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    Singapore Taxation

    Sumber:

    http://www.guidemesingapore.com/taxation/corporate-tax/singapore-corporate-tax-guide

    http://www.guidemesingapore.com/taxation/topics/singapore-tax-rates

    http://www.guidemesingapore.com/taxation/personal-tax/singapore-personal-tax-guide

    http://www.guidemesingapore.com/taxation/personal-tax/non-resident-company-employment-taxhttp://www.guidemesingapore.com/taxation/reports/singapore-dta-guide

    Singapore Tax Rates and Income Tax System

    Investors turn to Singapore for establishing their operations for several reasons. The easeof setting up and operating businesses is a prime motivator. Another central determinant isSingapores tax regime well-known for its attractive corporate and personal tax rates, tax reliefmeasures, absence of capital gains tax, one-tier tax system, and extensive double tax treaties.

    Persons, including corporations, partnerships, trustees and bodies of persons carrying onany trade, profession or business in Singapore are chargeable to tax on all profits (excludingprofits arising from the sale of capital assets) arising in or derived from Singapore and certainforeign-sourced income from such trade, profession or business.

    The purpose of this guide is to provide a general overview of Singapores tax system andtax rates. We also have a very usefulonline tax calculatorthat you can use to to estimate yourSingapore taxes and to compare how they stack up against those in your home country.

    Current Tax Rates in Singapore

    Corporate Tax Rates

    Income Tax Rate

    Tax rate on corporate profits for up to 300,000 SGD 8.5%

    Tax rate on corporate profits above 300,000 SGD 17%

    Tax rate on capital gains accrued by the company 0%

    Tax rate on post-tax profits (i.e. dividends) distribution toshareholder

    0%

    Tax rate on foreign-sourced income not brought into Singapore 0%Tax rate on foreign-sourced income brought into Singapore 017% subject to

    conditions

    http://www.guidemesingapore.com/taxation/corporate-tax/singapore-corporate-tax-guidehttp://www.guidemesingapore.com/taxation/corporate-tax/singapore-corporate-tax-guidehttp://www.guidemesingapore.com/taxation/topics/singapore-tax-rateshttp://www.guidemesingapore.com/taxation/topics/singapore-tax-rateshttp://www.guidemesingapore.com/taxation/personal-tax/singapore-personal-tax-guidehttp://www.guidemesingapore.com/taxation/personal-tax/singapore-personal-tax-guidehttp://www.guidemesingapore.com/taxation/personal-tax/non-resident-company-employment-taxhttp://www.guidemesingapore.com/taxation/personal-tax/non-resident-company-employment-taxhttp://www.guidemesingapore.com/taxation/reports/singapore-dta-guidehttp://www.guidemesingapore.com/taxation/reports/singapore-dta-guidehttp://www.guidemesingapore.com/taxation/topics/singapore-tax-calculatorhttp://www.guidemesingapore.com/taxation/topics/singapore-tax-calculatorhttp://www.guidemesingapore.com/taxation/topics/singapore-tax-calculatorhttp://www.guidemesingapore.com/taxation/topics/singapore-tax-calculatorhttp://www.guidemesingapore.com/taxation/reports/singapore-dta-guidehttp://www.guidemesingapore.com/taxation/personal-tax/non-resident-company-employment-taxhttp://www.guidemesingapore.com/taxation/personal-tax/singapore-personal-tax-guidehttp://www.guidemesingapore.com/taxation/topics/singapore-tax-rateshttp://www.guidemesingapore.com/taxation/corporate-tax/singapore-corporate-tax-guide
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    Personal Tax Rates

    Income Tax Rate

    Tax rate on first 20,000 0%

    Tax rate on next 10,000 3.5%Tax rate on next 10,000 5.5%

    Tax rate on next 40,000 8.5%

    Tax rate on next 80,000 14%

    Tax rate on next 160,000 17%

    Tax rate on above 320,000 20%

    Tax rate on capital gains 0%

    Tax rate on income earned overseas 0%

    Tax rate on dividends received from Singapore company 0%

    Singapore Income Tax SystemKey Facts

    Singapore follows a territorial basis of taxation. In other words, companies andindividuals are taxed mainly on Singapore sourced income. Foreign sourced income(branch profits, dividends, service income, etc.) will be taxed when it is remitted ordeemed remitted into Singapore unless the income was already subjected to taxes in ajurisdiction with headline tax rates of at least 15%. Although the concept of locality of thesource of income seems simple, in realty its application often can be complex andcontentious. No universal rule can apply to every scenario. Whether profits arise in or are

    derived from Singapore depends on the nature of the profits and of the transactions whichgive rise to such profits.

