Singapore accounting and tax considerations

Singapore accounting and tax service

Many clients choose to outsource their Singapore accounting and tax obligations to Tetra Consultants. Our accounting and tax team will timely complete your firm’s financial statements, corporate tax returns and manage auditors on your behalf and without the need to travel.

By outsourcing accounting and tax obligations to Tetra Consultants, you can enjoy reduced overhead costs and timely reporting and filings. Our accounting team will explain to our clients all required deadlines and expectations before the start of every engagement.

Thereafter, Tetra Consultants will prepare the required fillings in advance to ensure we meet all stipulated deadlines agreed at the start of the engagement. Tetra Consultants will send a weekly or bi-weekly update to our clients, ensuring all parties are aware of upcoming deadlines. Contact us now for a free consultation. Our team of experts will revert within the next 24 hours.

• Singapore has one of the world’s simplest and most rational tax system. It levies no tax on capital gains or on dividends received from a business. This makes the country particularly attractive to entrepreneurs who want to incorporate and build a new business.
• Singapore uses a tiered tax system for both personal and corporate taxes. New firms receive significant tax breaks during their first 3 years reducing their tax rate to 0% for first S$100k of income. The corporate tax rate is capped at 17%.
• Similarly, the personal tax rate starts at 0%, rises very gradually to a maximum of 20% for incomes above S$320,000. Corporate profits are not double taxed when they are passed to shareholders as dividends. In other words, dividends are distributed to shareholders tax-free. Finally, Singapore charges one of the lowest value added tax rates in the world.
• Due to Singapore’s excellent foreign relations, it has 75 comprehensive double taxation agreements and 8 limited treaties. These agreements are designed to ensure that economic transactions between Singapore and the treaty country do not suffer from double taxation. Furthermore, Singapore provides Unilateral Tax Credits (UTCs) for the case of countries with which it does not have a DTA. Thus, a Singapore tax resident company is very unlikely to suffer from double taxation.
• Singapore allows foreigners to own 100% of the stock of a Singapore incorporated company and there is no need for any local partners or shareholders. This enables you to start a company with the type of capital structure that you desire and distribute its ownership to suit your investment needs. Furthermore, there are no restrictions on the amount of capital that you can bring from your home country to invest in your Singapore company.
• Singapore imposes no restrictions on the repatriation of profits. No taxes are imposed on capital gains from the sale of a business. Similarly, no tax is levied on dividends paid to the shareholders.
• Singapore does not impose any restrictions on the movement of foreign currency into or out of the country. This frictionless movement of funds across borders can provide extreme flexibility to a business.
• Your Singapore business is legally tax exempt if the company does not have a local corporate bank account, does not have local management team and does not have local customers or suppliers.

Contact us to find out more about accounting and tax obligations in Singapore. Our team of experts will revert within the next 24 hours.

Benefits of Singapore Tax system

• 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.
• Singapore has a single-tier territorial-based flat-rate corporate income tax system. Since January 1, 2003, Singapore has adopted a single-tier corporate income tax system, which means there is no double-taxation for stakeholders. 
• Tax paid by a company on its chargeable income is the final tax and all dividends paid by a company to its shareholders are exempted from further taxation. 
• There is no tax on capital gains in Singapore. Examples of capital gains include gains on the sale of fixed assets, gains on foreign exchange on capital transactions, etc.

Corporate tax

• Singapore has one of the world’s simplest and most rational tax system. It levies no tax on capital gains or on dividends received from a business. This makes the country particularly attractive to entrepreneurs who want to incorporate and build a new business.
• Singapore uses a tiered tax system for both personal and corporate taxes. New firms receive significant tax breaks during their first 3 years reducing their tax rate to 0% for the first S$100k of income. The corporate tax rate is capped at 17%.
• Corporate profits are not double-taxed when they are passed to shareholders as dividends. In other words, dividends are distributed to shareholders tax-free. 

Personal income tax

• Similarly, the personal tax rate starts at 0%, and rises very gradually to a maximum of 20% for incomes above S$320,000.

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. The tax withholding does not apply to Singapore resident companies or individuals. 
• Under the law, when a payment of a specified nature is made to a non-resident company or individual, a percentage of the payment has to be withheld and paid to Income Tax Authorities. The amount withheld is called the withholding tax.

Goods & Service Tax

• All Singapore companies with an annual turnover exceeding S$1 million are required to register for collecting GST in Singapore. Currently pegged at 7%, GST is a broad-based consumption tax levied on the import of goods (collected by Singapore Customs), as well as nearly all supplies of goods and services in Singapore. 
• Some items, however, are specifically exempt from the tax. This includes financial services and the sale or lease of residential properties. Our services include taking care of all GST-related matters in Singapore for you.

