Singapore needs no introduction. It is considered the best destination not just for tourists, but also for entrepreneurs. The ease of setting up and operating a business is the prime reason. Another major detriment is its taxes. Singapore is known for its attractive taxes, especially its double tax treaties. Its low taxes and other incentives offered to foreign investors make it a tax haven. If you want to start your business in Singapore, this guide will provide you with a general overview of Singapore's taxes and accounting.
Different Types of Taxes
There are eight different types of taxes in Singapore. Let us take a brief look at each one of them.
Corporate Tax
Companies are charged a corporate tax of a flat 17% on their chargeable income. You can get the help of a professional tax services company in Singapore to help you with understanding the taxable income of your company. Furthermore, Singapore follows a single-tier corporate tax system, where tax paid by a company on its profits is not imputed to the shareholders. This means that the dividends are tax-free.
Personal Income Tax
Singapore personal tax is applied to the income earned locally. The rates start at 0% and income above S$3,20,000 is taxed at 22% for residents. For senior residents above 60 years of age, there is a 50% tax relief. And non-residents pay a flat rate of 15% to 22%.
Goods and Services Tax (GST)
Goods and Services Tax (GST) is an indirect consumption tax that is imposed on the supply of goods and services in Singapore and the import of goods into Singapore. The current GST rate is 7%. GST tax is imposed on the customer. Thus, it does not become a burden to the company. Companies just act as collecting agents of GST on behalf of the Singapore tax department.
Withholding Tax
This tax is applicable to non-resident companies or non-resident professionals for any income derived from a source in Singapore, or for services provided or work done in Singapore, or specific types of payments like interests, commissions, debt- or loan-related fees, royalties, rentals from movable properties, management, and technical fees, and management fees. The general withholding tax rate for non-resident professionals is a flat 15% of gross income.
Property Tax
Property tax is 10% in Singapore and is intended for all properties in Singapore. This includes Housing Development Board flats, warehouses, factories, offices, and vacant lots. Property tax is to be paid every year before 31st of January. However, the tax rate can be reduced under certain circumstances.
Stamp Duty
Stamp duty is imposed on documents pertaining to the transfer of immovable properties and shares. This tax is generally borne and paid by the buyer of such properties.
Stamp duty is calculated on the market value of the property or consideration paid, whichever is higher. Stamp duty on the transfer of immovable properties, whether residential or commercial ranges from 1% to 4%. There is also a stamp duty of 0.2% levied on the transfer of shares transfers. It is calculated on the purchase price or the net asset value of the shares.
Double Tax Treaties
Double taxation means the same income is taxed twice on the same taxpayer – once in the country where the income arises and once in the country of residence where the income is received. Singapore has entered into double taxation treaties with other countries to relieve the taxpayers from the burden of double taxation. However, only residents can benefit from the application of the DTA.
Accounting Standards in Singapore
Accounting standards in Singapore are known as Singapore Financial Reporting Standards (SFRS). All companies starting a business in Singapore with the financial period on or after January 1, 2003, have to comply with SFRS. There are almost 41 different accounting standards in Singapore and each standard covers a specific topic like the presentation of financial statements, identification of revenue, and more.
The major principle of Singapore accounting standards is accrual-based accounting. Financial statements prepared on the accrual basis notify users not only of past transactions but also of commitments to pay in the future and of things that represent cash to be received in the future.
Closing
With Singapore’s lenient tax system, entrepreneurs starting a business in Singapore get bigger tax savings and better business opportunities.
Do you want to learn more about Singapore's tax services? Contact Helen Campos today to consult with experts on your tax issues or concerns. Apart from Singapore taxation services, our experts can also advise you on matters from accounting to getting a Singapore employment pass.
Get in touch with us and we ensure that starting your business will be a breeze.
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