Ana Bulgaru

Corporate Taxation

UNIVERSITATEA DE VEST DIN TIMISOARA

FACULATEA DE ECONOMIE SI ADMINISTRAREA AFACERILOR
INTERNATIONAL CORPORATE FINANCE

Tax
System
in
Singapor
e

Content

1.

General facts about Singapore............................................................................... 2

2.

Introduction to the tax system of Singapore..............................................................3

4.

Individual Income Tax......................................................................................... 5

4.1.

Income tax for residents................................................................................... 5

4.2.

Income tax for non-residents.............................................................................. 7

Corporate Income Tax......................................................................................... 8

5.
5.1.

General Corporate Tax Incentives (for residents)........................................................9

5.1.2. One time non-taxable cash grant.......................................................................9
5.1.3 Tax exceptions for New SMEs..........................................................................10
5.1.4. Productivity and Innovation Credit (PIC)..........................................................10
5.1.5. Withholding tax.......................................................................................... 14
5.1.6. Global Trader program................................................................................ 15

5.2.

Corporate tax regulations................................................................................16

5.2.1.

Estimated Chargeable Income (ECI)...........................................................17

5.2.2.

Income Tax return (Form C / Form C-S).......................................................17

6.

Predictions: Singapore vs Switzerland...................................................................20

7.

Summary........................................................................................................ 20

8.

Bibliography.................................................................................................... 22

1. General facts about Singapore

Today, Singapore has a highly developed market economy, based historically on

extended entrept trade. Along with Hong Kong, South Korea, and Taiwan, Singapore is one
of the original Four Asian Tigers. The Singaporean economy is known as one of the freest,
most innovative, most competitive, and most business-friendly. The 2013 Index of Economic
Freedom ranks Singapore as the second freest economy in the world, behind Hong Kong.
According to the Corruption Perceptions Index, Singapore is consistently ranked as one of the
least corrupt countries in the world, along with New Zealand and the Scandinavian countries.
Singapore is often cited as the leading example of countries that continues to reduce
corporate income tax rates and introduce various tax incentives to attract and keep global
investments. 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.
The governing statute regarding corporate and individual taxation matters is The Income
Tax Act of Singapore and the responsible authority for tax collection is a statutory board under
the Ministry of Finance of the Singapore Department called Inland Revenue Authority of
Singapore or shortened: IRAS.
The Inland Revenue Authority of Singapore (IRAS), was formed in 1960 and was
formerly known as the Inland Revenue Department. It integrated all the key revenue
collection agencies into one body, enabling the administration and collection processes to
become more streamlined and better managed. IRAS has also made its mark as an efficient tax
administrator and a service-friendly tax collector.
The IRAS is responsible for collecting income tax, property tax, goods & services tax,
estate duty (abolished since 15 Feb, 2008), betting taxes and stamp duties. As the main tax
administrator for the Ministry of Finance, IRAS plays a role in tax policy formulation by
providing policy inputs, as well as the technical and administrative implications of each
policy. IRAS also actively monitors developments in external economic and tax environment
to identify areas for policy review and changes. It aims to foster a competitive tax
environment that encourages enterprise and growth. The other non-revenue functions
performed by IRAS include representing the government in tax treaty negotiations, providing
advice on property valuation and drafting of tax legislation.
In Singapore, the long-term objectives of government budgetary policy are (followed by
IRAS) are:
to promote and support sustained, non-inflationary economic growth;
to maintain a balanced budget, i.e. to finance total operating and development expenditures
from operating revenue over the course of the business cycle; and
to focus government expenditure on delivering essential public goods and services, e.g.
education, healthcare, infrastructure, housing and programs to protect the environment.
Underlying the above objectives are the recognition of market forces in driving the
economy, financial prudence and emphasis on human & infrastructure investment.
Tax policy on the other hand, is an integral part of fiscal policy. The main objectives of
tax policy in Singapore are:
Revenue Raising. This is the traditional aim of tax policy. Tax revenue is a substantial source
of funding for government operations.
Promotion of Economic and Social Goals. Tax has been used to influence behavior towards
desirable social and economic goals. For instance, to encourage mechanization and
2

automation, the government allows accelerated capital allowance for most assets used for
business purposes. To encourage Singaporeans to have more children, tax rebates are given for
the first to fifth child(ren).

2. Introduction to the tax system of Singapore

The fundamental tenet of Singapore's tax policy is to keep tax rates competitive both for
corporations as well as individuals. Keeping the corporate rate competitive will help to
continue to attract a good share of foreign investment. Keeping the individual rates low will
encourage the people to work hard. It will also make risk-taking worthwhile and encourage
entrepreneurship.
-

There are three main sources of government operating revenue:

