Rikvin Pte Ltd

Singapore Company Registration Specialists

  • WhatsApp Us+65 8699 8821
  • Get a Quote Now


  • Home
  • Services
    • Incorporation
    • Corporate Secretary
    • Taxation
    • Transfer Pricing
    • Accounting
    • Immigration
    • HR Outsourcing
    • Business Advisory & Support
    • Switch to Rikvin
  • Learn
    • Incorporation
    • Work Visas
    • Taxation
    • Accounting
    • Compliance
    • Resources
    • Blogs
    • Infographics
    • Industry Guides
    • FAQs
  • Tools
    • Company Name Check
    • SSIC Codes Search
    • AGM Calculator
    • Tax Calculators
    • Personal Tax Calculator
    • Corporate Tax Calculator
    • Global Tax Calculator
    • Work Visas
    • PEP Assessment
    • More Free Tools
  • About
  • Contact
You are here: Home / Blogs / Higher Personal Tax Rates For Top Earners

Higher Personal Tax Rates For Top Earners

corporation tax rates

The upward revisions to the top marginal personal income tax rate in the jubilee budget of Singapore, which was unveiled on February 23, 2015, surprised many sections of the Singaporeans. The top income earners, who earn at least $160,000, will have to bear a higher marginal tax rate from YA 2017.

The highest earners, with a chargeable income above $320,000,have been slapped with the largest increase – the marginal tax rate for this tier will go up by 2 percentage points to 22 per cent from the current 20 per cent. The revised rates will apply for the incomes earned in 2016, and on taxes to be paid in 2017.

Snapshot of Revisions: Effective From YA 2017
Chargeable Income (S$) Tax Payable (S$) Additional Tax Payable (S$) Current Effective Tax Rate (%) Increased Effective Tax Rate (%)
200,000 21,150 400 10.37 10.57
240,000 28750 800 11.64 11.98
280,000 36,550 1,400 12.55 13.05
320,000 44,550 2,200 13.23 13.92
350,000 51,150 2,800 13.81 14.61
Essentially, individuals with a taxable income of more than S$160,000 will be affected by the revisions and the impact will be much more pronounced for those who fall under the top income tiers. Presently the personal tax rate overshoots the corporate tax rate only beyond the S$200,000 chargeable income mark. From YA 2017, when the revisions kick in, the personal tax rate will overshoot corporate rate at S$160,000 chargeable income mark.

Is there an increased propensity to evade tax through corporatization?

corporatization The first reaction to the upward revisions was that there would be an increased tendency to avoid the higher personal tax rates by setting up companies to siphon the incomes. The incomes of the affected individual, when flowed through the company, would be subjected to a more competitive corporate tax rate of 17%. This will considerably reduce the tax burden on the top earners.

Responding to the potential risk of evasions through corporatization, Senior Minister of State for Finance Ms. Josephine Teo said that the IRAS will step up its audit measures to strictly monitor the corporatization behavior. She also added, “In cases where companies are being set up mainly to avoid personal income taxes, IRAS’ approach is to disregard the corporate structure, and assess income on the individuals.”

personal tax hikeMany of the affected parties may have speculated on the lines of corporatizing as a legitimate means of avoiding or reducing the tax burden. While it appears as a legitimate means to manage the tax liabilities, one must pay close attention to finer details to prevent any fallout with the taxman. Irrespective of the legality of the structure and arrangement, if the IRAS is able to prove that the intention behind the incorporation is to evade tax, then the delinquent will be subjected to personal tax rates.

It is important to bear in mind that setting up a company with a deliberate intention to flow your incomes through it, in order to enjoy competitive corporate tax rate will land you in a quagmire of litigations. There are some signs of devious corporatization that will set off the alarm for the taxman. These signs indicate the lack of commercial, economic or operational substance in the entity. Some of the indicators are listed below; do take note that the list may not be comprehensive.


Signs of Questionable Corporatization

Lack of substantial clients/customer base

If the new entity has only a sparse clientele from where all or most of the revenue is generated and if the sales invoices are made to entities that are related, it will reveal the lack of commercial substance. For instance, a top billing sales person of a company, in order to avoid excess tax liability, may choose to function as an external sales consultant. In this case, if he sets up a company it will invariably be an exclusive arrangement to meet the requirements of anti-competition clause of the arrangement. There is an obvious lack of substance in the arrangement. The nature of exclusivity and the purpose of arrangement will bring the newly setup company under the radar of the IRAS.

