Singapore’s tax laws tax income of a corporation that is
actually or deemed to be derived from a source within Singapore or is actually
or deemed to be received in Singapore from outside Singapore. There is no
precise definition of “source” in the Income Tax Act (Cap 134) and
consequently, each income-generating commercial activity has to be carefully
examined to determine its source. Income is deemed to be received in Singapore
from outside Singapore if the income:
- is remitted or transmitted to, or brought into, Singapore
- is applied in or towards the satisfaction of any debt
incurred in respect of a trade or business carried on in Singapore
- is applied towards the purchase of any movable property
which is brought into Singapore.
- In Singapore, income is assessed to tax on a preceding year
basis. Essentially, this means that income earned by a company in a financial
year will be taxed in the following tax year, referred to as the year of
assessment. For example, income for the financial year ended in 2008 will be
assessed in the year of assessment 2009. The Singapore fiscal year is the
calendar year. Singapore incorporated companies and Singapore branches of
foreign companies are both taxed at the same corporate tax rate, which is
currently 17 percent.
Sale of shares
Singapore laws do not impose tax on capital gains, but do
impose tax on income gains.
Accordingly, gains arising from a sale of shares are only
subject to tax where the gains are of an income nature and are derived from
Singapore or are received in Singapore.
The gains are usually deemed to be of an income nature where
the seller engages in or is deemed to be engaging in a business of dealing in
or trading of shares and securities. The gains are usually considered to be of
a capital nature where the seller is a long-term investor. Whether the sale of
shares amounts to income gains or capital gains is dependent on the facts of
each case. In determining whether the gains constitute taxable income gains,
the factors that the tax authority takes into consideration include:
- the length of the holding period of the shares in question
- the frequency of share sale transactions carried out by the
- the reasons for which the shares were acquired
- the circumstances under which the disposal of the shares
- the nature of business or trade carried on by the seller.
Dividends distributed by a company resident in Singapore are
deemed to be sourced from Singapore. A company is considered as a resident in
Singapore if the control and management of its business is exercised in
With effect from 1 January 2008, all Singapore companies
moved to a one-tier corporate tax system. Pursuant to the one-tier system, the
tax paid by a company on its normal chargeable income would constitute a final
tax. Also, dividends paid out of “after-tax profit” will be exempt from tax in
the hands of shareholders (exempt one-tier dividends). All dividends paid on or
after 1 January 2008 are exempt from one-tier dividends.
Under the one-tier system, companies need not maintain a
record of corporate tax paid for the purposes of paying dividends. Further,
when the company pays an exempt one-tier dividend, it is not required to deduct
tax from the dividend paid.
The one-tier system does not alter the tax treatment of
foreign dividends remitted to Singapore. Such foreign dividends remain taxable
in the hands of the shareholders unless exempted from tax. Expenses incurred by
the shareholders to earn the foreign dividends are attributed to and allowed as
set-off against such dividends only. The applicable foreign tax credit
continues to be granted.
Currently, for Singapore tax-resident corporations, foreign
dividends remitted to or received in Singapore will be tax exempt provided the
following conditions are met:
- in the year the foreign dividend is received in Singapore,
the headline tax rate of the foreign jurisdiction from which the dividend is
received is at least 15 per cent
- the foreign dividend has been subjected to tax in the
foreign jurisdiction from which they were received. This condition may be
regarded as fulfilled if no taxes are paid in the foreign
jurisdiction due to a tax holiday, or where specific
remission is granted for a “look through” treatment – where an operating
subsidiary at the end of a holding chain satisfies this requirement.
Withholding tax is a tax-collection mechanism enacted
primarily to ensure and facilitate the collection of taxes due on specified
categories of income sourced or deemed to be sourced in Singapore where such
payments are made by a person in Singapore to a non-resident.