    Singapore corporate tax rateis capped at 17%. By keeping corporate rates competitive,Singapore continues to attract a good share of foreign investment. Singapore follows asingle-tier corporate tax system, where tax paid by a company on its profits is notimputed to the shareholders (i.e. dividends are tax free).

    Singapore personal tax ratesstart at 0% and are capped at 20% (above S$320,000) forresidents and a flat rate of 15% for non-residents. As an example, if you are tax residentin Singapore and your personal income for the year was S$160,000, your income taxliability will be approximately S$15,5000.

    To increase the resilience of taxes as a source of government revenue,Goods andServices Tax(GST) was introduced in 1994. The current GST rate is 7%. The balancedmix of tax on consumption and income reduces the vulnerability of revenue intake toadverse changes in economic conditions and strengthens the resilience of Singaporesfiscal position.

    Interest, royalties, rentals from movable properties, management and technical fees, anddirectors fees paid to non-residents (individuals or companies) are subject towithholdingtax in Singapore.

    http://www.guidemesingapore.com/taxation/corporate-tax/singapore-corporate-tax-guidehttp://www.guidemesingapore.com/taxation/corporate-tax/singapore-corporate-tax-guidehttp://www.guidemesingapore.com/taxation/personal-tax/singapore-personal-tax-guidehttp://www.guidemesingapore.com/taxation/personal-tax/singapore-personal-tax-guidehttp://www.guidemesingapore.com/taxation/corporate-tax/singapore-gst-tax-guidehttp://www.guidemesingapore.com/taxation/corporate-tax/singapore-gst-tax-guidehttp://www.guidemesingapore.com/taxation/corporate-tax/singapore-gst-tax-guidehttp://www.guidemesingapore.com/taxation/corporate-tax/singapore-gst-tax-guidehttp://www.guidemesingapore.com/taxation/reports/singapore-withholding-tax-guidehttp://www.guidemesingapore.com/taxation/reports/singapore-withholding-tax-guidehttp://www.guidemesingapore.com/taxation/reports/singapore-withholding-tax-guidehttp://www.guidemesingapore.com/taxation/reports/singapore-withholding-tax-guidehttp://www.guidemesingapore.com/taxation/reports/singapore-withholding-tax-guidehttp://www.guidemesingapore.com/taxation/reports/singapore-withholding-tax-guidehttp://www.guidemesingapore.com/taxation/corporate-tax/singapore-gst-tax-guidehttp://www.guidemesingapore.com/taxation/corporate-tax/singapore-gst-tax-guidehttp://www.guidemesingapore.com/taxation/personal-tax/singapore-personal-tax-guidehttp://www.guidemesingapore.com/taxation/corporate-tax/singapore-corporate-tax-guide
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    For personal taxes, the tax year is the normal calendar year i.e. January 1December 31.Deadline for filing personal tax return is April 15. For corporate taxes, a company is freeto to decide on its financial year. Deadline for filing corporate tax return is November 30.Taxes are paid on a preceding year basis.

    Singapore has no capital gains tax. Capital loss expenses are correspondingly not allowedas deductions.

    Singapore has concluded more than 50 bilateral comprehensivetax treatiesto helpSingapore companies minimize their tax burden.

    Types of Taxes in Singapore

    1. Income Tax is chargeable on income of individuals and companies.2. Property Tax is imposed on owners of properties based on the expected rental values of

    the properties.3. Estate Duty has been abolished since February 15, 2008.4. Motor Vehicle Taxes are taxes, other than import duties, that are imposed on motor

    vehicles. These taxes are imposed to curb car ownership and road congestion.5. Customs & Excise DutiesSingapore is a free port and has relatively few excise and

    import duties. Excise duties are imposed principally on tobacco, petroleum products andliquors. Also, very few products are subject to import duties. The duties are mainly onmotor vehicles, tobacco, liquor and petroleum products.

    6. Goods & Services Tax (GST) is a tax on consumption. The tax is paid when money isspent on goods or services, including imports. This kind of indirect tax is also known asValue Added Tax (VAT) in many other countries.