tax revenue,
fees and charges and
other receipts.
Tax revenue accounts for around 75% of the government operating revenue per year.
The most significant is tax revenue from the various taxes imposed by the government, which
are as follows:
Individual Income Tax which is chargeable on income of individuals.
Corporate Tax - which is chargeable on income of companies.
Withholding tax for any payments to non-residents or non-resident companies
Property Tax which is imposed on owners of properties based on the expected rental values of
the properties. As of 2014, the amount levied will vary according to the type of property in
question, and will operate within a banded system, starting with a 10% tax.
Goods & Services Tax. GST is a tax on consumption. The tax is paid when money is spent on
goods or services, including import (7 %, paid every quarter if the taxable turnover exceeds
$1MM). Businesses effectively pay two kinds of GST: output tax, which they collect on goods
and services that they sell (paid to IRAS); and input tax, which they pay on goods and
services that they buy (paid to the seller at the point of sail).
Estate Duty (Removed for deaths occurring on or after 15 Feb 2008). It is levied on the value
of a deceased's net assets in excess of a threshold amount.
Stamp Duties, imposed on commercial and legal documents relating to stock & shares and
immovable property. It is calculated at varying rates depending on the document involved, and
usually as a percentage of a transaction cost rather than as a fixed fee
Betting Taxes. These are duties on private lottery, betting & sweepstake.
Casino Tax - a new tax levied on the casinos gross gaming revenue.
Motor Vehicle Taxes. These are taxes, other than import duties, that are imposed on motor
vehicles. These taxes are imposed to curb car ownership and road congestion.
Customs & Excise Duties. Singapore is a free port and has relatively few excise and import
duties. Excise duties are imposed principally on tobacco, petroleum products and liquors.
Also, very few products are subject to import duties. The duties are mainly on motor vehicles,
tobacco, liquor and petroleum products.
Others. The two main taxes are the foreign worker levy and the airport passenger service
charge. The foreign worker levy is imposed to regulate the employment of foreign workers in
Singapore.
There are no Wealth or gift taxes.
IRAS (Inland Revenue Authority is responsible for collecting income tax, withholding
tax, property tax, goods & services tax, stamp duty, estate duty (for deaths occurring before 15
Feb 2008) and betting taxes.

According to Doing Business 2014, Singapore is the 5th country in the world by best
practices in the tax payments and regulations (the best country is United Arab Emirates with
0% profit tax).
There are only 5 main groups of taxes to be paid 5 times (in total) per year (each of
them is paid ones per year):
Tax or mandatory
contribution

Notes on
payments

Employer paid - Social

security contributions
Corporate income tax

Online
filling
Online
filling

Time
(h) spent/
year

Property tax
Road tax
Value added tax (GST)

32
0
0

Online
filling

Totals

10

40
82

Statutory
tax rate

Tax base

Gross
salaries
Taxable
17%
profit
Property
10%
value
Fixed fee Engine size
Value added
7%
16%

Total tax
rate (% of
profit)
17.6
4.9
4.7
0
0
27.1

Taxable income includes:

gains or profits from any trade or business;
income from investment such as dividends, interest and rent;
royalties, premiums and any other profits from property; and
other gains of an income nature accrued in or derived from Singapore, or income received in
Singapore from outside of the jurisdiction. Capital gains (e.g. gains realized on the sale of
fixed assets, or on foreign exchange on capital transactions) are not liable to corporate income
tax. Certain income is exempt from tax under the Income Tax Act; examples of exempt
income include shipping income derived by a shipping company, and foreign-sourced
dividends, branch profits and service income received by a resident company that satisfies the
qualifying conditions.
Deductible expenses must have been wholly and exclusively incurred in the production
of income, and must also be revenue in nature and not prohibited under the Income Tax Act.
Capital expenditure is not allowable as a tax deduction. Non-deductible expenses include
amortization and depreciation (although capital allowances are allowed), bad debts, the writeoff or acquisition costs of fixed assets, legal and professional fees, medical and motor vehicle
expenses, and penalties and fines.

3. Tax history in Singapore

The income tax had been introduced briefly during World War I and II to raise revenue for the
war effort. But the tax was unpopular, and with many opposing the need for it, income tax
stayed off the agenda. The end of World War II highlighted the need for new infrastructure
and fresh sources of revenue, giving renewed impetus to the introduction of income tax.
In 1947 Income Tax was introduced in Singapore under the British colonial government.
4

In 1948 the Income Tax Act was imposed. The Act was based on the Model Colonial
Territories Income Tax Ordinance 1922, which was devised for British colonies at that time.
Therefore, Singapores tax laws share common historical roots with those of Malaysia,
Australia, New Zealand and South Africa.
1960s : With Independence in 1965, Singapore promoted a policy of rapid industrialization
and building an export oriented industrial base, to stimulate growth and employment. Hence
in the 1960s labor-intensive industries were encouraged by tax incentives. The Economic
Expansion Incentives Act was introduced in 1967. Companies which managed to grow their
exports enjoyed as much as a 90% tax exemption on the increased export income. Interest
paid on foreign loans granted to a local industrial company was tax exempt.
1970s: The growth of the service sector was high on the governments agenda. Shipping was
actively promoted. Income from the operation and charter of Singapore ships drew tax
exemptions. Tax measures to support urban redevelopment were also introduced. Different
property taxes were also phased out. Tax policies in the 1970s were also influenced by social
needs. Contributions to the Central Provident Fund were tax deductible and other tax relief
measures were introduced.
1980s: As Singapore became more developed, it became a more expensive place for
businesses in the 1980s. Measures to revamp the economy, with the aim of making it more
competitive was introduced. Changes to government policies, incentives and taxes were
considered. The late 1980s marked a significant shift towards lowering both corporate and
individual taxes. In 1987 corporate tax rates were lowered from 40% to 33%.
1990s. This period witnessed major changes in tax policies. There was a shift towards lower
direct taxes and the focus was on indirect taxes. The trend towards indirect taxation resulted in
the introduction of the Goods and Services Tax (GST) in 1994. It is a tax on domestic
consumption and applies to all goods and services supplied in Singapore except for financial
services and residential properties. It was in this period that the trend of lowering corporate
and individual tax rates accelerated.
2000 and beyond. This has been the phase of innovation and entrepreneurship. A number of
measures were, and are being introduced to attract foreign talent and investment. Tax rates
were further lowered and currently capped at 18% (17% from 2010) for companies and 20%
for individuals. This period witnessed the introduction of group relief and the one-tier
corporate tax system.

