The Singaporean tax system is one of the most convenient globally, chiefly because of its low tax rates and the opportunity for deductions under specific conditions.

In this piece, I’ll probe some specifics about Singaporean taxation from two aspects, the taxing for the individual and the corporate body.

Personal Tax Returns

In Singapore, individuals are taxed based on their residency status. The residency status classification divides the population into these broad groups for taxation;

  • Singapore citizens
  • Singapore permanent residents
  • A foreigner who has spent 183 days or more in Singapore
  • A foreigner who’s spent less than 183 days in Singapore

The government taxes the first three groups at a progressive rate that ranges from 2%-22.  Foreigners (commonly called nonresidents) are only taxed if they’ve spent more than 60 days on the land. Taxes are not imposed on foreigners who’ve stayed less than or exactly 60 days, except they occupy the following positions; Director (tax rate, 22%), Public entertainer (tax rate, 15%), consultant, trainer, or coach (tax rate, 15%). In these special cases, such foreigners pay taxes at the same progressive rate as the others, 15%-22%.

Tax On Foreign Income

Generally, tax is not imposed on income earned from business outside Singapore, even if the money is in a Singaporean account. However, exceptions are still in place here, like in these instances;

  • The position/job is physically based in Singapore, even though it requires foreign trips
  • The person earned money outside the country but working for the Singaporean government
  • The person earned money in a foreign location affiliated with his workplace in Singapore.

Tax Deductions

This tax deduction is another feature that makes Singapore an ideal spot for the high-income earner. Individual taxes enjoy deductions for the following reasons;

i)Employment Expenses: Employees will enjoy tax deductions for expenses borne as long as the following terms are satisfied;

  • Expenses incurred on the job itself
  • Expenses not offset by the employer
  • the expense was not a capital expenditure, e.g., purchase of a fixed asset
  • the expense was not for a personal end.

ii) Donations: Government will provide tax Deductions for persons who’ve made donations to qualifying charitable organizations. These donations could be cash donations, artefact donations, shares donations, or land and building donations.

iii) Expenses from rental income: Here, Government applies tax deduction under the following conditions;

  • the expense is to generate rental income
  • Tenant got the expenses while living on the property

iv) Self-improvement tax relief: Here, Government provides tax relief for taxpayers in the following forms;

  • Course Fee Relief; for persons who invested money in boosting their skills and employability
  • CPF Cash Top-Up; for persons who have set aside money for their retirement

Supplementary Retirement Scheme (SRS) relief encourages individuals to save beyond only their retirement or CPF savings.

Filing Taxes

Just like corporate bodies, individuals must file taxes yearly with the Inland Revenue Authority of Singapore (IRAS). Two deadlines exist for this process, as given below;

  • April 18 for the e-filing
  • April 15 for the paper filing.

It is important to note that personal taxes filed during any particular year cover the income earned from January 1 to December 31 of the preceding year. That means that an individual filing his tax returns in 2021 is taxed based on his income from January 1 of 2020 to December 31 of 2020. Also important is the exemption from taxes of persons who earn less than S$22,000 per annum, even though they’re still required to file taxes with the IRAS.

Individuals can file their taxes either online or via mail, and they must fill a firm based on their occupation and/or tax residency status. The forms are of the following kinds;

  • Form B1; for employed persons
  • Form B; for self-employed persons
  • Form M; for nonresidents

 

After completing filing, the individual will receive a tax bill called Notice of Assessment (NOA), sent between May and September. Once the person has received this NOA, he or she must pay the taxes in 30 days. Failure to do this will attract a fine, currently pegged at 5%.

Corporate Taxes

Singapore offers a very viable ground for corporations to establish themselves by their low tax rates and the numerous financial incentives on offer.

 

Tax Rate: The standard tax rate for corporations in Singapore is 17%. However, the good news is that it is usually even lower owing to the various tax exemption and incentive programs made available by the Singaporean government.

Furthermore, Singapore does not levy corporations based on revenue but based on profits. So, this 17% tax is imposed on the profits of the company, and just like in personal taxation, foreign-sourced income/profits will not be taxed.

Tax Residency Status of Corporations: A company situated in Singapore is not a resident company by right of location. The residency status of a corporation is dependent mainly on the location of its board meetings and the location of key personnel. If both board meetings and key management personnel are not in Singapore, the company is a nonresident, even if its daily operations occur on Singaporean soil. Nevertheless, the residency status of a company can change from year to year.

Resident corporations enjoy certain benefits such as;

  • -Tax benefits enjoyed under the Double Taxation Agreements (DTAs)
  • -Tax exemptions on foreign-sourced dividends and for start-up corporations

 

Filing Taxes: In filing tax returns, a company must submit two forms to the IRAS, namely;

-Estimated Chargeable Income (ECI): this is a company’s expenses after tax-allowable expenses have been deducted.

Form C or Form C-S: in both these forms, the company declares its total income for the financial year (including the tax-allowable expenses). The form includes supporting documents like tax computations, statements of profit and loss, etc., while the form C-S requires no such supporting documents.

Concerning deadlines, the ECI is due within three months of the company’s financial year-end, while the form C or firm C-S are due on the following dates;

  • -November 30 for paper filing
  • -December 15 for e-filing

Basis Period and Year of Assessment

These are vital concepts in corporate taxing. The Year of Assessment is when the company files the tax returns, while the Basis Period is the (financial) year in which the Government collects. Therefore, if a company whose financial year ends on October 16 of each year files taxes in 2021, the taxes will be on the profits from October 17 of 2019 to October 16 of 2020. In this case, 2021 is the assessment year (in which the filing year), while the period from October 17, 2019 – October 16, 2020, is the basis year (which is the taxation year).

Whether for an individual or a corporation, Singapore is surely a great location to site a financial franchise. Low tax rates, tax exemptions, tax deductions, incentive schemes, and many more packages within the system ensure that. International acclaim for their taxing system is also high. To properly navigate these taxations, you need an expert accountant to help you get on the right track. So, set your sights on establishing in Singapore and get the lowest taxes and maximum support all year long.

 

 

 

 

 

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