8 Different Types of Taxes in Singapore in 2024
Singapore is a country that needs no introduction. Not only is it a top destination for tourists and expatriates, but it's also a top destination for entrepreneurs. If you want to do business here in Singapore, you have to learn more about tax in Singapore.
What are the Different Taxes in Singapore?
Singapore is a small island nation that's home to world-class infrastructures and notable icons in luxury and entertainment. A melting pot of different culture, it's no surprise that Singapore is enticing to a lot of foreigners. But outside of the recreation and luxury, Singapore makes itself known as a robust business and finance presence.
It remains one of the most business-friendly and tax-friendly countries in the world. Its taxation system is considered to be one of the most competitive systems in the world as a whole. It's no wonder that entrepreneurs are looking to move their businesses to Singapore.
Corporate Tax
Corporate income tax in Singapore is territorial-based, meaning the only taxable income is received in or sourced from Singapore. Companies are required to file for income tax return on their earnings received in or derived from Singapore. A person's or company's income from other countries is not taxed, unlike other countries such as the US that does the opposite. Companies are charged 17% (flat tax rate) on their chargeable income. You can ask any professional accounting firm to help you with understanding the corporate income tax in Singapore. For foreign business owners, here’s some tips on how to find the right accounting firm in Singapore.
Singapore also makes it enticing by offering incentive schemes to reduce the tax rate for companies well below 17%. If you are a startup company, you can enjoy corporate tax exemptions on the first three years where they pay 75% of the first $100,000 of chargeable income and only 50% of the tax on the next $200,000 of chargeable income.
Singapore also has special tax regimes for industries and sectors that reduce tax rates and provide special tax exemptions. These industries include banking, shipping, leasing, and fund management. These schemes often reduce the company's effective tax rate below 17%.
Goods and Services Tax (GST)
GST or Goods and Services Tax are for goods and services made or imported to Singapore and subjected to 9% tax. GST does not tax financial services and income from sales or lease on residential properties. Sole proprietorships, partnerships, government bodies, clubs, and non-profit organizations can register for GST.
Singapore GST is also very similar to VAT or Value Added Tax that's imposed in other countries. According to the 2014 Budget, the Singapore government has not adjusted the Goods and Services Tax rate because of how well it worked and how it keeps businesses and their customers happy. Registration for GST falls under two categories: compulsory and voluntary. Your business may also be exempted from registering for GST if it meets certain conditions. If a permanent establishment is not required to sign up for GST, it may be beneficial to register voluntarily.
According to the World Economic Forum, one of the biggest reasons why entrepreneurs are drawn to Singapore is its personal income tax rate. This can be lowered further because of the GST. The government collects tax revenue growth data, so it's fully aware of the income from corporate tax payments, which allows them to lower personal tax rates.
When people pay GST every time they purchase a product, lower individual tax rates become more viable in the long run. In other words, GST is something that can help businesses save money.
Individuals and business owners looking to enjoy further tax incentives from the Singaporean government will need to apply for Certificate of Residency in Singapore.
Income Tax for LLP (Limited Liability Partnership)
By definition, a Singapore LLP is a business structure that requires two or more partners. Partners need to be at least 18 years of age and residing in Singapore, or a body corporate of another company or LLP.
Even if they're considered as a partnership, LLP's are not taxed at an entity level. Instead, LLP's profits are considered a partner's personal income. Personal income tax rate is applied, so the partners are liable to tax and not the partnership.
Income Tax for Sole Proprietors and Partnerships
If you run your business as a sole proprietorship or partnered, your business income is considered a portion of your personal income. This means that personal income tax rates will apply. Income tax rates are applied when a customer pays you for a Singapore product, or when you receive money in Singapore from overseas sales. Any person or business that receives income in Singapore is subject to this income tax. This includes your salary, businesses, interests formed from various deposits, and other taxable income sources.
Sole proprietors and partners will be able to avail of personal tax rates and tax exemption to reduce taxes that will allow them to keep their businesses running in Singapore. They can also enjoy tax deductions, rebates, and tax relief to help them manage their income.
Sole proprietors and business partners can claim Allowable Business Expense for expenses that their businesses incurred to generate income. These expenses include, but not limited to, rental income, office supplies and stationeries, and wages paid out to employees.
They can also claim something called Capital Allowances, which are for expenses that their businesses incur when purchasing machinery and other equipment. They can also file for Unutilised Losses and Capital Allowances, which they can carry forward in the following financial year. Sole proprietors and business partners can also enjoy tax relief and rebates when they make donations to charitable organizations.
Withholding Tax
If your business employs staff and overseas agents who are Singapore non-residents, or if your business partners are also Singapore non-residents, they're liable for withholding tax.
This is paid out to the Inland Revenue Authority of Singapore (IRAS). This withholding tax will cover commissions and fees for overseas, off-shore, and non-resident partners and employees. Withholding tax rates vary depending on the type of payment.
