Singapore is often hailed as a tax friendly nation with low tax rates and an easy compliance regime. Corporate tax rates in Singapore are amongst the lowest in the world, and the government provides additional incentives and exemptions to lower the tax burden even further.
The government of Singapore realises that it is only by attracting the best entrepreneurs and companies to Singapore can it continue to thrive and maintain its stellar growth.
So what makes Singapore so popular when it comes to taxation?
The Corporate Tax rate in Singapore is 17%, for both local companies and foreign companies.
This is one of the lowest rates in the world for a major trading economy.
Tax Exemption scheme for New Startup Companies
Singapore is especially attractive for new startup companies. Following deductions apply for all new companies for the first three (3) years.
From YA (Year of Assessment) 2020,
- 75% of the income is exempt up to the first SGD 100,000 of taxable income
- 50% of the income is exempt for the next SGD 100,000 of income
Effectively, this translates to a:
- Tax rate of 4.25% for the first SGD 100,000 of income
- Tax rate of 8.5% for the next SGD 100,000 of income.
- An average tax rate of 6.375% for the first SGD 200000 of income.
The exemption is provided to encourage entrepreneurship, therefore the following type of companies are not eligible for this exemption:
- A company whose principal activity is that of investment holding; and
- A company which undertakes property development for sale, for investment, or for both investment and sale.
Tax exemption available to all companies
After the first 3 years, a company will continue to have the following exemptions:
- 75% exemption on the first $10,000 of normal chargeable income; and
- A further 50% exemption on the next $190,000 of normal chargeable income.
Effectively it means, for the first SGD 200,000 of income, a company’s tax rate would not exceed 8.5%.
Tax on Capital Gains / Dividends
Singapore does not levy any tax on Capital Gains Tax or distribution of Dividends.