A key element contributing to Singapore’s appeal is its corporate tax system, designed to encourage entrepreneurship and investment. 

This article provides an overview of the foundations of the corporate taxation landscape in Singapore, focusing specifically on compliance timelines, tax rates and statutory concessions available to all companies incorporated in Singapore.

Understanding Singapore’s Corporate Tax Structure

Singapore operates on a territorial tax system, meaning that only income generated within the country is subject to tax. This approach is conducive for businesses trading internationally, as income derived from foreign sources are generally exempt from tax. 

We will consider foreign-sourced income in a future article.  However, it is important to note that such income may still be subject to taxation in Singapore under certain circumstances.  The most common instance is where the foreign-sourced income is remitted into a bank account located in Singapore. 

The corporate tax rate in Singapore is currently a flat 17%.

However, there are statutory concessions that result in an effective rate of tax closer to 15% for SMEs operating from Singapore. 

There is no Capital Gains Tax (CGT) regime in Singapore, so the disposal of capital assets by a Singapore company are not subject to tax.

Singapore Corporate Tax Terminology

Before we go further, a quick overview of the Singapore corporate tax terminology:

a) The Singapore financial year ends on 31 December, however a company is able to elect to use another date throughout the year (e.g. 30 June) so that the tax compliance cycle is aligned to a parent company in another jurisdiction.

b) Year of Assessment (YA) refers to the year in which the company will receive a Notice of Assessment from the Inland Revenue Authority of Singapore (IRAS). As an example, the YA 2025 refers to a financial year which ends during the 2024 calendar year. 

c) Estimated Chargeable Income (ECI) is a submission due three months following the end of your financial year and acts as a preliminary estimate of what tax will be payable upon the filing of the corporate tax return. This is an additional submission to the annual company tax return.

Singapore’s Lodgement Timeline

The annual lodgement deadline for company tax in Singapore is as follows:

a) Lodgement Of ECI – three-months following the end of the company’s financial year.

b) Annual Company Tax Return – 30 November in the YA.

Singapore Company With A 31 December Year End

If a company adopts the default Singapore financial year which starts on 1 January and concludes on 31 December of a calendar year, then  for the financial year ending 31 December 2024, the due dates for submissions to IRAS are: 

a) ECI is due by 30 March 2025; and 

b) Company tax return is due by 30 November 2025.

Singapore Company With An Elected Year End

If we assume that a company has a 30 June 2025 year end, the two lodgement deadlines are

a) ECI – due by 30 September 2025

b) Company tax return – due by 30 November 2026

As the Company’s year end is within the YA2026, the tax return is due in 30 November 2026. 

Statutory Concessions Available To Foreign Owned SMEs

Partial Tax Exemption

As the name suggests, the Partial Tax Exemption makes a portion of a company’s first S$200,000 of taxable income exempt from taxation for each YA. 

The Partial Tax Exemption is available to all companies which are incorporated in Singapore.  Thus, a foreign company is not able to access this concession as it is not incorporated in Singapore. 

The current exemption is calculated as:

   – Exemption of 75% for the first S$100,000 of chargeable income.

   – A further 50% exemption on the next S$100,000 of chargeable income.

Meaning that the first S$125,000 of taxable income is not subject to tax.

Start-Up Tax Exemption (SUTE)

In the same vein as the Partial Tax Exemption, the Start-Up Tax Exemption allows for a portion of a company’s first S$200,00 exempt from taxation for its first three financial years. 

Qualifying new companies incorporated in Singapore can enjoy additional tax exemptions under the Start-Up Tax Exemption scheme. 

For the first three years of assessment (YA), qualifying companies may receive:

   – Exemption on the first S$100,000 of chargeable income.

   – A further 50% exemption on the next S$200,000 of chargeable income.

For the first three YA, the company will be exempt to pay tax on the first S$200,000 of taxable income. 

To qualify for this Start-Up Tax Exemption, your company must meet all of the following requirements:

a) Incorporated in Singapore; and

b) Derive trading income; and

c) Be a tax resident of Singapore; and

d) Have at least one individual owning at least 10% of the company – this individual does not need to be a tax resident of Singapore.

Given the requirement for an individual shareholder to qualify for the Start-Up Tax Exemption, it is important to consider the long-term implications from owning the shares in this manner.

Some of the issues to consider include:

– From an asset protection perspective, there may be a preference for the shares not to be held by an individual Founder; 

– In the event of a future disposal of the shares, the resulting tax payable (for example, capital gains tax) may exceed the benefits arising from the concession;

– In many cases, new companies often fail to generate significant income in the initial years of operations, and thus fail to maximise the benefits provided by the Start-Up Tax Exemption.

Key Takeaways For Foreign Owned SMEs

The key considerations for foreign owned SMEs operating in Singapore include: 

• Singapore operates on a territorial tax system which generally means that only income sourced in Singapore is subject to taxation. 
• Foreign-sourced income which is remitted to a Singapore bank account may still be subject to tax in Singapore at the 17% rate. 
• While the standard financial year ends on 31 December, a Singapore company is able to align its year end to a date which matches related companies based in other jurisdictions. 
• There are two forms of tax exemption available to companies incorporated in Singapore which reduces the effective corporate rate of tax.
• Whilst the Start-Up Tax Exemption provides a more generous concession, there are long-term planning and commercial issues to be considered before deciding to structure the company in a way to qualify for this concession. 
• The ECI return is due 3 months after the end of the financial year. 
• The annual corporate tax return is due on 30 November in the YA. 

Moving to the United States as an Australian expat is an exciting step, but it also comes with a range of financial and tax implications that can be confusing. 

One of the most significant concerns we encounter for Australians relocating to the U.S. is how their Australian superannuation is treated. Unlike other investments, superannuation has unique tax and reporting requirements that can significantly impact your financial position.

This article explores how your Australian superannuation is treated in the U.S., the disclosures and forms you need to file, the consequences of contributing to super while living in the U.S., and what happens when you access your super while residing in America.

How Is Your Australian Superannuation Treated In The U.S.?

Superannuation is a cornerstone of retirement planning for Australians, but once you move to the U.S., its classification under American tax law becomes complicated. 

The main challenge arises from the fact that the U.S. does not recognize Australian superannuation as a tax-deferred retirement account like a U.S. 401(k) or IRA. Instead, the U.S. views superannuation in one of two ways:

1. Foreign Trust – The Internal Revenue Service (IRS) may consider your super fund as a foreign grantor trust, subjecting it to complex U.S. tax and reporting requirements. This classification may lead to additional tax liabilities, particularly when earnings inside the super fund are realized.
   
2. Foreign Pension – In some cases, the superannuation fund may be classified as a foreign pension, which can offer a more favorable tax treatment. However, there is no definitive IRS guidance on this, leading to inconsistent application of tax rules.

Taxation Of Superannuation In The U.S.

Regardless of its classification, the U.S. generally taxes superannuation in ways that differ from Australian tax laws. While contributions and earnings may grow tax-free in Australia, the U.S. may tax contributions, earnings, and distributions differently. Key considerations include:

• Employer Contributions: Employer contributions to your super fund may be considered taxable income in the U.S. in the year they are made.
  
• Investment Earnings: Earnings within your superannuation fund, such as dividends and capital gains, may be subject to annual U.S. taxation, even if they are not distributed.
  
• Withdrawals and Distributions: The tax treatment of superannuation withdrawals varies, but in many cases, distributions may be taxed in the U.S. as ordinary income, even if they are tax-free in Australia.

The range of outcomes noted above depends on the type of superannuation fund you have.

Self Managed Superannuation Funds

For expats in the USA that have a ‘Self-Managed Superannuation Fund’ urgent attention is needed toward restructuring your Superannuation Fund BEFORE you move to the USA.

Remaining the Trustee of an Australian Superannuation Fund after you move to the US – even inadvertently – causes a number of serious tax issues both in Australia (not the focus of this article) and the USA.