4. Individual Income Tax

Individuals resident in Singapore are taxed on a progressive tax rate as listed below.
Filing of personal tax return is mandatory if the annual income is S$22,000 or more, you dont
need to pay tax if his annual income is less than S$22,000. However, he may still need to file
a tax return if he have been informed by Singapore tax department to submit his tax return.
4.1. Income tax for residents
-

A person is considered a tax resident if he/she is:

a Singaporean; or
a Singapore Permanent Resident and have established his/her permanent home in Singapore;
or
a foreigner who has stayed or worked in Singapore for 183 days or more in the tax year.
Tax residents pay taxes on their chargeable income as per the tax rate table below. The
chargeable income (i.e. income subject to taxation) for tax residents is determined as below:

Total Income Expenses Donations Personal Reliefs = Chargeable Income

Whereas
Total income means
gains or profits from carrying on any business, trade, profession or vocation either as a sole
proprietor or partner in a partnership
gains or profits from any employment
dividends, interests, investment income
rents, royalties, premiums and other profits arising from properties
exclude qualified income earned overseas (more deails provided later in the guide).
Expenses means
qualified employment related expenses
qualified rental related expenses are expenses
Donations means
donations to qualified charitable organizations
Personal Reliefs means
special personal reliefs such as eligible course fees, earned income relief, parent relief, etc.
Chargeable income is this adjusted income after deductions from the total income (as shown
in the picture above).
The Individual Income tax rates for residents are calculated based on the following
table:
Chargeable
Rate
Gross Tax
Income
Payable
$
(%)
$
On the first
20,000
On the next
10,000
2
% calculation
On the first
30,000 fixed amount
200
On the next
10,000
4
% calculation
On the first
40,000 fixed amount
550
On the next
40,000
7
% calculation
On the first
80,000 fixed amount
3,350
On the next
40,000
12
% calculation
Chargeable
Rate
Gross Tax
Income
Payable
6

$
On the first
On the next
On the first
On the next
On the first
On the next
On the first
Above

120,000
40,000
160,000
40,000
200,000
120,000
320,000
320,000

(%)
fixed amount
15
fixed amount
17
fixed amount
18
fixed amount
20

$
7,950
% calculation
13,950
% calculation
20,750
% calculation
42,350
% calculation

4.2. Income tax for non-residents

You are considered a non-resident for tax purpose if you are a foreigner who stayed or
worked in Singapore for less than 183 days in the tax year. As a non-resident, you will be
taxed as below:
Physical presence
Resident
(Calendar year Basis)
Status
Tax rates
60 days or less
non-resident no tax
taxed on 15% or based on the table below (for
61-18 days
non-resident
Singaporean citizens); Not eligible for tax reliefs
Director's fees, consultation
non-resident fixed tax of 20%
and other income
For calculation of the income tax for non-resident Singaporean citizens, the following
table applies:

On the first
On the next
On the first
On the next
On the first
On the next
On the first
On the next
On the first
On the next
On the next
On the first
On the next
On the first
On the next
Above

Chargeable
Income
$
2,500
2,500
5,000
2,500
7,500
2,500
10,000
5,000
15,000
5,000
5,000
25,000
10,000
35,000
15,000
50,000

Rate
(%)
4
6
fixed amount
8
fixed amount
10
fixed amount
14
fixed amount
16
17
fixed amount
20
fixed amount
27
15

Gross Tax
Payable
$
% calculation
% calculation
250
% calculation
450
% calculation
700
% calculation
1,400
% calculation
% calculation
3,050
% calculation
5,050
% calculation
% calculation

As the Singaporean government would like to attract foreign companies and transform
the city state into a business hub for the Asia-Pacific region, the IRAS has introduced special

clauses for expat executives who work in Singapore, but have to travel a lot. They can claim
certain tax benefits for up to five consecutive years under certain conditions.

5. Corporate Income Tax

Singapore has been facing an urgency to push their efficiencies and productivity in wide
range of industries. As a result, several different government agencies in Singapore have been
continually providing several grant schemes to aid SMEs to use technology and other
resources to achieve that objective.
Under Singapore's tax laws, a "company" means any company incorporated or
registered under any law in force either inside or outside Singapore.
-

As per Income Tax Act of Singapore, corporate tax is imposed on the income that is
accruing in or derived from Singapore (income that has a source in Singapore);
received in Singapore from outside Singapore
A companys net profit/loss alone does not provide an accurate picture of the taxable
income. For instance, some of the expenses incurred by your company may not be deductible
for tax purposes or some of the income received may not be taxable or it may be taxed
separately as a non-trade source.
Since January 1, 2003, Singapore has adopted a single-tier corporate income tax system,
which means there is no double-taxation for stakeholders for resident companies. Tax paid by
a company on its chargeable income is the final tax and all dividends paid by a company to its
shareholders are exempt from further taxation.
There is no tax on capital gains in Singapore. Examples of capitals gains include gains
on sale of fixed assets, gains on foreign exchange on capital transactions, etc
Singapores headline corporate tax rate is a flat 17% as of 2010. In order to make
Singapore as an attractive investment destination, income tax rates in Singapore have been
going down consistently as seen below

Tax rate evolution in Singapore

26%
26%
25%
22%
20%
18%

17%

The effective rate is normally lower than the headline tax rate due to applicable tax
exemptions and tax incentives, depreciation rules, etc. which resident companies can benefit
from.
The local tax system operates on the territorial principle. Therefore the income taxes in
Singapore should be paid on local sources. For example, for overseas investments, the capital
interest from such foreign accounts would not be taxed in Singapore.
A company is considered as resident in Singapore if the control and management of the
business is exercised in Singapore referring to the policy level decision making at the level of
Board of Directors and not the day-to-day decision making and operations.
In general, a company is considered non-resident in Singapore if the directors manage
and control the business and hold board meetings from outside Singapore and the lower level
operations are taking place in Singapore. A companys residence may change from one year of
assessment to the next depending on the circumstances. A Singapore branch of a foreign
company is generally not treated as a Singapore tax resident since the control and
management is vested with an overseas parent company.

