Singapore Tax vs Malaysia Tax
Singapore and Malaysia, both nations located in South East Asia, compete with one another to attract business and investment. A key determinant for setting up a business in a given jurisdiction is the tax regime in force.
The taxation comparison between Malaysia and Singapore has been a major topic for discussion over time. The South-Eastern part of Asia is an area with a rapidly growing economy, and investors—whether on the large or small scale— want to take a part in its immense bloom. So, what are the similarities and differences between Malaysian Tax and Singaporean tax systems?
Singapore Income Tax
A Singapore tax resident is a Singaporean citizen who normally resides in Singapore or a foreigner who is staying or works in Singapore for 183 days or more during the year preceding the year of assessment. An expatriate who enters Singapore on or after 1 January 2007 and stays or works in Singapore for a continuous period of at least 183 days spanning two calendar years will be considered a resident for those two years; irrespective of one’s physical presence/employment period being less than 183 days in either or both the years.
Singapore Tax Rate
|Taxable Income||Progressive rate from 0% to 22%|
|Up to SGD 20,000||0%|
|From SGD 20,001 to 30,000||2%|
|From SGD 30,001 to 40,000||3.5%|
|From SGD 40,001 to 80,000||7%|
|From SGD 80,001 to 120,000||11.5%|
|From SGD 120,001 to 160,000||15%|
|From SGD 160,001 to 200,000||18%|
|From SGD 200,001 to 240,000||19%|
|From SGD 240,001 to 280,000||19.5%|
|From SGD 280,001 to 320,000||20%|
|Over 320,000 SGD||22%|
Employment expenses wholly and exclusively incurred in the production of the income are tax-deductible.
Life insurance premiums are deductible up to a maximum of SGD 5,000 (subject to conditions). A 250% deduction is granted for qualified donations to approved charities and foundations.
The interest expense may be deductible when incurred wholly and exclusively in the production of taxable income. Mortgage interest is, therefore, deductible only where the property concerned yields income. No deductions are allowed for medical expenses or for any other personal or household expenditure.
Singapore citizens and permanent residents are allowed deductions against their taxable income for contributions made to the Central Provident Fund or an approved pension/provident fund but subject to certain limits. Several personal reliefs are also available (e.g. spouse, earned income, child reliefs, educational expenses, etc.).
For a full list of deductions and reliefs, consult the dedicated page on the Inland Revenue Authority website.
Non-resident individuals are taxed at a flat rate of 22%, except that Singapore employment income is taxed at a flat rate of 15% or at resident rates with personal reliefs, whichever is higher. The Not Ordinarily Resident (NOR) Taxpayer Scheme allows an individual to be taxed only for the days spent in Singapore as well as to receive tax exemptions on contributions made by the employer to an overseas pension fund. To qualify for NOR status, an individual must have 3 consecutive non-resident YAs immediately prior to the first year of residency in Singapore. The status is granted for 5 consecutive YAs commencing on the first year as a Singapore tax resident. The NOR scheme will cease after year of assessment 2020. As such, the last NOR status granted will be valid from YA 2020 to YA 2024.
There is no capital gains tax in Singapore. Similarly, no wealth or inheritance taxes are levied. Property tax is levied on immovable properties in Singapore on the annual value (estimated annual rent at market price) of the property. The rate is progressive for residential properties and flat for non-residential properties (0-16% for residential property occupied by its owner, 10-20% for residential property not occupied by its owner, 10% for a non-residential property).
Note: Information from the table above adapted from Inland Revenue Authority of Singapore
Malaysia Income Tax
Generally, an individual is considered resident in Malaysia for tax purposes if he/she stays in the country for a period or periods amounting to 182 days or more in a calendar year.
Malaysia Tax Rate
|Individual income tax (2020)||Progressive rates from 0% to 30%|
|Up to MYR 5,000||0%|
|MYR 5,000 – 20,000||1%|
|MYR 20,001 – 35,000||3%|
|MYR 35,001 – 50,000||8%|
|MYR 50,001 – 70,000||14%|
|MYR 70,001 – 100,000||21%|
|MYR 100,001 – 250,00||24%|
|MYR 250,001 – 400,000||24.5%|
|MYR 400,001 – 600,000||25%|
|MYR 600,001 – 1,000,000||26%|
|MYR 1,000,001 – 2,000,000||28%|
|Qualified knowledge worker||15% Applies to workers in the Iskandar Malaysia, from employment with a designated company engaged in a qualified activity (e.g. green technology, educational services, healthcare services, creative industries, financial advisory and consulting services, logistics services, tourism)|
|Non-resident individuals||30% flat rate on total taxable income|
Employees are allowed a deduction for any expenditure incurred wholly and exclusively in the performance of their duties, but no allowance is given for tax depreciation. Donations to approved institutions or organisations are deductible (limits apply). Contributions and donations in cash and in-kind by individuals and corporates to the Covid-19 Fund and the Ministry of Health are officially tax-deductible.
