Incorporating a new company in Singapore comes with various tax considerations crucial for businesses to understand. Singapore’s tax system is known for its competitiveness, simplicity, and multiple incentives to encourage economic growth. Here are the key tax considerations for new companies in Singapore:
1. Corporate Tax Rates:
Singapore’s corporate tax rate is low and capped at 17%. This flat rate applies to local and foreign companies, providing a competitive advantage for businesses operating in the country.
2. Partial Tax Exemption for Companies:
Singapore offers a partial tax exemption to further support small and medium-sized enterprises (SMEs). Under this scheme, qualifying companies receive a reduction on the first S$300,000 of their chargeable income. The effective tax rate is thereby lowered for eligible businesses.
3. Start-Up Tax Exemption:
New companies in Singapore may qualify for the Start-Up Tax Exemption (SUTE) scheme, which grants full exemption on the first S$100,000 of normal chargeable income for the first three consecutive years of assessment. Additionally, a 50% exemption is given on the next S$200,000.
4. Corporate Income Tax Rebate:
Periodically, the Singapore government introduces corporate income tax rebates to provide relief to businesses. The rate and conditions of the rebate can vary and are subject to government announcements. Companies should stay updated on such incentives to optimise their tax planning.
5. Goods and Services Tax (GST):
Companies with an annual turnover exceeding S$1 million must register for Goods and Services Tax (GST) and charge GST on their goods and services. However, smaller businesses may choose to register voluntarily. Companies need to understand their GST obligations and comply with filing requirements.
6. Research and Development (R&D) Tax Incentives:
Singapore encourages research and development activities by offering tax incentives. The Productivity and Innovation Credit (PIC) scheme, replaced by the Automation Support Package, previously provided tax benefits for qualifying R&D expenses. Companies engaged in innovative activities should explore available incentives.
7. Foreign-Sourced Income:
Singapore follows a territorial tax system, meaning foreign-sourced income is generally not subject to Singaporean tax. This includes dividends, branch profits, and service income earned by a Singapore company abroad. This feature makes Singapore attractive for regional headquarters and international business operations.
8. Global Trader Program (GTP):
Companies engaged in global trading activities, such as trading of goods or commodities, may benefit from the Global Trader Program. This initiative offers reduced concessionary tax rates on qualifying income from international trading transactions.
9. Double Taxation Avoidance Agreements (DTAs):
Singapore has an extensive network of Double Taxation Avoidance Agreements, relieving the burden of double taxation on income earned in foreign jurisdictions. Companies should be aware of the specific provisions of DTAs relevant to their operations.
10. Transfer Pricing Compliance:
Companies with related party transactions must adhere to transfer pricing regulations to ensure that transactions are conducted at arm’s length. Documentation to support the pricing of such transactions is crucial to comply with tax regulations.
In conclusion, new companies in Singapore can benefit from a favourable tax environment that encourages business growth and innovation. Understanding the various tax considerations, exemptions, and incentives available is essential for effective tax planning and compliance. Contact Xignam Consulting to learn more about our associated services that can further assist your business in optimising its tax structures and maximising benefits within the Singaporean tax framework.