The basis of taxation for a resident company and non-resident company is generally the
same with the exception of certain benefits that are available to resident companies. These
include:
A Singapore resident company is eligible for income tax exemption scheme available for new
start-up companies.
A Singapore resident company can enjoy income tax exemption on foreign-sourced dividends,
foreign branch profits, and foreign-sourced service income under section 13(8) of the Income
Tax Act.
A Singapore resident company is entitled to benefits conferred under the Avoidance of Double
Taxation Agreements (DTA) that Singapore has concluded with treaty countries (single-tier
corporate tax system). Singapore has concluded tax treaties with more 50 countries and the list
continues to grow (Romania is one of them). The treaties reflect Singapores continual efforts
to help businesses in relieving double taxation and to encourage and facilitate the trade and
investment opportunities across-borders. Starting 2008, new policy was adopted based on
which, all Singapore companies that earned income from countries that dont have double tax
agreement with Singapore, will be allowed a tax credit on their foreign-sourced income from
those countries.
5.1. General Corporate Tax Incentives (for residents)
5.1.2. One time non-taxable cash grant
In addition, according to the Singapore Budget 2012, every Singapore company will
receive a one-time non taxable SME cash grant amounting to 5% of the companys revenue
for YA 2012, capped at S$5,000. However, to qualify for the cash grant, the company must
have made CPF contributions for at least one employee who is not a shareholder of the
company during the relevant accounting period for YA 2012.

5.1.3 Tax exceptions for New SMEs

A resident company can enjoy tax exemption from its foreign-sourced dividends,
foreign branch profits, and foreign-sourced service income that is remitted into Singapore on
or after 1st June 2003 if the following conditions are met:
The headline tax rate of the foreign country from which income is received is at least
15%;
The income had been subjected to tax in the foreign country from which it is received;
and
The Comptroller of Income Tax is satisfied that the tax exemption would be beneficial
to the person resident in Singapore
Tax exceptions/incentives have a big impact especially on the small-to-midsize
Singapore companies, which encourages entrepreneurship.
The following tables are applied for calculation of the corporate taxes:

First 3 years of income Tax

fillings
After 3 years of income Tax
fillings

Taxable Income ($)

0 100 000
100 001 300 000
300 001 - higher
0 300 000
300 001 - higher

Tax rate
0%
8.5%
17%
8.5%
17%

The corporate income tax rate is 0% on the first S$100,000 taxable income for each of
the first three tax filing years for a newly incorporated company that meets the following
conditions:
be incorporated in Singapore
be tax resident in Singapore
has no more than 20 shareholders of which at least one is an individual shareholder holding at
least 10% of shares.
All Singapore resident companies are eligible for partial tax exemption which
effectively translates to about 8.5% tax rate on taxable income of up to S$300,000 per annum.
The taxable income above S$300,000 will be charged at the normal headline corporate tax
rate of 17%.
5.1.4. Productivity and Innovation Credit (PIC)

PIC was introduced in Budget 2010 to encourage productivity and innovation

activities in Singapore.
The productivity improvement activities covered under PIC are:
Acquisition and leasing of PIC Information Technology (IT) and Automation Equipment;
Training of employees;
Acquisition and In-licensing of Intellectual Property Rights;
Registration of patents, trademarks, designs and plant varieties;
Research and development activities; and
Design projects approved by DesignSingapore Council.

400% of tax deduction

10

PIC grants businesses which invest in specified productivity and innovation activities,
enhanced deductions and/ or allowances (enhanced deductions). These are in addition to the
deductions and/ or allowances allowable under current tax rules. The total deductions and/ or
allowances are in effect 400% per dollar of qualifying expenditure.
The tax deductions/allowances base is a combined view of several years, according to
the PIC tax deduction limit amount announced.
For example businesses can enjoy 400% tax deductions/allowances on up to $400,000
for 2013-2015, but this year, it was announced that for 2015-2018, the tax
deductions/allowances will be applied on up to $600 000 per year. This new announcement
goes under so called PIC+ Scheme.
The following table applies:
Year of
Expenditure Cap per Qualifying
Assessment (YA) Activity*

Tax Deduction per Qualifying

Activity

2011 and 2012

(Combined)

$800,000
(400k*2 years)

$3,200,000
(400% x $800,000)

2013 to 2015
(Combined)

$1,400,000
$5,600,000
(400k * 2 years + 600k * 1 year[2015]) (400% x $1,400,000)

2016 to 2018
(Combined) New!

