It is not surprising to see Singapore as a burgeoning powerhouse in the Asian business industry. Because of its non-toxic business environment, what with its friendly business legislations, a lot of entrepreneurs really choose Singapore as a place for their ventures. Not to mention that the country is conveniently located at the heart of the flourishing Asian economy.
Most of the businesses, if not all, situated in Singapore, actually gain benefits from the country’s ties with other booming tiger economies. It also has the reputation as a trustworthy jurisdiction to work in and a country with great corporate tax policies. They have competitive, but fair, tax rates that other jurisdictions do not offer. Because of all of this, Singapore definitely has become one of the globally recognized business hubs.
If we look closely at the country’s tax policies, one can see why Singapore is so popular with businesses.
Corporate Tax in Singapore
Unlike other jurisdictions, in Singapore, they do not discriminate businesses according to their origin. Whether you are a local or a foreign business, you will be taxed all the same. If you look at it, it may seem like disadvantageous, but actually, Singapore favors both local and offshore business, therefore, resulting into a productive entrepreneurial culture in the country.
All businesses operating in Singapore pay taxes on all of their income coming from the country or are remitted to it. This means that if a company that is operating in Singapore gains most of its income from overseas business transactions; the business is not obliged and liable to pay tax in Singapore from a legal perspective. There are a lot of policies about business transactions; therefore, it is really recommended that entrepreneurs seek the help from professionals that are experts on the tax policies in Singapore, just so the business is sure that they are legally complying with the jurisdiction of Singapore.
General Corporate Tax Rates in Singapore (2010)
- Tax rate went down from 18 percent to 17
- Taxes are charged according to profit blocks. It depends on how much is the income. Tax is applied to the first 10,000 SGD at 4.5%. Next to be charged is at the 290,000 SGD profit bracket and is charged at 8.5%. Thereafter, the rest of the income falling above the 290,000 is taxed at 17%. For example, if a company only made 8,000 SGD for the year, they will only be taxed 360 SGD.
Singapore definitely has earned the respect from entrepreneurs all over the world because of its very flexible corporate tax policies. Their policies are very friendly, even to rookie companies who just incorporated. In their jurisdiction, new companies have tax exemptions, just so they can jumpstart their business easily, given the fact that they are starting from scratch. Singapore acknowledges the fact that it is very costly for new businesses to set up shop, so they created policies to make these newbies breathe a little bit easier. Their policy is that, for newly incorporated companies, whether local or foreign, they are exempt to pay taxes on their first 100,000 SGD of annual income. This is applicable for the company’s first three fiscal years and is only for companies that qualify in the following:
- Must be registered tax payers in Singapore
- Must have only 20 stockholders or less
- Must have 10% of its stockholders be comprised of individuals
If the new company does not pass such criteria, there are still partial exemptions that apply. Instead of having the tax exemption on the 100,000-income bracket, they can have tax exempted on the 200,000 SGD bracket. The tax rate can be calculated at roughly around 8.5% on the company’s first 300,000 SGD of income, which is considered as a very low rate.
As one can observe, Singapore really does have a favorable tax environment for companies, without sacrificing its own welfare. Singapore has a very reputable status as a country as well, given its productivity and very good quality of living, even with its low and competitive tax rates. It makes one think why other countries have very high taxes when you can still have a good economy with charging smaller rates. Overall, Singapore, along with its good business policies and tax benefits, has truly transformed into a haven for entrepreneurs, making it a very important business environment globally.
More updated details about Tax Rates in Singapore can be found at IRAS.