Tax on dividend distribution to shareholders 

• A dividend is a payment made by a company to its shareholders, usually as a distribution of post-tax profits. When a company makes a profit, it can either reinvest it in the business or distribute it to shareholders or decide on some combination of these two options.
• The tax codes of most countries impose a tax on any dividends that are paid out to the shareholders. These countries consider such dividend payments as a transfer of income from the company to the shareholders; therefore, they impose a tax on the dividends that the shareholders have to pay. In this manner,  a company’s earnings get taxed twice, first as corporate income tax which is paid by the company, and a second time as dividend tax which is paid by the shareholder. The net result is that the “take-home” income of the shareholder is dramatically reduced. Most entrepreneurs find this double-taxation of profits unfair and unjustified.
• In Singapore, dividend distributions by a Singapore company are tax-free. This means that neither the company nor the shareholders will have to pay any tax on the dividend payments made to shareholders. This is another critical advantage of Singapore’s corporate tax policy and it can greatly increase the “take-home” payment that an investor or entrepreneur receives from her Singapore company.

Tax on capital gains

• Capital gains are profits from the sale of a capital asset owned by the company, such as a real estate property, shares of a company’s stock, an IP asset, a piece of art, etc.
• In Singapore, capital gains are tax-free i.e. there is no tax on capital gains. Therefore, if an entrepreneur starts a company in Singapore which is subsequently acquired by another company or has an IPO, the entrepreneur will pay no tax on the gains that she receives from the sale of her equity.

Other tax considerations

• Singapore imposes no restrictions on the repatriation of profits. No taxes are imposed on capital gains from the sale of a business. Similarly, no tax is levied on dividends paid to the shareholders.
• Singapore does not impose any restrictions on the movement of foreign currency into or out of the country. This frictionless movement of funds across borders can provide extreme flexibility to a business.
• Your Singapore business is legally tax-exempt if the company does not have a local corporate bank account, does not have a local management team, and does not have local customers or suppliers.

Singapore tax treaties

• A tax treaty between two countries is generally an agreement that specifies how the income earned will be taxed by the authorities of each country when a company is involved in doing business in both countries. The main benefit and objective of an income tax treaty are to help businesses avoid double taxation of their income.
• Due to Singapore’s excellent foreign relations, it has 75 comprehensive double taxation agreements and 8 limited treaties. These agreements are designed to ensure that economic transactions between Singapore and the treaty country do not suffer from double taxation. Furthermore, Singapore provides Unilateral Tax Credits (UTCs) for the case of countries with which it does not have a DTA. Thus, a Singapore tax resident company is very unlikely to suffer from double taxation.
• Effective from YA2009, Singapore has gone a step further to grant unilateral tax credits to Singapore companies. According to the new policy, all Singapore companies that earned income from countries that don’t have a double tax agreement with Singapore will be allowed a tax credit on their foreign-sourced income from those countries.

Tax filing requirements & procedure

• The process for filing corporate (or personal) tax returns is quite straightforward. Singapore companies need to file their corporate tax return on an annual basis with IRAS. Companies need to file two corporate income tax forms: estimated chargeable income (ECI Form) and Corporate Income Tax Return known as Form C. A simplified version of Form C called Form C-S is available to smaller companies that meet certain conditions.
• The tax returns forms must be filled within three months from when the company’s financial year ends unless the company fulfills certain conditions and is therefore exempt from filing ECI.
• Form C must be filed by November 30 of the year following the year of tax period. If a company has no revenue or income during a given financial period (a dormant company) and does not expect to receive income or commence business within the next two years, it can apply to IRAS to be released from its obligation to file its income tax return (Form C-S/ C).

Record-keeping requirements

Singapore companies are required to keep the following records for a period of at least 5 years for each financial year:

• Source documents that substantiate all transactions of your business such as invoices, receipts, vouchers, credit and debit notes, import/export documents, etc.
• Accounting records such as various ledgers, cash registers, financial statements, etc.
• Bank statements.
• Any other records related to transactions connected with the business.

There is no need to submit these records unless requested by IRAS. 

Note that in the absence of proper records, relevant expenses may be disallowed, revenue numbers may be understated, and worst, there may be severe penalties for filing an incorrect tax return and/or lack of supporting documentation. Therefore, it is a good practice to implement an accounting system for your company or outsource the accounting function from the very first day of operation of your business.

Contact us to find out more about accounting and tax obligations in Singapore. Our team of experts will revert within the next 24 hours.