$1,800,000
(600k * 3 years)

$7,200,000
(400% x $1,800,000)

For example, a company has a Gross Taxable Profit of $1M. It has bought about
$100K of IT equipments.
It will enjoy PIC 400% tax rebate of $400k. Thus, it lowered the taxable income to
$600k. (1MM 400k).
Currently, the corporate tax is 17%. Therefore, there is a tax saving of $68k:
1MM * 17% = 170k
600k * 17% = 102k
170k 102k = 68k
In practice, the company will pay $32k for $100k (100k 68k) worth of IT hardware
and software.
The expenditure cap for each activity is applicable at the sole-company level. In the case
of partnerships, the expenditure cap is applicable at the partnership level regardless of the
number of partners.

Example for 2013:

Source: IRAS, http://iras.gov.sg/irashome/uploadedfiles/eTax_Guide/etaxguides_CIT_Revised%20PIC%20e-Tax%20Guide_2013_09_20.pdf

Cash payout
In lieu of a deduction, businesses may opt to convert qualifying expenditure of up to
$100,000 for each YA into cash. The conversion rate is 30% (for YA 2011 and YA 2012) or
60% (for YA 2013 to YA 2015).

The qualifying conditions for cash payout, except of being part of the 6 activities listed
above are:
incurred qualifying expenditure and are entitled to PIC during the basis period for the
qualifying YA;
active business operations in Singapore; and
at least 3 local employees (Singapore citizens or Singapore permanent residents with
CPF contributions) excluding sole-proprietors, partners under contract for service and
shareholders who are directors of the company. A business is considered to have met the 3local-employees condition if it contributes CPF on the payroll of at least 3 local employees in
the relevant months.
Year of
Assessment YA)

Expenditure Cap for All

Qualifying Activities

2011 and 2012

(Combined)

$200,000
(2YAs combined)

2013 to 2018
(Cap cannot be
combined)

$100,000
per YA

Cash Payout Rate Maximum Cash

Payout

Tax Bonus
12

30%

$60,000 combined
(30% x $200,000)

60%

$60,000 per YA
(60% x $100,000)

In Budget 2013, an additional cash bonus (known as PIC bonus) was announced as part
of a 3-year transition support package under the Quality Growth Program.
The PIC Bonus gives businesses a dollar-for-dollar matching cash bonus for YAs 2013
to 2015, subject to an overall cap of $15,000 for all 3 YAs combined to sole-proprietorships,
partnerships and companies the following qualifying conditions are met:
incurred at least $5,000 in PIC-qualifying expenditure during the basis period for the
YA in which a PIC Bonus is claimed;
active business operations in Singapore; and
at least 3 local employees (Singapore citizens or Singapore permanent residents with
CPF contributions) excluding sole-proprietors, partners under contract for service and
shareholders who are directors of the company. A business is considered to have met the 3local-employee condition if it contributes CPF on the payroll of at least 3 local employees.
Differed tax
Businesses may also opt to defer their tax payments based on qualifying expenditure
incurred for YA 2012 to YA 2015. Tax payable of up to $100,000 per YA may be deferred to
the following year.
IRAS will notify businesses on the payment of the tax deferred when
- the first assessment for the next YA is raised or
- three months from the end of the current financial period, whichever is the earlier
Computation of tax refund in case the company opted for PIC Cash Payout as well:
YA 2013
Qualifying PIC expenditure
PIC cash payout
PIC Bonus
Total PIC Benefits

YA 2014

$6 000

$3 000

$3 600
($6000 * 60%)

$1 800
($300 *60%)

$6000
$9 600

YA 2015
$12 000
$7 200
($12000 * 60%)

0
$9000
(PIC expend.<5k) (15k 6k [2013])
$1 800

$16 200

In the case above, in each year, the tax can be deferred to the following year, upon IRAS
approval.
A schematic overview of the PIC incentives are illustrated below:

5.1.5. Withholding tax

Singapore has implemented a withholding tax law (on certain types of income) to
ensure the collection of tax payable to non-residents on income generated in Singapore. Under
the law, when a payment of a specified nature is made to a non-resident company or
individual, 15% of the payment has to be withheld and paid to Income Tax Authorities. The
calculations of the withholding tax can become complex in some specific cases, as they
include the effect of expenditure. The tax withholding does not apply to Singapore resident
companies or individuals.
The withholding tax should be paid to IRAS by the 15th of the following month from
the date of payment to the non-resident.
Withholding tax - A tax levied on income (interest and dividends) from securities owned
by a non-resident or a tax withheld from employees' wages and paid directly to the
government by the employer.
Certain company income may be exempted from tax under the provisions of the
Singapore Income Tax Act as well. Examples include general tax exemptions available to all
companies, exempt income for certain industries such as shipping income derived by a
shipping company, foreign-sourced dividends, branch profits & service income received by a
resident company that satisfies the qualifying conditions, exemptions on qualified foreign
sourced income, etc.
There is a special treatment of losses. In general, a company can deduct losses against
the income for taxation purposes in Singapore. The loss can be carried forward indefinitely
(subject to certain conditions), however, it must be deducted in the first available year where
there is a statutory income. The deduction of the loss follows the proceeding year basis. Its
important to note that the losses can be utilized only as long as there is no substantial change
in the shareholding.
Withholding tax:
Type of payment
% of the tax paid
Interest, fees, payments in connection with
15% (final tax)
any loan or indebtedness.
Royalty or other payment for the use of
10% (final tax)
movable property
Payment for the use or right to use scientific, 10% (final tax)
technical, industrial or commercial nowledge
or information
Technical assistance and service fees and
Prevailing corporate tax rate (20% for
management fees
individuals
Rent or other payments for the use of
15% (final tax)
movable properties
Time charter fees and voyage charter fees,
Nil to 2%
bareboat charter fees
Directors remuneration/directors fees
20 %

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5.1.6. Global Trader program