Property Tax
Property tax is intended for all properties in Singapore. This includes HDB flats, warehouses, factories, offices, and even vacant lots. This is paid out yearly before January 31st at a 10% taxation rate. This rate can be reduced if you meet certain requirements of the owner-occupier rate.
Like personal income tax, property owners can enjoy certain rebates and tax refund to keep taxes manageable. For example, if your property has been vacant for at least a month due to repair work or failure to find tenants, you can reduce your property tax.
Stamp Duty
When it comes to buying property here in Singapore, you incur additional costs. One of them is the Stamp Duty.
Stamp Duty simply refers to the tax on documents that relate to leasing or purchase of a property. This is payable to the IRAS.
All residential property transactions, whether it's buying, selling, or renting, are subject to stamp duty but there are some exceptions.
Stamp Duty can cost quite a bit so be sure to factor this in when you're considering your financials. You can use this calculator to find out how much you need to pay.
Buyer’s Stamp Duty (BSD)
Purchasing properties in Singapore will require you to pay BSD or Buyer's Stamp Duty for the documents executed for these purchases. BSD is based on purchase price stated in the document to be stamped, or the market value of the property - whichever amount is higher.
The BSD was recently revised on 20th February 2018, and the current rates are as follows:
BSD Rate is 1% for residential properties and 1% for non-residential properties for the first $180,000 of purchase price or market value.
BSD Rate is 2% for residential properties and 2% for non-residential properties for the first $180,000 of purchase price or market value.
BSD Rate is 3% for residential properties and 3% for non-residential properties for the next $640,000 of purchase price or market value.
BSD Rate is 4% for residential properties and 3% for non-residential properties for the remaining amount of purchase price or market value.
Closing
The Singapore tax system is a great example of how tax incentives are effectively used to promote free trade and commercial activity while ensuring that there's sufficient revenue to be collected by the state to meet both economic and social objectives. This allowed the country to create an environment where state and residents have a mutual beneficial relationship.
Their simplified tax policies allowed them to have one of the world's highest rates for tax compliance from domiciled residents and companies. This arrangement is symbiotic and has allowed the country to develop world-class infrastructure that allows for a better quality of life for its residents and enticing global businesses to relocate to Singapore.
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.
If you want to know more about different types of taxes in Singapore, feel free to check out other tax articles, give us a call or send us an email. Our team of highly qualified experts are always ready to answer your queries.
Frequently Asked Questions
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Businesses in Singapore are required to prepare their financial statements in accordance with the Singapore Financial Reporting Standards (SFRS). The SFRS are based on the International Financial Reporting Standards (IFRS), but there are some differences between the two sets of accounting standards in Singapore.
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Yes, you certainly can. In fact, many small business owners choose to outsource their accounting in Singapore to professional firms like Piloto Asia. This approach not only saves time and ensures accuracy but also provides peace of mind knowing that your financial affairs are being handled by experts familiar with Singapore's tax laws.
At Piloto Asia, we offer a range of accounting services including bookkeeping, tax preparation, and financial reporting, tailored to meet the unique needs of your business.
Reach out to us to learn more about how we can assist you in managing your accounting and tax requirements efficiently.
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Navigating the intricate tax landscape in Singapore can be challenging. To ensure compliance and accuracy in your tax filings, it's advisable to collaborate with experts in the field.
While there are several top 10 audit firms in Singapore that offer comprehensive services, many businesses also benefit from the personalized approach of smaller firms like Piloto Asia.
With a deep understanding of Singapore's tax regulations, Piloto Asia provides tailored guidance, from tax planning to audit assurance, ensuring your business remains compliant and takes advantage of any available tax incentives.
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Singapore businesses are required to pay various forms of taxes as regulated by the Inland Revenue Authority of Singapore (IRAS). These include corporate tax, goods and services tax (GST), property tax, and stamp duty, among others. The exact tax requirements vary according to the nature and scope of the business. For instance, an IRAS Investment Holding Company is exempt from certain types of income, such as dividends and capital gains. However, it is subject to corporate tax on its income from Singapore-sourced investment assets like rental properties. It's critical to understand these tax regulations to ensure your business remains compliant. Always consult with a tax professional or the IRAS for accurate information.
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Singapore tax is computed on a company's chargeable income, the difference between its taxable revenues and deductible expenses. Taxable revenues include all recurring or ongoing expenses earned in Singapore or remitted into the country. Deductible expenses include any expenses spent by the company to generate revenue.
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NOA stands for Notice of Assessment. It is a document that the Inland Revenue Authority of Singapore (IRAS) gives to businesses after they have submitted their income tax returns. The NOA outlines the business's taxable income, tax liability, and applicable deductions or reliefs.
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In Singapore, businesses, including IRAS investment holding companies, are subject to corporate tax at a flat rate of 17%, Goods and Services Tax (GST) at 7%, property tax, and stamp duty. Investment holding companies specifically may have exemptions on certain income types like dividends and capital gains but are taxed on Singapore-sourced investment income. Understanding these tax obligations is crucial for compliance.