Generally, withholding tax applies to the following
categories of income or payment:
- interest, commission, fees in connection with any loan or
- royalties and other payments for the use of, or right to
use, movable property
- know-how payments for the use of scientific, technical,
industrial or commercial knowledge/ information
- technical assistance or service fees
- management fees
- rent or other payments for use of movable property
- directors’ remuneration
- professional service fees
- proceeds from sale of real property by a real property
The rate of withholding tax applicable to a payment made to
a non-resident is either the prevailing corporate tax rate (17 percent for 2009
year of assessment), or the reduced rate of 15 percent or 10 percent, depending
on the nature of the payment. These rates may be reduced under Singapore’s tax
treaties with other countries in respect of payments made to residents of such
treaty countries. There are also exemptions from withholding tax for specified
payments under certain conditions.
Goods and services
Goods and services tax (GST) is a tax imposed on the supply
of goods or services made in Singapore. GST is payable on any taxable supply
made by a taxable person in the course or furtherance of any business carried
on by him or her and on the importation of goods into Singapore.
A “taxable supply” is a supply of goods or services made in
Singapore other than an exempt supply. A “supply” refers to any form of supply
made for a consideration. An “exempt supply” generally relates to financial
services, leases and sales of residential properties.
GST is only required to be charged on the supply of goods
and services made in Singapore. There are different rules for determining the
place of supply of goods and the place of supply of services.
Generally, goods are
treated as being supplied at the place from where they are “removed”. If a
supply of goods involves “their removal” to Singapore (that is, they are
imported), these goods are treated as supplied outside Singapore. If the supply
of goods does not involve their removal from or to Singapore, the supply is
made in Singapore if the goods are “in” Singapore at the time of the supply. If
the goods are not in Singapore at the time of the supply, the supply is not
made in Singapore.
In the case of services, a supply of services is deemed made
in Singapore if the supplier “belongs” in Singapore. A supplier of services
will be treated as belonging in Singapore if they:
- have a business establishment or some other fixed
establishment in Singapore and no such establishment elsewhere
- have no such establishment in any country but their usual
place of residence is in Singapore
- have such establishments in Singapore and elsewhere and
their establishment in Singapore is the one that is most directly concerned
with the supply.
A “taxable person” is a person who is, or is required to be,
registered under the Goods and Services Tax Act (Cap 117A). At present, a
person is required to be registered as a taxable person if their annual
turnover of taxable supplies exceeds or is expected to exceed S$1 million.
Only a GST-registered person can charge and collect GST on
all taxable supplies they make (output tax). The person is also entitled to
recover any GST (input tax) that they had paid in the purchase of goods and
services, provided that the goods and services purchased are directly
attributable to the making of the taxable supplies in respect of which the
registered person has charged and collected GST (that is, output tax). The
amount of GST payable by the GST-registered supplier to the IrAS is the
difference between the output tax and the input tax. Where the input tax
exceeds the output tax, the IrAS will refund the difference to the registered
If a person’s taxable supply is below the S$1 million
threshold, they are not required to be registered as a taxable person. However,
if the person transacts frequently with suppliers and customers who are
GST-registered, they may consider voluntary registration in order to claim
credits or refunds for input tax paid on such goods or services. The
Comptroller of GST is not obliged to accept a request for voluntary
registration and will only consider such registration if:
- the applicant makes taxable supplies in the course of their
- the taxable supplies contribute substantially to the
livelihood of the applicant
- the denial of registration would cause the applicant to
incur substantial input tax which he is unable to recover by virtue of his
Once registered under the voluntary registration category,
the person must remain registered for at least two years.
GST is charged at a prevailing standard rate of 7 per cent.
However, there are certain specified goods and services which are termed
zero-rated supplies and are subject to GST at 0 per cent. Generally, exported goods
and international services rank as zero-rated supplies.
Examples of zero-rated international services include:
- services connected with international transportation
- hiring of transport for use outside Singapore
- services connected with offshore property
- services connected with offshore goods
- services (including prescribed financial services)
connected with goods for export
- cultural, artistic and sporting services performed outside
- services supplied to
persons and businesses abroad
- services related to ships and aircraft, other than
recreation or pleasure craft
- prescribed international telecommunication services.