The GTP was created as an incentive to global trading companies, an encouragement to

choose Singapore as their regional or global base for conducting business activities all along
the total trade value-add chain, ranging from the procurement stage to the distribution stage,
with the intention of expanding into the region and beyond.
The Singapore Global Trader Programme was launched in June 2001. This program is
focused on big and medium sized companies with a high growth. There are 3 types of GTP:
3 years GTP (10%). Concessionary rate of Tax would be applicable for the period of 3
years ( with Provision of extension) at 10% as against regular income tax of 17% on income
derived from GTP qualifying transaction. Income tax concession under GTP is allowed to
existing established company as well as newly incorporated companies upon demonstrating
following basic conditions over proposed incentive period. After this initial 3-year period, if
the company has been able to demonstrate healthy and sustainable growth projections, in line
with the requirements of the Global Trader Programme, they can then apply for the 5-year
renewable Global Trader Programme scheme.
5 year GTP (10%). Tax effect for this option and the 3 year incentive is the same.The
5 year incentive has a higher GTP qualifying turnover, employment of trading processionals in
Singapore and business spending requirement.
5 years GTP (5%). A Company can apply for 5% GTP on the basis of established a
good track record of its operations in Singapore and can demonstrate significant increase in
qualifying turnover, local spending and employment trading professionals
Each company is negotiating its application status to one of the categories above and
the commitment for the next 3 or 5 years agreed.

Qyalifying criteria:
A company can apply to be a part of the Global Trader Programme if:
It is a well established international company, (large or medium sized) and carry out
international trading, procurement, distribution and transportation of qualifying commodities
and products.
It intends to use Singapore as its regional base for the principal offshore trading
activities, business activities and support functions, including
general and administrative management control
business and investment planning and coordination
financial control and treasury functions
market development and planning
logistics management including warehousing and freight services
It is be a bona fide company with a global network and good track record
It can ensure that it will:
principally conduct substantial offshore trading activities
incur a significant amount of local business spending in Singapore
employ a substantial number of experienced trading professionals in Singapore
make significant use of Singapores banking and financial services and its
ancillary services (e.g. trade and logistics services, trade institutes and trade arbitration
services etc. )
impart manpower training and aid in the development of trading expertise in
Singapore

In addition, the applicant company will be required to meet the following benchmark
criteria. If the company does not meet the benchmark criteria, it will be required to show that
it can commit to these benchmarks for its projected incentive period :
Minimum Annual Turnover USD 100 million
Minimum Annual Local Business Spending SGD 3 million
Minimum Employment of Trading Professionals 3 (involved in either
procurement/sourcing, sales & marketing, risk management). May include senior management
and can either be local or expatriates.
There is a list of products and commodities allowed under the GTP. The authorities
periodically review and update this list. The current list includes these products and
commodities:
Electronic and electrical products.
Consumer products.
Building and Industrial materials.
Industrial products.
Energy commodities and products.
Agricultural commodities and bulk edible products
Minerals
Machinery components
As a rule, the authorities will scrutinize the companys overall business plan and
closely examine whether you are going to make significant contributions to the economy of
Singapore before granting you admission to the Programme.
5.2.

Corporate tax regulations

In Singapore, corporate income is assessed on a preceding year basis. This means that
the basis period for any Year of Assessment (YA) generally refers to the financial year ending
(FYE) in the year preceding the YA. For example, in year 2008 it should be filled the
corporate tax return for a companys financial year that ended anytime between January 1,
2007 to December 31, 2007. The companys accounts are prepared up to the FYE each year
by November 30 for the previous year so that the companies have at least 11 months to file
their tax returns.
In order to ease the burden on smaller businesses,
exempt private companies (i.e no corporate shareholders and individual shareholders < 20)
with annual revenue of less than S$5 million; and
dormant companies (i.e. no accounting transactions during the year)
are exempted from auditing their accounts and can file unaudited accounts. Where the
financial year is less than 12 months, the said limit of S$5 million must be pro-rated.
An Exempt Private Company (EPC) is defined under Section 4(1) of the Companies Act
as a company which has no more than 20 shareholders and its shares are held by individuals
only.
At the end of the financial year (FA), all companies have to submit:
Estimated Chargeable Income (ECI)
Income Tax return (Form C / Form C-S)
Usually, the end of a financial year is 31st of December. However, the end of the
financial year may differ for some companies. If this is the case, the company should send a
notification to IRAS by filling the Notification of new Accounting Year-End. There is no
need to inform IRAS if the financial year-end is 31st of Dec. (default date).
16

This record is used by IRAS for sending you the ECI notification letter and for other
assessment purposes.

ECI is a form for declaration of the revenue amount and estimated chargeable income that
IRAS will deduct tax from.
Income Tax return (Form C / Form C-S) is a form for return of excess taxes paid during a
given tax year; this is more accurately known as a "tax refund".
Tax computation is a statement showing the adjustments to the net profit/loss as per the
accounts of a company to arrive at the amount of income that is chargeable to tax.
5.2.1. Estimated Chargeable Income (ECI)
ECI should be filled and sent to IRAS within three months of the end of their financial
year, even if their ECI is zero.
IRAS will send the company a notification to file its ECI in the last month of its
financial year, starting from the year following the year of incorporation. If the company
closes its first set of accounts in the year of incorporation, there will be no ECI
filing notification sent in the year of incorporation as most companies do not close their first
set of accounts in that year. If the company decides to close its year of assesment in the year
of incorporation, it should proceed to file the ECI within three months from the companys
financial year-end. ECI can be filled online on My tax portal
(https://mytax.iras.gov.sg/ESVWeb/default.aspx ) or sent to IRAS my post or fax. Online
filling is encouraged with some additional small benefits though.
Example:
First Financial Period ECI Notification
15 july 2013 to
31 Dec. 2013
15 july 2013 to
31 Dec. 2014

