Singapore tax system is one of the best in the world for entrepreneurs. Explore Singapore business opportunities and learn how to benefit from opening your company and paying its taxes here.
What are the benefits of Singapore tax system?
The tax rates in Singapore are simple, transparent and fairly low. The corporate tax rate is 17% flat for both foreign and local entrepreneurs. On top of that, Singapore government supports startups by giving exemptions for the first three years after incorporation. And since Singapore and India have a Double Taxation Agreement, you’re protected from being taxed twice on the same income.
What exemptions are there for start-ups?
The Start-Up Tax Exemption (SUTE) provides tax cuts for the first 3 years of operation. Starting from the financial years 2019 and 2020 the rules translate into the following effective rates:
- 4.25% on the first S$100,000 (₹52,60,000) of normal chargeable income
- 8.5% on the next S$100,000 (₹52,60,000)
After the first 3 assessment years have expired, you can receive a Partial Tax Exemption (PTE). Here are the effective tax rates:
- 4.25% for the first S$10,000 (₹5,26,000) of normal chargeable income
- 8.5% on the next S$190,000 (₹1,00,00,000)
How do Singapore and Indian corporate taxes compare?
Singapore has a one-tier tax structure: you only pay 17% corporate tax and there are exemptions for SME that make effective rate even lower. Tax on dividends is exempted. In India, you pay twice: 25% corporate tax and then 15% tax on dividends. The result can be 4.5 times more than you’d pay in Singapore. Let’s do the math comparing two mature companies with the same profit:
|Tax on profit||25%
|Tax on dividends||15%
How can I qualify for the start-up tax exemption?
It is available within the first 3 years after you opened a company in Singapore.
- At least one shareholder has to be a person, not a company and hold more than 10%.
- No more than 20 shareholders altogether.
- Investment holding and property development companies cannot apply.
- You have to be a tax resident in Singapore.
What are other taxes on business?
Singapore declared dividends are not taxable, neither are capital gains. There’s a Goods and Services Tax (GST) on supplies made in Singapore but your company only has to register for it if your turnover grows over S$1,000,000 (₹5,26,00,000). As a GST-registered company, you have to charge GST on your supply. The upside is you can claim GST suffered on your purchases. If you mainly export your goods abroad, you may apply for an exemption from GST registration.
|Capital Gains Tax||0%||15–2-%|
|Tax on Dividends||0%||10%|
after S$1m turnover
|Personal Income Tax||0%–22%
When and how do I submit my taxes?
Taxes are filed annually with IRAS (the tax authority) by November 30th. You report on your income for the previous year. For example, a report on 2018 income is submitted on November 30th, 2019.
You also get to choose the exact evaluation period. It doesn’t have to match a calendar year. For example, if you’ve incorporated in October, you can report your income from the 1st of October to the 30th of September.
Annual reporting is a service regularly provided by local agencies. As they process your documents, they will advise on possible changes needed to qualify for tax exemptions.
Closing data of your evaluation year
|30 Sep||31 Mar|
Your evaluation year, choose convenient dates.
|1 Oct 2017
to 30 Sep 2018
|1 Apr 2018
to 31 Mar 2019
|Year of Assessment (YA)
When you submit the report
|Tax Filing Deadline
Always 30 Nov
|30 Nov 2019||30 Nov 2020|
Can my company lose Singapore tax residency?
Yes, if the IRAS thinks your “control and management” happens elsewhere. So one important requirement is that your board of directors has to meet and make strategic decisions in Singapore. Having a local executive also helps convince IRAS that your company is resident.
Losing residency means you won’t get most of the exemptions and benefits. Good news is that residency is evaluated on a yearly basis so you can apply again the following year.
If I move to Singapore, what personal taxes will I pay?
The personal tax rate is progressive from 0% to 22%. If you buy a property, tax on property is progressive from 0 to 16%.
Personal tax rate
|Chargeable income ($)||Estimated tax (S$)||Effective tax rate|