Understanding tax and accounting in Singapore

Since 1 January 2003, Singapore has adopted a single-tier corporate income tax system. Under this system, the tax paid by your company on chargeable income is considered the final tax, and dividends distributed to shareholders are exempt from further taxation. Singapore’s current headline corporate tax rate is capped at 17%. 

To maintain the status of an attractive business hub and stay competitive, Singapore’s corporate tax rate has remained at 17%.  

Depending on the tax exemptions your business is eligible for, your effective tax rate may be lower than the headline rate. You may also be able to benefit from the various industry-specific tax incentives and concessionary tax rates available. 

Additionally, there is no tax on capital gains in Singapore. Examples of capitals gains include gains on the sale of fixed assets and gains on foreign exchange on capital transactions. 

In Singapore, corporate income is assessed on a preceding year basis. This means that the basis period for any year of assessment (YA) refers to the financial year ending (FYE) in the year preceding the YA.  

For example, in 2024, you will be filing a corporate tax return for your company’s financial year that ended anytime between 1 January 2023 to 31 December 2023. Your company’s accounts should be prepared up to the FYE each year. 

The due date for corporate tax filing for Singapore companies is 30 November. You must file a complete set of returns that includes Form C/Form C-S, audited or unaudited accounts and tax computation with the Inland Revenue Authority of Singapore (IRAS).

For effective employee management and compliance in Singapore, understanding the personal income tax regulations is essential.  

Tax residents in Singapore are taxed on a progressive rate from 0% to 24%. Filing of personal income tax returns is mandatory if their annual income is SG$20,000 or more. Tax residents do not need to pay tax if their annual income is less than SG$20,000. 

On the other hand, non-residents are taxed at a flat rate of 15% on their employment income or at resident rates, whichever results in a higher tax amount. Other types of income, such as directors’ fees, are taxed at 24%.  

If your company has five or more employees, you will need to join the Auto-Inclusion Scheme (AIS). This involves submitting your employees’ income details to the IRAS, which will simplify the filing process for them. Moving forward, they will only need to verify and submit their personal income tax returns.  

Also known as value added tax (VAT) in other countries, the goods and services tax (GST) is a consumption tax that is levied on the supply of goods and services, as well as the import of goods into Singapore. Currently set at 9%, GST is an indirect tax applied to the selling price of goods and services provided by GST-registered businesses. 

Bear in mind that companies incorporated in Singapore are not automatically registered to charge GST. You will need to continually assess the need to be registered for GST. Registration is compulsory when: 

• your taxable turnover exceeds SG$1 million at the end of the calendar year; or 
• you are currently making sales and can reasonably expect your business turnover to exceed SG$1 million in the next 12 months. 

You may also voluntarily register for GST.  

Subsequently, you will need to e-file your GST return to the IRAS on a quarterly basis. If there is no tax due for the relevant period, you can submit a ‘nil’ return. Penalties will be imposed if you file the GST return late.  

Withholding tax is another crucial aspect of Singapore’s tax system, particularly affecting non-resident companies. A company is considered non-resident if its control and management are conducted outside of Singapore, including;  

• Companies incorporated outside Singapore that have operations in Singapore 
• Singapore-incorporated offices that are managed and/or controlled outside Singapore 
• Singapore branches of foreign companies 

As a non-resident company, you may be subject to the withholding tax on certain types of income. Withholding tax requires a payer to deduct tax from payments, such as royalties, interest, or technical services fees made to a non-resident company. The payer then remits this tax to the IRAS. This ensures that tax is collected on income earned in Singapore by non-resident entities.  

The withholding tax rate will vary based on the type of payment. The primary impact is that it may reduce the net income received by your non-resident company. To provide relief, Singapore has double tax treaties with various countries to prevent companies from being taxed by both jurisdictions.  

A double taxation agreement (DTA) is a bilateral agreement between two countries to prevent double taxation that may occur due to the application of their respective domestic tax laws. Only residents can benefit from the application of the DTA. The definition of a resident will be outlined in the relevant DTA and referred to for application purposes. This applies to both individuals, as well as corporates/bodies of person.  

The types of income typically covered under a DTA include: 

• Income from immovable property 
• Shipping and transport 
• Royalties 
• Dividends 
• Capital gains 
• Interest income 
• Director fees 
• Employment income 
• Professional fees  

For foreign income earned from a treaty country, you are entitled to claim for relief under the relevant tax treaty by submitting a Certificate of Residence to the foreign country. This is proof of your Singapore tax residency.  

On the other hand, if you are a tax resident of a treaty country, you will need to provide IRAS with a completed Certificate of Residence, duly certified by the tax authority of the treaty country. 

The SFRS for Small Entities (SE) is an alternative framework to the full SFRS for eligible entities in Singapore. SFRS for SE provides an optional financial reporting standard for small entities for reporting periods beginning on or after 1 January 2011. 
 
The objective of the SFRS for SE is to provide some relief to small entities from compliance with the full SFRS, while ensuring quality, transparency, and comparability, which can benefit the investment community and other users of financial statements. 
 
You may be eligible to apply the SFRS for SE, provided your business: 

• Is not publicly accountable 
• Publishes general-purpose financial statements for external users 
• Is a small entity. An entity qualifies as a small entity if it meets at least two of the three following criteria: 
• Total annual revenue does not exceed SG$10 million 
• Total gross assets do not exceed SG$10 million 
• Total number of employees is 50 or less 

An entity that qualifies under these criteria may adhere to the standards until it falls out of the size threshold for two consecutive reporting periods. In such cases, the company must follow the full SFRS.