The tax filing deadline for Singapore companies is just around the corner – 30 November. With this in mind, we thought we’d get some updates on the topic. What exactly is required for businesses to file tax here? And what else should budding entrepreneurs and business owners be aware of? The team from Hawksford Singapore answered some of our readers’ questions.
“What are the tax obligations for my Singapore-based company, and how is tax assessed?”
Singapore has adopted a single-tier corporate income tax system, which means there is no double-taxation for stakeholders. Tax paid by a company on its chargeable income is the final tax and all dividends paid by a company to its shareholders are exempt from further taxation. There is no tax on capital gains in Singapore. (Examples of capital gains include gains on the sale of fixed assets, gains on foreign exchange on capital transactions, and so on.)
All companies are required to submit the following forms to IRAS every year:
#1 ECI (Estimated Chargeable Income) – to be submitted within three months of the end of the financial year, unless the company qualifies for ECI waiver
#2 Form C / C-S – to be submitted by 30 November
A company is taxed at a flat rate of 17 percent on its chargeable income regardless of whether it’s a local or foreign company. There are, however, tax-saving schemes available for companies that can help to lower the overall effective corporate tax rate – which is where consulting a professional service provider can benefit.
Also, a company is taxed on the income earned in the preceding financial year. This means that income earned in the financial year 2018 will be taxed in 2019.
“Have there been recent changes to Singapore’s corporate tax guidelines that might affect me?”
Yes, there have been various changes. Hawksford is the brand behind GuideMeSingapore and provides annual updates to our readers about any changes – here are links to the three most recent:
“What’s the difference between a tax-resident company and a non-resident company?”
A company is considered as a tax resident in Singapore if the control and management of the business is exercised in Singapore. “Control and management” is the making of decisions on strategic matters, such as those on company policy and strategy. Generally, the location of the company’s Board of Directors meetings, during which strategic decisions are made, is one of the key factors in determining where the control and management is exercised.
Also, if the company has an executive director or key management personnel who plays an important role in decision-making based in Singapore, this is another of the key factors in determining where the control and management is exercised.
In general, a company is considered non-resident in Singapore if the directors manage and control the business and hold board meetings elsewhere. This is true even if, for example, the lower level operations are taking place in Singapore.
A few extra things to note:
* A company’s residence may change from one year of assessment to the next depending on the circumstances.
* A Singapore branch of a foreign company is generally not treated as a Singapore tax resident since the control and management is vested with an overseas parent company.
* The place of incorporation of a company and the appointment of Nominee Director aren’t necessarily indicative of the tax residence of a company.
“Are there pros and cons to these different statuses?”
The basis of taxation for a resident company and non-resident company is generally the same, with the exception of certain benefits that are available to Singapore tax-resident companies. These include:
* Eligibility for an income tax-exemption scheme available for new start-up companies (except for investment holding and property development companies).
* Income tax exemption on foreign-sourced dividends, foreign branch profits and foreign-sourced service income under section 13(8) of the Income Tax Act with certain conditions.
* Benefits conferred under the Avoidance of Double Taxation Agreements (DTA) that Singapore has concluded with treaty countries.
“I want to start a company in Singapore; are there any grants or incentives available?”
Yes. For funding grants, Hawksford works closely with the Action Community for Entrepreneurship (ACE). ACE was launched in 2003 by the Ministry of Trade & Industry as a national effort to foster innovation and entrepreneurship in Singapore. We also work closely with Singapore professional firms to assist in the application of tax incentives.
See this article by Hawksford Singapore for some ideas on how you save on your corporate tax bill, and get in touch with them for a consultation regarding your corporate tax obligations to ensure you stay on track and on time.
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Read more in our Living in Singapore section:
The expat’s guide to where to live in Singapore
How to become a permanent resident in Singapore