Lack of headcount

If there is no other headcount in the scrutinized company besides the person, who would have otherwise been subjected to higher personal tax rates, or the employees are the next-of-kin to such a person, then it will be an obvious sign of a devious arrangement. The CPF contributions of the company will be scrutinized as a proof of headcount for this purpose.

Lack of business spending

If the company’s business spending is insignificant or inadequate then it is a potential giveaway. Not incurring expenses in the form of rentals, utilities etc will reflect badly on the legitimacy of the entity.

Dubious Transactions

Transactions could be subjected to scrutiny and if there are too many transactions between related parties and such transactions have not been carried out at arm’s length then it will draw allegations of avoidance.


Who may resort to incorporate a Private Ltd Company?

Sole proprietors (SP) and individuals in Partnership and Limited Liability Partnership (LLP) arrangements, with an annual chargeable income of more than S$160,000 will be paying higher taxes from YA 2017. Such individuals, if they foresee revenue growth and have business expansion plans, will be better off if they incorporate a private limited company, provided they have substantial proof of substance.

corporatization problem Such individuals may have chosen the SP, Partnership or the LLP business structure in order to keep the compliance costs low and to retain control over the business. However if the revenues are substantially higher and the prospects of business expansions and growth are brighter then it will be a prudent move to incorporate a company. Besides tax savings, this will bring other benefits such as limiting the financial liability of shareholders, improved access to funds, better identity and public perception and facilitate succession and transfer.

Howsoever, the costs involved for incorporation, ongoing compliance and administrative encumbrances should be duly considered. The costs and burden on the resources should not become counterproductive and turn out to be costlier than the excess tax that one would have otherwise paid. More importantly the arrangement should not be devious and must have substantial proof of substance, else it is wise to pay the excess tax and save the peace of mind.


Closing Note

Singapore’s tough anti-evasion stance will keep the corporatization activities, for the purpose of roundtriping incomes of top tier individuals, under check. The increase in marginal tax rate may be a departure from the global trend, however it is imperative to bolster the economy and to inclusively progress to the next phase of development. Besides taxes, Singapore’s attraction lies in its economic and political stability, sound regulation, low crime rate, rule of law and high standards of living. So despite the tax hikes Singapore will continue to attract top talent.

Read more: Increased personal tax rates for high-income earners »


Need Help with Your Personal Taxes?

We can assist you in your personal income tax filings and long-term tax planning. Contact us now for a free consultation.

Contact Us

Rikvin Company Registration in Singapore
Rikvin Content

Rikvin’s content team includes in-house and freelance writers across the globe who contribute informative and trending articles to guide aspiring entrepreneurs in taking their business to the next level in Asia.

Best Strategies to Save On Your Personal Tax
Changes to the Companies Act 2015

Contact Us

  • Rikvin Pte. Ltd. is a part of InCorp Group. All data collected in Rikvin.com website are part of In.Corp Global’s Privacy terms and conditions.

  • This field is for validation purposes and should be left unchanged.

Learning Guide

  • Incorporating a Company in Singapore
  • Singapore Immigration and Work Visas
  • Singapore Taxation
  • Accounting Services
  • Singapore Business Infographics
  • Singapore Industry Guides

Latest Posts

  • Going Offshore: Cayman Islands Company Incorporation vs Setting Up a BVI Company
  • Why Engage a Corporate Secretarial Services Provider?
  • Singapore Tax Basics: A Must-Read Guide for Business Owners
  • Singapore Dividend Taxes: Everything You Need to Know
  • 2024 Singapore GST Rate Change Transitional Rules
InCorp GroupPrimeGlobal

Rikvin Pte Ltd

EA License No. 11C3030

36 Robinson Road,
#20-01 City House,
Singapore 068877

Company Registration

  • Company Incorporation
  • Subsidiary Registration
  • Branch Registration
  • Representative Office Registration
  • Offshore Company Registration

Immigration

  • Employment Pass Guide
  • ONE Pass Guide
  • Tech.Pass Guide
  • Singapore Work Visas
  • SG Immigration Options

Taxation

  • Corporate Tax Guide
  • Personal Tax Guide
  • Tax Filing Calendar
  • Singapore GST Guide
  • Transfer Pricing

Resources

  • Infographics
  • FAQs
  • Singapore Company Name Check
  • Income Tax Calculator
  • Incorporate Now

© 2025 Rikvin Pte Ltd (UEN 200708442E) An InCorp Group Company. All Rights Reserved.

Terms of Use | Privacy Policy

Sitemap | Terms of Use | Privacy Policy

© 2025 Rikvin Pte Ltd. UEN: 200708442E · All Rights Reserved.