There are favorable tax benefits to be considered a tax resident by the Inland Revenue Authority of Singapore (IRAS). As a tax resident, a Singapore company:
- Is eligible for tax exemption scheme available for new start-up companies.
- Can enjoy tax exemption on foreign-sourced dividends, foreign branch profits, and foreign-sourced service income.
- Is entitled to benefits conferred under the Avoidance of Double Taxation Agreements (DTA) that Singapore has concluded with treaty countries.
- Is only taxed on Singapore source income and foreign income which is remitted to Singapore.
A company is considered as resident in Singapore if the control and management of the business is exercised in Singapore. Although the term “control and management” is not defined explicitly by authorities, a generally accepted consensus is that it refers to the policy level decision making at the level of Board of Directors and not the day-to-day decision making and operations.
Tax Exemptions for Newly Start-up Companies in Singapore
To encourage local entrepreneurship, Singapore Government has declared a full tax exemption for newly incorporated companies. Full tax exemption is granted on the first S$100,000 of Chargeable Income for qualifying new companies for the first three years of assessment consecutively.
How to Qualify for Tax Exemptions
To qualify for tax exemptions, a new company must fulfill the following conditions
- It is incorporated in Singapore;
- It is a tax resident of Singapore for that Year of Assessment;
- It has no more than 20 shareholders throughout the basis period relating to that Year of Assessment;
- All its shareholders are individuals throughout the basis period relating to that Year of Assessment; or
- There is at least one individual shareholder with a minimum of 10% shareholding.
Tax Incentives for Companies in Singapore
All existing companies are not left without any tax incentives. Singapore has provided a tax break to encourage entrepreneurial growth among the existing companies. Companies pay only 4.5% tax on their first S$10,000 of Chargeable Income and 8.5% for the next S$290,000.
Other Tax Incentives
To encourage foreign capital inflow into Singapore, there are tax incentives provided to various industries namely in the form of reduced corporate tax rates.
| Name of Company | Tax Rates |
|---|---|
| Finance & Treasury Centre Co. | 10% |
| Fund Manager | 10%/exempt |
| Headquarters Co. | 10% |
| International Commodity Trader | 10% |
| Offshore Leasing | 10% |
| Oil Trader | 10% |
| Securities Company | 10%/exempt |
| Trustee Company | 10% |
| Arts & Antique Dealers | 10% |
| Asian Currency Unit | 10%/exempt |
| Insurance & Re-insurance Co. | 10%/exempt |
| Members of Commodity Futures Exchange | 10% |
| Pioneer/Incentive Co. | Exempt/Various |
| Financial Sector Incentive Co. | 5%/10% |
| Cyber Trader | 10% |
| Commodity Derivatives Trader (New) | 5% |