Taxation and Accounting in Singapore

Singapore’s favorable tax regime is internationally recognized for allowing entrepreneurs and companies to enjoy low tax rates and numerous types of tax relief – through incentives, comprehensive tax treaty networks, and exemptions from certain incomes.

Contributing Advisor

David Tan

Assistant Manager, Corporate Accounting Services

Singapore has a territorial tax system, which means that it levies a tax on all income earned in or derived from Singapore. Foreign-sourced income, such as branch profits, dividends, and service income, are taxed when remitted or deemed remitted into Singapore but will be exempted provided that the income has been taxed in the source country with a rate of at least 15 percent. There is also no capital gains tax in Singapore.

Overview of Singapore’s tax rates

Corporate Income Tax

Singapore imposes corporate income tax (CIT) at a flat rate of 17 percent for both foreign and domestic companies.

CIT in Singapore is the lowest among all ASEAN member states. The country practices a single-tier corporate tax system, which means businesses pay CIT only on chargeable income (profits).

Singapore’s favorable tax regime is internationally recognized for allowing entrepreneurs and companies to enjoy low tax rates and numerous types of tax relief – through incentives, comprehensive tax treaty networks, and exemptions from certain incomes.

As Singapore adopts a territorial basis of taxation, companies are taxed only on Singapore- sourced income.

Taxable incomes include:

• Profits from trade or business (the single-tier system this means Singapore-based companies will only pay taxes on profits and not on revenue);
• Royalties and premiums;
• Rental property income; and
• Income from investments such as interests.

Foreign-sourced income such as branch profits, dividends, and service income, are taxed when remitted or deemed remitted into Singapore but may be exempted if the income has been taxed in the source country with a rate of at least 15 percent, among other conditions applicable if a Double Taxation Avoidance Agreement is present with the home country.

Goods and Services Tax (GST)

The GST rate in Singapore is currently eight percent.

The goods and services tax (GST), also known as value-added tax (VAT), is a consumption tax imposed on goods and services in Singapore, regardless of whether they are acquired from domestic or overseas suppliers.

Did you know: The government is planning to increase the GST rate to nine percent in January 2024.

As GST is a self-assessed tax, and Singapore-based businesses are therefore required to assess their need to register for GST. Companies must register for GST if they:

• Earn a taxable turnover of more than S$1 million (US$741,900) during a 12-month period at the end of the calendar year.
• Expect to earn a taxable turnover of more than S$1 million (US$741,900) in the next 12 months.

GST-registered businesses charge GST on their sales and can claim input tax credits for the GST paid on their purchases. The GST that is levied on customers is known as ‘output tax’, and the GST that is incurred on business purchases and expenses, which includes the import of goods, is known as the ‘input tax’. The difference between the output and input tax is the net GST payable to the government.

Certain supplies, such as the provision of financial services and the sale or lease of residential properties, are exempt from GST.

Businesses must maintain proper records, issue tax invoices, and file GST returns promptly to comply with Singapore’s GST regulations.

Withholding tax in Singapore

The withholding tax rates range from 0% to 24%.

The applicable tax rate depends on the nature of the payment and the tax treaty agreements between Singapore and the recipient's country.

A withholding tax is a common form of tax that most countries impose on cross-border transactions and other payments involving non-residents. It is called a withholding tax because it is levied on the payer rather than the recipient, meaning the taxable amount is withheld from the recipient.

Withholding tax is applicable to certain types of payments made to non-resident entities, such as interest, royalties, and technical service fees.

It is crucial for businesses to identify whether their payments are subject to withholding tax and fulfill their withholding obligations. Non-resident companies can apply for reduced or exemption certificates from the Inland Revenue Authority of Singapore (IRAS) to benefit from reduced withholding tax rates or complete exemption in specific cases.

Proper documentation, record-keeping, and compliance with withholding tax obligations are vital to avoid penalties and ensure compliance with tax regulations. Read our guide for an overview of the withholding tax types and rates in Singapore, and what companies should consider when planning for them.