File ECI for

File First ECI by
YA 2014 YA 2015

No Notification is sent
(in 2013)
Notification is sent in
Dec. 2014

31 mar. 2014

31 mar. 2015

After IRAS has processed the ECI form, the company will receive a Notice of
Assessment (NOA) stating the estimated tax, which has to be paid within one month from the
date of the NOA. However, IRAS will not issue a NOA to the company which has filed a
"NIL" ECI amount.
If the actual figure at year-end differs from the ECI, IRAS will either automatically
issue a refund for an overpayment, or will request additional amounts with a Notice of
Assessment (NOA) for an underpayment. When calculating overpayments and
underpayments, IRAS bases its calculations on the company's annual statement of actual
incomes, which is reported using Form C or Form C-S.
5.2.2. Income Tax return (Form C / Form C-S)
Its important to note that all companies (regardless of exempt or not) are required to
submit a Form C, tax computation and the audited/unaudited accounts annually.
There are two types of Income Tax Return, Form C and Form C-S:

Form C-S
Form C
This is a shortened 3-page form.
This is a 7-page form.
Companies that meet qualifying conditions
Companies are required to report their
may report their income by filing Form C-S. income using Form C if they do not meet the
qualifying conditions for filing Form C-S
The financial accounts, tax computation and
supporting schedules are not required to be
The financial accounts, tax computation and
submitted together with Form C-S. They are supporting schedules have to be submitted
to be prepared and retained for submission
with Form C.
upon IRAS request.
Qualifying conditions for filling Form C-S
-

A company meets the qualifying conditions for Form C-S if it:

Is incorporated in Singapore
Has an annual revenue* of $1 million or below
Derives only income taxable at 17%

And does not claim any of the following:

Carry-back of Current Year Capital Allowances/Losses
Group Relief
Investment Allowance
Research & Development Tax Allowance
Foreign Tax Credit and Tax Deducted at Source

In April each year, IRAS will send your company either a Form C-S e-Filing package or
Form C paper filing package in Apr of each year, starting from the second year following the
year of incorporation. Companies that qualify for Form C-S filing are strongly encouraged to
e-File Form C-S* via myTax Portal to enjoy the following tax benefits:
Extra 15 days to e-File!
iHelp for step-by-step guidance
Auto-computation of certain fields that minimize filing errors
An estimate of tax payable on the spot!

In the event that your company does not receive a tax return filing package from IRAS,
the companies can:
For Form C-S filing e-File Form C-S* via myTax Portal. From YA 2014, IRAS will not
issue paper copies of Form C-S. If the company cannot e-File Form C-S, they should
download the softcopy of Form C-S, complete, print and submit the signed copy to IRAS
For Form C filing download the softcopy of Form C, complete, print and submit the signed
copy to IRAS.
If or the companies close their set of accounts in the first year following the year of
incorporation, they should request a tax return filing package from IRAS by May of the
following year.
A company whose first set of accounts (it completes first tax return) covers a period of
more than 12 months will need to attribute and declare its profit/ losses under 2 YAs. If the
company was incorporated in 2013, it will be issued a tax return filing package for YA 2015
only.
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Examples of scenarios:
Date of
28 Apr 2012
incorporation
Period covered in
28 Apr 2012
first set of financial
to 31 Mar 2013
accounts
First YA to file
YA 2014
the Income Tax Return
Date of
28 Apr 2012
incorporation
When the
company will receive
tax return filing
package

Form C/
Form C-S filing
package for YA
2014 will be sent to
the company by
Apr 2014

15 Jul 2013

15 Jul 2013

15 Jul 2013
to 31 Dec 2013

15 Jul 2013
to 31 Dec 2014

YA 2014

YA 2015

15 Jul 2013

15 Jul 2013

No Form C/
Form C-S filing
package for YA
2014 is sent to the
company.

Request a Form C/
Form C-S filing
package for YA
2014 from IRAS if
the company
commenced
business or
received income
during the period
from 15 Jul 2013
to 31 Dec 2013
When to file the
YA 2014
YA 2014
first Income Tax Return Income Tax Return Income Tax Return
is to be submitted
is to be submitted
by 30 Nov 2014 (or by 30 Nov 2014
15 Dec 2014 if you (or 15 Dec 2014 if
e-File Form C-S)
it was e-Filed
Form C-S)

Form C/
Form C-S filing
package for YA
2015 will be sent
to the company by
Apr 2015

YA 2015
Income Tax Return
is to be submitted
by 30 Nov 2015
(or 15 Dec 2015 if
it was e-Filed
Form C-S)

