporate tax residency is based on the place of Control and Management, not on the jurisdiction of Incorporation.
In general, the place of Control and Management is where the Board of Directors’ meeting is held.
Taxation of Tax Resident Companies in Singapore
Singapore imposes a 17% income tax rate on tax-resident companies, nonetheless, it does not tax tax-resident companies who do not remit their foreign-sourced income to Singapore.
In addition, Singapore provides income tax exemptions to tax resident companies. These tax exemptions are classified as Tax Exemption for New Start-up Companies and Partial Tax Exemption (for all companies)
Taxation of Singapore Tax Resident companies that remit their income to Singapore
Companies that remit their income to Singapore are subject to a 17% on its net income, nonetheless, they can benefit from tax exemptions classified as Tax Exemption for New Start-up Companies and Partial Tax Exemption (for all companies regardless of their age).
Tax Exemptions and Refunds for Singapore Tax Resident Companies
Tax Exemption in Singapore for new Start-up Companies.
Newly formed tax-resident companies in Singapore benefit from a yearly tax exemption where 75% of its first SGD 100,000 net taxable income will be exempt from taxes, and 50% of its next SGD 100,00 net taxable income will be exempt from tax.
Explanation example: if your company earns a net income of SGD 300,000 in a year, its taxation will be broken down as follows:
75% of your first SGD 100,000 net income will be exempt from tax, so only SG SGD 25,000 will be subject to the 17% income tax rate =
SGD 100,000 net income minus 75% exemption equals SGD 25,000 (taxable amount after exemption is applied) by 17% = SDG 4,250
50% of your second SGD 100,000 net income will be exempt from tax, so only SG SGD 50,000 will be subject to the 17% income tax rate
SGD 100,000 minus 50% equals SGD 50,000 (taxable amount after exemption is applied) by 17% = SDG 8,500
The remaining SGD 100,000 net income will be taxed at the full tax rate of 17%
SGD 100,000 remaining income by 17% income tax rate = SGD 17,000
So, for a SGD 300,000 net income, you would pay a total tax of SGD29,750
Exemption Period
This tax exemption is provided for the first 3 years after a company is formed.
Which companies cannot benefit from the New Start-Up Tax Exemptions?
Investment holding companies and companies engaged in property development for sale or investment purposes.
Partial Tax Exemption
Newly formed companies and companies beyond 3 years of formation, including investment holding companies, can benefit from a partial tax exemption.
The exemption is as follows:
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75% exemption on its first SDG 10,000
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50% exemption on its next SGD 190,000.
Additional Corporate Income Tax (CIT) Rebate (Refund).
In addition to the tax exemptions mentioned above, Singapore provide a Corporate Income Tax Rebate, where it refunds companies a percentage of the income tax paid. This percentage varies per year, and for tax year 2024, the Rebate rate is 50% of the income tax paid, with a Rebate Maximum of SGD 40,000
Total tax bill of a Singapore Tax Resident Company with a net income of SGD 200,000 in tax year 2024
First SGD 100,000 - 75% exemption = SGD 25,000 by 17% tax rate = 4,250 tax
Next SGD 100,000 - 50% exemption = SGD 50,000 by 17% tax rate = 8,500 tax
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Tax to be paid on an SGD 200,000 yearly net income = SDG 12,750
Corporate Income Tax Rebate (SDG 12,750 minus %50) = SGD 6,375.
Total tax to be paid on an SGG 200,000 net taxable income = SGD 6,375.
Overall Effective tax rate
So, according to the explanations provided above, if your Singapore Company earns a net income of USD$ 74,486.17 (SGD 100,000), it would US$ 2,125 as income tax, in other words, it would be an effective tax rate of 2.85%
If your company’s net income is USD 148,989 (SGD 200,000), it would pay an income tax of USD 4,748, in other words, you pay an effective tax rate of 3.19%.
Taxation of a Tax Resident Company that does not remit or receive its income to Singapore
Foreign-Sourced Income not sent to Singapore
Singapore tax-resident companies that do not remit their foreign-sourced income will not pay income tax in Singapore on this foreign-sourced income.
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This foreign-sourced income will not need to prove nor is required to have paid taxes abroad on this income.
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A company remits its income when it sends this income to a bank account located in Singapore, or when pays for services in Singapore or Buys products, assets, etc., in Singapore through a foreign bank account.
Specified Foreign-Sourced Income Remitted to Singapore
There are certain types of foreign-sourced income that will not pay taxes in Singapore if remitted and received in Singapore. These types of income are Foreign-sourced dividends, Foreign branch profits, Foreign-sourced service income.
For this remitted income to not pay taxes in Singapore when remitted, it must have been to taxes in a foreign jurisdiction at a tax rate of at least 15%.
Companies incorporated in Singapore but not tax residents in Singapore
If the company has its place of Control and Management outside of Singapore, it will not be considered a tax resident in Singapore, hence its foreign-sourced income will not be taxed in Singapore.
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These non-resident companies would be subject to withholding tax in Singapore on Singapore-Sourced Income, and will not have access to Singapore's tax treaty network.
Capital Gains Tax in Singapore
Singapore exempts Capital Gain from taxes, but these gains might get taxed by IRAS in case the capital gain is considered to be motivated by profit seeking or that you trade properties.
IRAS takes the frequency of transactions, the reason for buying/selling property, financial means to hold the property for long term, and holding period to assess wether you are trading in properties. If IRAS after its evaluation considers that this was not a capital gain but from trading activities, the gain would be added to your taxable tax base and be subject to the corporate income tax rate.
Investment holding company
If most of the company’s income is from passive income sources like dividends, interests, royalties, gains from the disposal of shares, properties, etc., then it would be considered as an Investment Holding Company, and its income would be subject to Corporate Income Tax without the possibility to benefit from tax exemption scheme for new start-up companies but can benefit from the partial tax exemption Scheme
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