Individual Income Tax

Individual income tax rates in Singapore are progressive and range from 0% to a maximum of 22%.

Singapore’s tax system is progressive in nature, which means higher income earners pay a proportionately higher tax, with taxes currently ranging from zero to 22 percent. The headline individual income tax (IIT) rate will increase to 24 percent from Year of Assessment 2024 onward.

IIT in Singapore is payable on an annual basis and is imposed only on the income sourced within the country. The income earned outside Singapore is exempt from taxation.

The tax rates are applicable to residents and non-residents based on their income levels and tax residency status. To determine tax residency status, factors such as the duration of stay, employment status, and economic ties to Singapore are considered. Individuals are required to file their income tax returns annually by April 15th and comply with the reporting requirements to avoid penalties.

Singapore residents enjoy personal reliefs and rebates, which help lower their taxable income. Notable personal reliefs include the Earned Income Relief, Parenthood Tax Rebate, and Course Fees Relief. Non-residents are taxed on their Singapore-sourced income.

Tax incentives for business

With one of the world’s most business-friendly tax regimes, Singapore has emerged as a major financial and economic hub in Asia. Investors are also drawn by the efficient and cost-effective process to incorporate a company and the country’s transparent legal system.

Singapore offers a  range of tax incentives and schemes to encourage specific industries and activities. These incentives aim to foster economic growth and innovation. These incentives help reduce a company’s final corporate income tax rate.

• Progressive Wage Credit Scheme
• Start-Up Tax Exemption Scheme
• Double Tax Deduction for Internationalization
• The 100 percent investment allowance scheme
• Startup SG Tech
• Enterprise Development Grant
• Enterprise Innovation Scheme; among others.

Additionally, there are industry-specific incentives for sectors such as biotechnology, maritime, and tourism. It is essential for businesses to understand the eligibility criteria, compliance requirements, and application procedures to fully benefit from these tax incentives and contribute to their long-term growth and competitiveness.

Transfer pricing

The Singapore government has developed a comprehensive system for transfer pricing to prevent the abuse of intracompany transactions by companies in the city-state. Being a regional hub for multinational companies, the country’s transfer pricing regulations ensures that relevant parties do not underpay taxes and aims to prevent the distortion of taxable income.

Singapore has transfer pricing regulations to ensure that transactions between related entities are conducted at arm's length. The Inland Revenue Authority of Singapore (IRAS) requires businesses to maintain transfer pricing documentation and demonstrate that transactions are conducted on commercial terms. The documentation should include details of the related party transactions, comparability analysis, selection of appropriate transfer pricing methods, and supporting data.

Audit and compliance

Companies in Singapore must maintain proper accounting records and undergo an annual audit by a qualified auditor. Compliance with statutory requirements, such as timely submission of tax returns and financial statements, is essential to avoid penalties and ensure good standing with regulatory authorities.

According to Singapore’s Companies Act, the primary legislation regulating the conduct of companies in the country, companies must comply with annual filing requirements of the Accounting and Corporate Regulatory Agency (ACRA), as well as the Inland Revenue of Singapore (IRAS).

Accounting Standards

There are two main accounting standards, set out by the Accounting and Corporate Regulatory Authority (ACRA), that companies are required to adhere to when preparing their financial statements:

• The Singapore Financial Reporting Standards (SFRS) - based on the International Financial Reporting Standards (IFRS)
• Singapore Financial Reporting Standard (SFRS) for Small Entities – based on IFRS for SMEs.

Further, there are approximately 41 different standards that provide specific guidelines for financial reporting, reporting inventory, industry related standards, among others.

Financial statements are prepared under the accrual basis of accounting, which is a one of the main principles of the accounting standards in Singapore. Under this accounting method, revenues are recorded when a transaction occurs rather than when the payment is received.