6. Predictions: Singapore vs Switzerland

Official corporate tax rates in Singapore have fallen by around 3 percent to 17 percent
over the past five years but held steady at just above 21 percent in Switzerland, according to
accountancy firm KPMG
Although Switzerland easily retains its offshore banking crown with $2.8 trillion in
assets under management, or 34% of the global private banking industry, Singapore is now the
world's fastest growing market with $550 billion under management at the end of 2011, up
from just $50 billion in 2000.
As regulations tighten in Europe and the world's wealth moves to Asia, Singapore (with
$450billion belonging to offshore currently) is tipped to overtake Switzerland to become the
largest global offshore wealth center in terms of assets by 2020, according to London research
firm, WealthInsight.
"The perception is that Swiss banks have concluded Switzerland is unlikely to remain a
tax haven for much longer and Singapore is the new place to do business," said Ronen Palan
as well, a professor at City University London who has conducted numerous studies on
offshore finance.
European currency movements have also contributed to the shift, with the value of the
Swiss Franc rising more than 20% against the U.S. dollar last year due to ongoing concerns
over Europe's debt crisis.
The Singapore 17% corporate taxes with its various incentives which can get to down
to 5% corporate tax in the Global Trade Program (GTP) makes a strong competition to
Switzerlands 21.17% corporate tax (5 Singaporean tax payments against 19 Swiss tax
payments per year) even if the tax is more transparent in Switzerland.
Doing business 2014 ranked Singapore as more favorable as well (5th in the rank of the
tax best practices in the world) than Switzerland (16th in the same ranking).
The main constraints on Singapores growth at the moment seem to be a lack of
qualified staff: top salaries for client relationship managers in Singapore are almost double the
level of Switzerland, according to PricewaterhouseCoopers. Further rapid growth is clearly
anticipated by the many international banks who are moving into or aggressively expanding
their wealth management and advisory business to Singapore (and Hong Kong).

7. Summary
Singapore follows a territorial basis of taxation. In other words, companies and
individuals are taxed mainly on Singapore sourced income. Foreign sourced income (branch
profits, dividends, service income, etc.) will be taxed when it is remitted or deemed remitted
into Singapore unless the income was already subjected to taxes in a jurisdiction with headline
tax rates of at least 15%. Although the concept of locality of the source of income seems
simple, in realty its application often can be complex and contentious. No universal rule can
apply to every scenario. Whether profits arise in or are derived from Singapore depends on the
nature of the profits and of the transactions which give rise to such profits.
Singapore corporate tax rate is capped at 17%. By keeping corporate rates competitive,
Singapore continues to attract a good share of foreign investment. Singapore follows a single20

tier corporate tax system, where tax paid by a company on its profits is not imputed to the
shareholders (i.e. dividends are tax free).
Singapore personal tax rates start at 0% and are capped at 20% (above S$320,000) for
residents and a flat rate of 15% for non-residents.

Interest, royalties, rentals from movable properties, management and technical fees, and
directors fees paid to non-residents (individuals or companies) are subject to withholding tax
in Singapore.
For personal taxes, the tax year is the normal calendar year i.e. January 1 December
31. Deadline for filing personal tax return is April 15. For corporate taxes, a company is free
to decide on its financial year. Deadline for filing corporate tax return is November 30. Taxes
are paid on a preceding year basis.
Singapore has no capital gains tax. Capital loss expenses are correspondingly not
allowed as deductions.
Singapore has concluded more than 50 bilateral comprehensive tax treaties to help
Singapore companies minimize their tax burden.
Many entrepreneurs affirmed that, making the decision to come to Singapore, and
setting up their business is an easy decision. This is due to the many favorable factors
Singapore business environment possess such as lower corporate tax rates, excellent
infrastructures, stable government and first class living environment, etc. Other areas which
should be of concern in order to benefit from Productivity and Innovation Credit (PIC) such
as Incorporating a Singapore Company and the Singapore Tax system is relatively easy to
comprehend.
Of course, all the above benefits come with a cost, Singapore been voted the ninth most
expensive city according to latest Economist Intelligence Unit survey published in 2012.
However, entrepreneurs who are keen in setting up a business in Singapore need not
worry as Singapore pro business tax incentives would help to cushion the initial setting up
cost due to Singapore Tax incentives such as SME Cash Grant where IRAS will rebate 5% of
your companys revenue or Productivity Credit scheme where IRAS will rebate you 60% of
your companys automated fixed assets such as computers, machinery and etc.

8. Bibliography

Singapore Corporate Tax Guide by JANUS Corporate Solutions,

http://www.guidemesingapore.com/taxation/corporate-tax/singapore-corporate-taxguide
Singapore Tax System & Tax Rates by JANUS Corporate Solution,
http://www.guidemesingapore.com/taxation/topics/singapore-tax-rates
Inland Revenue Authority of Singapore official website,

http://www.iras.gov.sg/irashome/page03a.aspx?id=5676
Singapore, http://en.wikipedia.org/wiki/Singapore#Economy
Guide to Singapore Global Trader Scheme,
http://www.bycpa.com/html/news/20128/1769.html
Income Tax in Singapore, http://www.internations.org/singaporeexpats/guide/16064-social-security-taxation/income-tax-in-singapore-16054
Corporate tax in Singapore, http://www.paulhypepage.com/corporate-tax-insingapore/
Tax in Singapore by KPMG, http://www.icaew.com/en/library/subjectgateways/tax/tax-by-country/singapore
Paying taxes in Singapore, Doing Business 2014,
http://www.doingbusiness.org/data/exploreeconomies/singapore/paying-taxes/
Corporate Income Tax, http://app.mof.gov.sg/corporate_income_tax.aspx
Singapore tax facts 2013 by BDO,
http://www.bdo.com.sg/pub/singapore_taxfacts_13.pdf
Tax justice network, http://taxjustice.blogspot.sk/2014/01/singapore-rise-and-rise-ofasias.html
New rules, tough talk as Singapore seeks to end tax haven image by John
OCallaghan and Rachel Armstrong, Oct 2014,
http://www.reuters.com/article/2012/10/14/us-singapore-taxidUSBRE89D0GM20121014

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