New to Singapore? Learn How to Qualify for Corporate Tax Exemptions and Reduce Your Tax Liability
If you are new to Singapore and considering setting up a business, you are likely aware of the importance of understanding the country’s tax laws. Singapore is a popular destination for businesses due to its business-friendly environment, low tax rates, and high standard of living. However, the country’s tax system can be complex, and it is essential to understand how to qualify for corporate tax exemptions and reduce your tax liability.
In this article, we will provide an overview of the corporate tax system in Singapore, the different types of corporate tax exemptions, and the steps you can take to reduce your tax liability.
Corporate Tax System in Singapore
Singapore has a territorial tax system, which means that only income derived from Singapore is subject to tax. The country has a single tax rate of 8.5% for all companies, with a minimum tax rate of SGD 17,500. The tax year in Singapore runs from January to December, and businesses must file their tax returns by the 31st of March of the following year.
Types of Corporate Tax Exemptions
Certain types of income are exempt from tax in Singapore, including:
- Rental income from a property used for a trade or business
- Income from a trade or business carried on in Singapore by a non-resident company
- Dividends received from a Singaporean company
- Interest income from a Singaporean bank account
- Rent and royalty income from intellectual property rights
In addition, some companies may be eligible for tax exemption on their first SGD 1 million of profit, known as the “small and medium-sized enterprise (SME) tax exemption.”
How to Qualify for Corporate Tax Exemptions
To qualify for corporate tax exemptions, businesses must meet certain criteria, such as:
- Being a Singaporean company or a non-resident company carrying on a trade or business in Singapore
- Having a minimum annual income of SGD 1 million (for the SME tax exemption)
- Filing a tax return and paying any outstanding taxes due
- Not being a Singaporean company that is controlled by a non-resident company or individual
Steps to Reduce Your Tax Liability
There are several steps you can take to reduce your tax liability in Singapore:
- Claim all eligible deductions and reliefs
- Keep accurate and detailed records of your business expenses
- Consult with a tax professional to ensure you are taking advantage of all available tax reliefs and exemptions
- Consider setting up a Singaporean company to take advantage of the SME tax exemption
- Consider incorporating a holding company in Singapore to reduce your global effective tax rate
Conclusion
Understanding the corporate tax system in Singapore is crucial for any business looking to set up operations in the country. By qualifying for corporate tax exemptions and reducing your tax liability, you can increase your profits and improve your company’s competitiveness. With this article, you are now better equipped to navigate the complex world of Singaporean tax laws and take advantage of the many benefits that the country has to offer.
FAQs
Q: What is the tax rate in Singapore for companies?
A: The tax rate in Singapore for companies is 8.5%.
Q: What is the minimum tax payment in Singapore?
A: The minimum tax payment in Singapore is SGD 17,500.
Q: What types of income are exempt from tax in Singapore?
A: Certain types of income are exempt from tax in Singapore, including rental income from a property used for a trade or business, income from a trade or business carried on in Singapore by a non-resident company, dividends received from a Singaporean company, interest income from a Singaporean bank account, and rent and royalty income from intellectual property rights.
Q: How do I qualify for the SME tax exemption?
A: To qualify for the SME tax exemption, you must be a Singaporean company or a non-resident company carrying on a trade or business in Singapore, have a minimum annual income of SGD 1 million, file a tax return and pay any outstanding taxes due, and not be a Singaporean company that is controlled by a non-resident company or individual.
Q: How do I reduce my tax liability in Singapore?
A: There are several ways to reduce your tax liability in Singapore, including claiming all eligible deductions and reliefs, keeping accurate and detailed records of your business expenses, consulting with a tax professional, setting up a Singaporean company to take advantage of the SME tax exemption, and incorporating a holding company in Singapore to reduce your global effective tax rate.