    7. Betting Taxes are duties on private lottery, betting & sweep-stake.8. Stamp Duty is imposed on commercial and legal documents relating to stock & shares

    and immovable property.

    9. OthersThe two main taxes are the foreign worker levy and the airport passengerservice charge. The foreign worker levy is imposed to regulate the employment of foreignworkers in Singapore.

    Singapore Tax Governing Authority

    The Income Tax Act of Singapore is the governing statute regarding corporate andindividual taxation matters.

    The Inland Revenue Authority of Singapore (IRAS), was formed in 1960 and wasformerly known as the Inland Revenue Department. It integrated all the key revenue collectionagencies into one body, enabling the administration and collection processes to become morestreamlined and better managed. IRAS has also made its mark as an efficient tax administratorand a service-friendly tax collector.

    The IRAS is responsible for collecting income tax, property tax, goods & services tax,estate duty (abolished since 15 Feb, 2008), betting taxes and stamp duties. As the main taxadministrator for the Ministry of Finance, IRAS plays a role in tax policy formulation by

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    providing policy inputs, as well as the technical and administrative implications of each policy.IRAS also actively monitors developments in external economic and tax environment to identifyareas for policy review and changes. It aims to foster a competitive tax environment thatencourages enterprise and growth. The other non-revenue functions performed by IRAS includerepresenting the government in tax treaty negotiations, providing advice on property valuation

    and drafting of tax legislation.

    Singapore Personal Income Tax Guide

    Personal income tax rates in Singapore are one of the lowest in the world. In order todetermine the Singapore income tax liability of an individual, you need to first determine the taxresidency and amount of chargeable income and then apply the progressive tax rate to it. Keypoints of Singapore income tax for individuals include:

    Singapore follows a progressive tax rate starting at 0% and ending at 20% aboveS$320,000.

    There is no capital gain or inheritance tax. Individuals are taxed only on the income earned in Singapore. The income earned by

    individuals while working overseas is not subject to taxation barring few exceptions. Tax rules differ based on the tax residency of the individual. Tax filing due date for individuals is April 15 of each year. Income tax is assessed based

    on a preceding year basis.

    The rest of this guide explains personal income tax in more detail. If you are interested tolearn about corporate taxation, refer toSingapore corporate tax guide. To calculate estimatedSingapore taxes and to compare how they stack up against those in your home country, refer to

    ouronline tax calculator.

    Personal income tax rates

    Individuals resident in Singapore are taxed on a progressive tax rate as listedbelow. Filing of personal tax return is mandatory if your annual income is S$22,000 or more.You do not need to pay tax if your annual income isless than S$22,000. However, you may stillneed to file a tax return if you have been informed by Singapore tax department to submit yourtax return.

    All resident individual tax payers will be given a one-off income tax rebate of 20%, upto

    a cap of S$2,000, for the tax payable for YA 2011.

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    Different income tax rules apply in Singapore depending on the tax residency status of theindividual.

    Personal Tax for Singapore Residents

    You are considered a tax resident if you are:

    a Singaporean; or a Singapore Permanent Resident and have established your permanent home in

    Singapore; or a foreigner who has stayed or worked in Singapore for 183 days or more in the tax year

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    Tax residents pay taxes on their chargeable income as per the tax rate table above. What ischargeable income? The chargeable income (i.e. income subject to taxation) for tax residents isdetermined as below:

    Whereas

    Total income meanso gains or profits from carrying on any business, trade, profession or vocation either

    as a sole proprietor or partner in a partnershipo gains or profits from any employmento dividends, interests, investment incomeo rents, royalties, premiums and other profits arising from propertieso exclude qualified income earned overseas (more deails provided later in theguide).

    Expenses meanso qualified employment related expenseso qualified rental related expenses are expenses

    Donations meanso donations to qualified charitable organizations

    Personal Reliefs meanso special personal reliefs such as eligible course fees, earned income relief, parent

    relief, etc.

    Chargeable income is this adjusted income after deductions from the total income (as shown inthe picture above).

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    Personal Tax for Singapore Non-Residents

    You are considered a non-resident for tax purpose if you are a foreigner who stayed orworked in Singapore for less than 183 days in the tax year. As a non-resident, you will be taxedas below:

    Your employment income is exempt from tax if you are here on short-term employmentfor 60 days or less in a year. This exemption does not apply if you are a director of acompany, a public entertainer or exercising a profession in Singapore. Professionalsinclude foreign experts, foreign speakers, queens counsels, consultants, trainers, coachesetc.

