Each year tens of thousands of entrepreneurs setup their businesses in Singapore for its ease of capital access, strategic location & supportive policies from the government. The city-state’s tax-friendliness is one prominent reason. Singapore has an extremely competitive corporate and personal tax rates, rivalling the lowest-taxed OECD states. This guide serves to give an introduction to Singapore corporate tax system and shed some light to some key considerations among business owners.
The prevailing Singapore corporate tax rate is 17% flat on its chargeable income. Though this may not be the lowest among all global jurisdictions, generous tax exemption and rebates from the Singapore tax authority has boosted the city-state to among the lowest-taxed places in the World, which has become a magnet to businesses and capital.
Partial-tax exemption for established Singapore companies
Currently, tax exemption is applicable to Singapore companies at different stages of their life, up to SGD$300,000. To illustrate, for established companies with chargeable income (taxable profits) of SGD $300,000, you would only need to pay an effective tax of 8.36% because up to SGD $152,500 of that income is being exempted from tax according to the latest tax rules. For new start-up companies (those in existence for less than 3 years), the tax-exemption amount is even higher at SGD $200,000.
How it is calculated?
For those interested in the math – The rule goes this way. Your first $10,000 of chargeable income would be 75% exempted from tax, whilst the next $290,000 is 50% exempted. i.e. For your first SGD $300,000 of chargeable income, a total of $152,500 will be exempted from tax. Therefore, your company would need to pay tax = ($300,000-$152,500) * tax rate of 17% = $25,075 = Eff 8.36%
Below we have calculated for you the effective % of tax you could expect to pay for your Singapore Company under prevailing rates for various taxable income brackets: