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.