    If you are in Singapore for 61-182 days in a year, you will be taxed on all income earnedin Singapore. You may claim expenses and donations to save tax. However, you are noteligible to claim personal reliefs. Your employment income is taxed at 15% or theprogressive resident rate (see rate table above), whichever gives rise to a higher taxamount.

    Director fees, consultant fees and all other incomes are taxed at 20%.Filing personal income tax returns

    Filing your tax return is a yearly obligation for every eligible taxpayer. All completedforms must be submitted to Singapore tax department by the 15th of April.

    You do not need to pay tax if your annual income isless than S$22,000. However, youmay still need to file returns if you have been informed by tax authority to submit your tax form.Even if you do not have any income in previous years, you still need to declare zero income in

    your tax form and submit by 15 Apr. You need to compulsorily file tax returns if your annualincome is S$22,000 or more.

    You can choose to file your returns online or by mail. IRAS will send you the appropriatepaper tax form, as listed below, during February to March.

    1. For tax resident individualsForm B12. For self-employedForm B3. For non-resident individualsForm M

    You will be subject to penalties for filing late or not filing.

    After you have filed your returns, you will receive your Notice of Assessment or tax billby September. The tax bill will indicate the amount of tax you have to pay. If you disagree withyour tax amount, you need to inform tax department within 30 days from the date of your tax billand state your reasons for objection.

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    You need to pay the full amount of tax within 30 days of receiving your Notice ofAssessment. This is regardless of whether you have informed tax authority about your objection.If your tax remains outstanding after 30 days, a penalty will be imposed.

    Tax treatment of income earned overseas

    Generally, overseas income received in Singapore on or after 1 Jan 2004 is not taxable.This includes overseas income paid into a Singapore bank account. You do not need to declareoverseas income that is not taxable.

    There are certain circumstances under which overseas income is taxable:

    It is received in Singapore through partnerships in Singapore. Your overseas employment is incidental to your Singapore employment. That is, as part

    of your work here, you need to travel overseas. You are employed outside Singapore on behalf of Government of Singapore.

    You need to declare the qualified taxable overseas income under employment income andother income (whichever applicable) in your tax form.

    Tax treatment of employer benefits

    All gains and profits derived by you in respect of your employment are taxable, unless theyare specificallyexempt from income tax or are covered by an existing administrative concession.The gains or profits include all benefits, whether in money or otherwise, paid or granted to youin respect of employment. Examples of taxable benefits received from your employer:

    1. Accommodation and housing allowance2. Car provided by employer3. Reimbursements of medical and dental treatments for dependants other than yourself,

    your spouse and children4. Overtime payments5. Per diem allowances (daily allowance given to employees on overseas trips, out of

    Singapore, for business purposes), provided the amount is in excess ofacceptable rates6. Fixed monthly allowance for transport or if mileage on private cars are reimbursed7. Fixed monthly meal allowance

    Note however that some of the non-cash benefits (e.g. accommodations) are taxed using specialformulas resulting into a lower taxation on these benefits-in-kind. Thus, a properly structuredcompensation package (i.e. salary plus benefits in kind) for the executives can help reduce theirindividual tax liability in Singapore. Further details on this are outside the scope of this guide.

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    Capital gains tax, inheritance tax, estate duty

    Capital gains may refer to investment income that arises in relation to real assets, suchas property, financial assets, such as shares or bonds, and intangible assets such as goodwill.Singapore does not impose any capital gains tax.

    Inheritance tax is a tax that you have to pay when you die which comes out of thefinancial estate that you leave behind. In Singapore, it is commonly referred to as Estate Duty.Estate Duty in Singapore has been abolished effective 2008.

    Personal Tax When Employed By Non-Resident Company

    This article provides clarification on a individuals tax liability in Singapore if (s)he is

    employed by a non-resident Singapore company. For general information on personal taxation,refer toSingapore personal income taxguide.

    Non-resident Singapore companies include:

    Representative Offices (ROs) that are registered with International Enterprise Singapore. Companies that are incorporated outside Singapore such as Singapore branch office

    setups

    Tax liability for employees of a non-resident Singapore

    company According to Singapore income tax law, employees will be liable to Singapore tax on all

    income earned during the employment period in Singapore, irrespective of the fact thatthe income is not paid in Singapore and that the employer is a non-resident Singaporecompany.

