Introduction to Taxes Applicable to Singapore Businesses
This thriving and bustling island nation is home to world-class infrastructure and the best names in lifestyle and entertainment. It’s a truly beautiful melting pot that’s uniquely Singapore, but it doesn’t stop there. What makes Singapore the top destination for tourists, expatriates, and entrepreneurs alike is the country’s presence as a global leader in business and finance.
Singapore has the best interest of the entrepreneur in mind, and it remains one of the most business and tax-friendly countries in the whole of Asia. In fact, it has one of the best and most competitive taxation systems in the world. It’s no surprise that entrepreneurs choose to bring their business to Singapore. Not only does Singapore have an excellent tax system, but it also has the easiest and quickest processing when it comes to putting up a business.
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Types of Taxes in Singapore
1) Income Tax for Sole Proprietors and Partnerships
When you are your business’ sole proprietor, or a partner in a business, the business income is considered a portion of your personal income. Thus, personal income tax rates apply. Income tax rates apply whenever a customer pays you for a Singapore product, or whenever you receive money in Singapore for overseas sales. Any person or business that receives income in Singapore is subject to income tax, whether it be from the business, from your salary, or from interests earned from deposits, and other forms of income.
Sole proprietors and business partners get to avail of tax rates and exemptions to reduce taxes. There are also tax deductions, reliefs, and rebates set up that will help the entrepreneur keep their businesses running in Singapore.
You can claim for Allowable Business Expenses for expenses that your business incurred to generate income, like rent, office supplies, stationery, and wages paid to employees. You can claim for Capital Allowances for expenses your business incurred for purchasing plant and machinery. You can also claim for Unutilised Losses and Capital Allowances, which you can carry forward in the following financial year. Not only that, there are also applicable reliefs and rebates when you make donations to charitable organizations.
2) Income Tax for LLPs (Limited Liability Partnerships)
A Singapore LLP is a business structure that requires two or more partners, who can be an individual (at least 18 years old and residing in Singapore) or a body corporate (a company or another LLP). Even if they are considered a partnership, LLPs are not taxed at an entity level. Instead, an LLP’s profits are considered as a partner’s personal income. Thus, personal income tax rates are applied. The partners, not the partnership, are liable to tax.
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3) Singapore Corporate Tax Rate for companies
Any company that receives or accrues income in Singapore is subject to tax. This includes any company that is registered or incorporated in Singapore or outside Singapore. Companies are taxed at 17% tax rate. Capital gains are not taxable.
Depending on conditions and criteria met, companies can be given Partial Tax Exemption (75% tax exemption on company’s first S$10,000 chargeable income, 50% for the next S$290,000), Full Tax Exemption for New Companies (startups are tax exempted on the first S$100,000 of chargeable income, and 50% more on their next S$200,000, not including Singapore franked dividends), and Tax Exemption for Foreign-Sourced Income (dividends, remittances).
4) Stamp Duty
Stamp duty is tax imposed on documents, which can be commercial or legal in nature, usually land and property related, as well as anything with regards to shares and stocks. Documents must be stamped within 14 days or 30 days, depending on which country they were executed. Failure to stamp these documents within the required period can result in penalty fees, fines, and even imprisonment.
You can have your documents stamped over the counter at the office of the Inland Revenue Authority of Singapore, or you can also do it online where there is an e-Stamping system in place.
5) Goods and Services Tax (GST)
Goods and services made in or imported into Singapore are subject to a 7% Goods and Services Tax. However, financial services and proceeds from sales or lease on residential properties are not taxed by GST. Sole proprietorships, partnerships, companies, government bodies, statutory boards, clubs, and non-profit organizations, to name a few, can register for GST.
You must keep your tax invoices and receipts or anything related to GST transactions for at least 5 years, and file GST returns on a quarterly basis using myTaxPortal, the online filing system.
6) Withholding Tax
If your business employs staff and overseas agents who are Singapore non-residents, and if you have business partners who are also Singapore non-residents, they are liable for withholding tax, which are then paid to the Inland Revenue Authority of Singapore. This covers fees and commissions to overseas, offshore and non-resident employees and partners.
Withholding tax for a non-resident company is at 18%, and at 20% for non-resident individuals.
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7) Property Tax
Property tax is imposed on all properties in Singapore. HDB flats, warehouses, factories, offices, and vacant lots must pay property tax. It is paid yearly, before the 31st of January, at 10% tax rate. This amount can be further reduced if you meet the requirements of the owner-occupier rate.
There are rebates and refunds issued to property owners to keep taxes manageable, like when your property is vacant for at least one month due to repair work or failure to find tenants.
We at Piloto Asia will work with you in every step of your business operations in Singapore. We believe in long-term relationships, and people orientation is at our core. Our team of highly qualified experts can help you set up your business hassle-free.
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Want to know more about procedures of setting up your Singapore company and where Singapore stands amongst OECD countries in taxes? Look at our most popular guides.