Although such goods and services are zero-rated, the
suppliers of zero-rated goods are entitled to obtain credits or refunds in the
form of input tax for GST paid on purchases of goods and services used in the
making of these zero-rated supplies. This is unlike the case of an exempt
supply, where no credit is available for the input tax charged to an exempt
The rules prescribing when a supply would be zero-rated are
very limited and a misreading or misinterpretation of these rules is not a defense
to any claim or charge for breach of the law. It is strongly advised that
professional advice be sought in this regard.
A registered taxable person is required to furnish a tax
return to the Comptroller not later than one month after the end of each
three-month accounting period. An application may be made to the Comptroller
for a shorter accounting period of one month, or a longer period of six months
provided certain conditions are met. In each case, the tax return for the
period must be furnished within one month after the end of the period to which
A person furnishing his or her GST return must pay the
Comptroller the GST due (that is, the difference between the output tax and
input tax for the relevant period) for the accounting period to which the
return relates. The payment must be made no later than the last day on which he
or she is required to forward the GST return to the Comptroller – unless
payment is made by way of Giro (automatic bank withdrawal) in which case the
payment will be deducted from his or her bank account on the 15th day of the
month after the due date for submission of the GST form.
Tax on individuals
The imposition of Singapore tax on the income of an
individual depends on the source of the income and the tax-resident status of
the individual. Generally, an individual who is a Singapore resident is subject
to Singapore income tax on their income derived from a source in Singapore.
Foreign-sourced income that is received in Singapore is not subject to
Singapore income tax, so long as it is not received via a partnership in
Singapore. A non-resident individual, on the other hand, need only pay
Singapore income tax on their Singapore-sourced income and is exempt from
Singapore income tax on income arising abroad even when such income is received
As a general rule, a person is considered resident in
Singapore if they are physically present in Singapore or exercise employment in
Singapore (other than as a director of a company) for 183 days or more during
the year preceding the year of assessment.
Singapore income tax on individuals is imposed on a marginal
basis. For the year of assessment 2007 onwards, the maximum marginal tax rate
is 20 per cent.
Central Provident Fund (CPF) contributions Unlike most
countries, there are no compulsory contributions to any pension scheme or
social security insurance scheme in Singapore. Singapore instead has the CPF
Scheme, which is a form of long-term savings scheme. Compulsory contributions
to the CPF account of an employee are required for an employee who is a
Singapore citizen or permanent resident.
For such an employee, the employer must deduct and pay to
the CPF Board a specified percentage of the employee’s salary (employee’s
contribution) for deposit into the employee’s CPF account. The employer must
also itself contribute to the employee’s CPF account, which contribution is
also a specified percentage of the employee’s salary. Currently, the employee’s
rate of contribution is 20 percent and the employer’s rate of contribution is
14.5 percent (15 percent from 1 September 2010) for Singapore citizens and
residents (from their third year of obtaining permanent
Other forms of tax
Under the Stamp Duties Act (Cap 312), stamp duty is levied
on instruments and agreements which relate to stocks and shares and immovable
property situated in Singapore. Stamp duty is payable at ad valorem rates or at
fixed rates, depending on the document concerned. Where the document is
executed in Singapore, stamp duty is payable within 14 days after the document
has been executed. Where the document is executed outside Singapore and
received in Singapore, stamp duty is payable within 30 days after the document
has been received in Singapore.
In the case of corporate reorganization involving transfer
of shares or the business of a company or transfer of beneficial interests in
assets between associated companies, exemption of stamp duty may apply if
certain conditions are met.
Property tax is levied on immovable properties in Singapore
based on the annual value of the property at the progressive rates of 0 per
cent, 4 per cent and 6 per cent for owner-occupied residential properties and
10 per cent (with effect from 1 July 2001) for other properties. Certain
buildings may, however, qualify for exemptions or concessions. The annual value
is the estimated annual market rent that the property can reasonably be
expected to fetch if it were let from year to year.
Customs duty is levied on tobacco, liquor, motor vehicles
and petroleum-related products.