Mortgage interest incurred to finance the purchase of a house is deductible only if income is derived from the house.
Several personal allowances apply standard allowance of MYR 900, MYR 400 for a spouse, MYR 2,000 for each child below 18 years of age, extra allowances for disabled persons.
Other deductions include medical expenses, pension/provident funds and insurance premiums, education fees, childcare, etc. For a detailed list, consult the Inland Revenue Board guide.
From the fiscal year 2020, individuals who do not meet the residence requirements are taxed at a flat rate of 30% on total taxable income.
Capital gains are not taxed, except for gains derived from the disposal of real property or on the alienation of shares in a real property company. Gains from disposals of real property are subject to a real property gains tax (RPGT). The rate is 30% for disposals of real property made within three years of the date of acquisition. The rates are 20% and 15% for disposals in the fourth and fifth years after the acquisition, respectively, and 10% for disposals in the sixth year after acquisition and thereafter. For companies incorporated outside Malaysia, the rate is 30% for disposals made within five years and 10% thereafter. Malaysia does not levy inheritance, estate, or gift taxes.
Note: Information from the table above adapted from Inland Revenue Board of Malaysia.
Singapore Corporate Tax
A company is considered as resident for tax purposes if the place where the central management and control of its business is located in Singapore.
Singapore Tax Rate
|Corporate Income Tax||17% (with a 75% exemption of the first SGD 10,000 and a 50% exemption of the next SGD 190,000, for a total exempt income of SGD 102,500)|
|Start-up tax exemption||75% exemption of the first SGD 100,000 and a 50% exemption of the next SGD 100,000, for a total exempt income of SGD 125,000|
|a 25% tax rebate capped at SGD 15,000 is available for year of assessment 2020|
Both resident and non-resident companies that carry on a business in Singapore are taxed on their Singapore-sourced income when it arises and on foreign-sourced income when it is remitted or deemed remitted to Singapore. Non-residents are subject to withholding tax on certain types of income (e.g. interest, royalties, technical service fees, rental of movable property) where these are deemed to arise in Singapore.
Singapore does not tax capital gains. Nevertheless, if the taxpayer trades securities, capital gains obtained on the disposition of shares may be included in the tax base and taxed at the same rate as ordinary income.
Expenses may be deducted if they are of a revenue nature and are incurred wholly and exclusively to produce income. Bad trade debts and provisions for trade debts are deductible to the extent that they are incurred in the business and previously included as trading receipts. Doubtful debts are deductible if they are properly estimated and specific, whereas general provisions for bad debts are not deductible.
The first SGD 100,000 of qualifying expenditure incurred to register qualifying IP and the first SGD 100,000 of expenditure incurred to license qualifying IP are subject to an enhanced tax deduction of 200% for tax years 2019 to 2025, same as for R&D expenses carried out in Singapore (100% if carried out overseas). Interest incurred on capital employed in the production of income will be allowed as a tax deduction.
The tax deduction for medical expenses is limited to 1% of total payroll unless the employer provides for certain portable medical insurance or benefit schemes (in such cases, the limit goes up to 2% of total payroll). Donations are deductible only if they are made in cash or another prescribed form and to an approved recipient. The deduction allowed for qualifying donations is generally 250% of the value of the donation.
Tax losses can be carried forward indefinitely, provided that the company passes the shareholding test (i.e. shareholdings in the company have not changed beyond 50% of the total number of issued shares). Tax losses and tax depreciation can be carried back up to one year, capped at SGD 100,000 and subject to the shareholding test.
Various tax exemptions and incentive schemes exist to encourage investment and trading in the country. For an extensive list, visit the website of the Inland Revenue Authority.
Malaysia Corporate Tax
A company is deemed to be tax resident in Malaysia in a financial year if, at any time during the basis year, the management and control of its affairs are exercised in Malaysia (maybe in the case that one meeting of the Board of Directors is held in Malaysia).