One of the major issues is that you are personally taxable on the income of the Australian Self-Managed Superannuation Fund as it arises. This can add materially to your USA tax bill and should be avoided.

What Disclosures And Forms Do You Need To File?

As an Australian expat living in the U.S., you must comply with stringent reporting requirements related to your superannuation. 

Failure to do so can result in significant penalties. Some of the key forms and disclosures include:

1. FBAR (Foreign Bank Account Report) – FinCEN Form 114
   • If the total value of your non-U.S. financial accounts (including superannuation) exceeds $10,000 at any time during the year, you must file an FBAR.
   • Superannuation accounts are generally considered foreign financial accounts and should be included in the FBAR filing.
2. Form 8938 (Statement Of Specified Foreign Financial Assets)
   • If the total value of your foreign financial assets (including superannuation) exceeds certain thresholds ($50,000 for single filers, $100,000 for married filers living in the U.S.), you must file Form 8938 with your tax return.
   • This form is in addition to the FBAR and provides the IRS with detailed information about your foreign financial accounts.
3. Form 3520 (Annual Return To Report Transactions With Foreign Trusts)
   • If your superannuation is classified as a foreign trust, you may need to file Form 3520 to report contributions and distributions.
4. Form 8621 (Passive Foreign Investment Company – PFIC) Reporting
   • If your superannuation fund holds certain types of investments (e.g., managed funds), you may have to file Form 8621 to report Passive Foreign Investment Company (PFIC) income.

Consequences Of Contributing To Super While Living In The U.S.

If you continue making superannuation contributions while residing in the U.S., you may face unintended tax consequences:

• U.S. Tax on Contributions: Since the U.S. does not recognize super contributions as tax-deferred, employer contributions may be taxable to you in the year they are made.
• Double Taxation Risks: While contributions may be tax-free in Australia, they may be taxable in the U.S., leading to double taxation.
• Compliance Burden: Additional contributions increase the complexity of reporting and could result in higher U.S. tax compliance costs.
• Potential Loss of Benefits: Depending on how your super fund is classified, additional contributions could subject you to PFIC rules, leading to unfavorable tax treatment.

What Happens When You Can Access Your Super And Are Living In The U.S.?

When you reach preservation age and become eligible to withdraw your superannuation, you must consider how the U.S. will treat these withdrawals:

• Australian Tax Treatment – In Australia, lump-sum withdrawals from super after the age of 60 are typically tax-free.
• U.S. Tax Treatment – The U.S. may treat these withdrawals as taxable income, potentially subjecting them to ordinary income tax rates.
• Foreign Tax Credits – You may be able to offset some U.S. tax liability by claiming foreign tax credits, but this depends on the tax treaty’s applicability and how your super is classified.
• State Taxes – If you live in a U.S. state that imposes income tax, super withdrawals may also be subject to state taxation.

Strategies For Managing Your Super As A U.S. Based Expat

To minimize your tax burden and compliance obligations, consider the following strategies:

1. Pause Contributions While In The U.S.
   • Avoid making new contributions to super to prevent triggering additional U.S. tax and reporting obligations.
2. Review Your Super Investments
   • Assess whether your super fund contains investments subject to PFIC rules, and consider adjusting your investment mix.
3. Work With A Tax Professional
   • Given the complexity of superannuation taxation in the U.S., consult a tax advisor experienced in cross-border taxation.
4. Plan For Withdrawals
   • If you intend to withdraw super in the future, explore tax-efficient withdrawal strategies to minimize your U.S. tax liability.

Key Takeaways For Australians Living In The USA With Superannuation

Navigating superannuation as an Australian expat in the U.S. is challenging due to differing tax treatments and complex reporting requirements. 

Understanding how your super is classified, ensuring compliance with U.S. tax laws, and proactively planning for contributions and withdrawals can help you avoid unnecessary tax burdens. 

Given the nuances of cross-border tax regulations, seeking advice from an international tax firm is essential to optimize your financial situation while living in the U.S.

By staying informed and proactive, you can ensure that your superannuation remains a valuable asset for your retirement, regardless of where you reside.