Malaysia Tax Rate
|Corporate tax standard rate||24%|
|The corporate tax rate for resident small and medium-sized enterprises (with capitalisation under MYR 2.5 million)||17% on the first MYR 600,000|
24% above MYR 600,000
|Corporate tax for companies originating in the Territory of Labuan and operating a trading activity in this territory||3% of the audited income|
|Petroleum income tax||38% on income from petroleum operations in Malaysia|
25% on income from petroleum operations in marginal fields
The Malaysian tax system is territorial. Residents and non-residents alike are taxed on their Malaysian-sourced income while foreign-sourced income is usually not taxed even in the case of resident and/or local firms. Non-resident companies are taxed at a 24% flat-rate, regardless of their capital.
Malaysia does not tax capital gains from the sale of investments or capital assets other than those related to land and buildings. A real property gains tax (RPGT) applies to the sale of land in Malaysia and any interest, option or other rights in or over such land. The rate is 30% for disposals of real property made within three years of the date of acquisition. The rates are 20% and 15% for disposals in the fourth and fifth years after the acquisition, respectively, and 10% for disposals in the sixth year after acquisition and thereafter. For companies incorporated outside Malaysia, the rate is 30% for disposals made within five years and 10% thereafter.
Deductions are allowed for any revenue expenditure incurred wholly and exclusively in the production of income, including interest, royalty payments and certain taxes. Interest expense is allowed as a deduction if the expense was incurred on any money borrowed and employed in the production of gross income or laid out on assets used or held for the production of gross income. Where borrowing is partly used to finance non-business operations, the proportion of interest expense will be allowed against the non-business income. A deduction is allowed for cash donations to approved institutions, capped at 10% of the aggregate income of that company for a year of assessment. Contributions and donations in cash and in-kind by individuals and corporates to the Covid-19 Fund and the Ministry of Health are officially tax-deductible. Incorporation and recruitment expenses are deductible, same as bad debts (which however need to be identified and reasonably estimated to be irrecoverable). Net operating losses can be carried forward indefinitely (except in the case of a significant change in the ownership structure of a dormant company). The carryback of losses is not permitted. Tax incentives are granted in exchange of investments in certain sectors (including manufacturing, hotels, tourism, energy conservation and environment protection) in the form of tax exemption (up to 10 years) or a tax credit (varying between 60% and 100% of the capital investment up to 10 years).
Singapore Double Taxation Treaties
Countries with Whom a Double Taxation Treaty Have Been Signed – IRAS – International Tax Agreements
Malaysia Double Taxation Treaties
Countries with Whom a Double Taxation Treaty Have Been Signed – See the list of the double taxation avoidance agreements on the website of the Inland Revenue Board of Malaysia.
Singapore Withholding Taxes
Dividends: 0; Interest: 0/15% (final rate)/17% (interests that are not eligible for the final rate); Royalties: 0/10% (final rate)/17% (royalties that are not eligible for the final rate).
Malaysia Withholding Taxes
Dividends: 0%; Interest: 0% (paid to a non-resident by a bank operating in Malaysia) /15%; Royalties: 10%
From manufacturing to distribution and technical expertise in the services sector, Malaysia offers opportunities and capabilities across the value chain. A cost-productive workforce, coupled with developed infrastructure and investor-friendly business policies make the country an enticing place for investors.
Singapore’s highly developed economy enjoys stable prices and a per capita GDP higher than that of most developed countries. According to the World Bank’s 2017 Ease of Doing Business Report, Singapore ranks 2 as the easiest place to do business in the world, while Malaysia is ranked 24.
Transparency International’s Corruption Perceptions Index ranked Singapore 6 with Least Corruption Perception, while Malaysia was ranked 62. Inefficient civil servants and corruption were quoted as the main difficulties of doing business in Malaysia. One key factor for companies who do eventually envision bringing their employees and their families over, Singapore has been recognized as the World’s Lowest Risk City for Employing and Relocating Employees according to Aon Consulting’s People Risk Index in the year 2013.
It is common knowledge that the average cost of living in Singapore is higher than in Malaysia.
Malaysia has a far larger population of 32 million, as compared to Singapore’s 5.7 million.
Nevertheless, given the unique strengths and features of each country, it may be difficult to decide whether to commit to investing in Singapore. You need a tax expert to guide you through the workings of the system. This way, you and your business can stay ahead of the dynamic trends.