    Taxable income includes salary, bonus, allowances, per diem allowance, housingallowance, transport allowance, meal allowance, and other benefits-in-kind. Note thattaxable income also includes any allowances received from the local sponsoringcompany.

    The general taxation rules for non-residents and residents as outlined above will apply. Inother words,

    o The employment income of non-residents who work in Singapore for 60 days orless in a calendar year is exempt from tax.

    o The income of non-residents who work in Singapore for 61-182 days in acalendar will be taxed at 15% or at the progressive resident rates, whichever givesrise to a higher tax amount.

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    o Individuals who work in Singapore for 183 days or more in a calendar year willbe considered as tax residents and their income will be taxed at the progressiveresident rates.

    Employees who are not Singapore citizens and are employed by a non-resident employermust submit to the Inland Revenue Authority of Singapore (IRAS), a letter of guarantee

    from a local bank or an established limited company in Singapore to cover their taxliability for a given Year of Assessment (YA). In the absence of a letter of guarantee theIRAS will issue an advance assessment based on their estimate of the individuals incomefor the given tax year.

    The non-resident employer must comply with all Singapore tax clearance requirementsby submitting a duly completed tax clearance form for all non-resident employees to theIRAS, at least one month prior to the employees cessation of employment or departurefrom Singapore. Note that all non-resident employees must pay all their taxes beforleaving Singapore.

    Reducing tax liability for employees of a non-resident

    Singapore company

    Foreign employees of a non-resident Singapore company can reduce their tax liability if theyqualify for:

    The Area Representative Scheme; or Exemption under Avoidance of Double Taxation Agreement (DTAs).

    Area Representative Scheme

    The Area Representative Scheme allows time apportionment of employment income,subject to qualifying conditions, for foreign employees who travel and work in Singaporeduring the course of their employment with a non-resident Singapore company. In otherwords, only that portion of the employment income that is attributable to the number of daysspent in Singapore will be subject to Singapore tax. Note however that all benefits-in-kindprovided in Singapore are fully taxable. To qualify for this scheme the employee must satisfythe following criteria:

    The individual must be employed by a non-resident employer; The employee must be based in Singapore for geographical convenience; The employee is required to travel outside Singapore in the course of his/her duties; and The employees remuneration is paid by the foreign employer and not charged directly or

    indirectly to the accounts of any company in Singapore.

    Exemption under Avoidance of Double Taxation Agreement (DTAs)

    If the foreign employee is a resident of a country with which Singapore has a DoubleTaxation Agreement that provides for exemption from Singapore income tax in respect ofDependent Personal Services rendered in Singapore, (s)he can apply for a tax exemption. For this

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    purpose, a completed Certificate of Residence that is duly certified by the tax authority of theforeign employees home country will have to be submitted to the IRAS.

    Singapore Corporate Tax Guide

    Singapore is often cited as the leading example of countries that continues to reducecorporate income tax rates and introduce various tax incentives to attract and keep globalinvestments. Singapore has a single-tier territorial based flat-rate corporate income tax system.Effective tax rates as one of the lowest in the world and the general business friendliness ofSingapore are the two important factors contributing to the economic growth and foreigninvestment into the city-state.

    This guide provides a detailed overview of income tax rates, tax system, and taxincentives for Singapore companies. To calculate your estimated Singapore taxes and to comparehow they stack up against those in your home country, refer to ouronline tax calculator.

    Single-tier income tax system

    Since January 1, 2003, Singapore has adopted a single-tier corporate income tax system,which means there is no double-taxation for stakeholders. Tax paid by a company on itschargeable income is the final tax and all dividends paid by a company to its shareholders areexempt from further taxation.

    There is no tax on capital gains in Singapore. Examples of capitals gains include gains onsale of fixed assets, gains on foreign exchange on capital transactions, etc.

    Corporate income tax rates and general tax exemptions

    Highest Tax Rate

    Singapores headline corporate tax rate is a flat 17%. In order to make Singapore as anattractive investment destination, income tax rates in Singapore have been going downconsistently as seen below.

    1997-00 2001 2002 2003-04 2005-06 2007-09 2010-11

    26% 25.5% 24.5% 22% 20% 18% 17%

    Headline income tax rate in Singapore as in many other jurisdictions does not necessarilyprovide an accurate indication of effective corporate tax rate. The effective rate is normallylower than the headline tax rate due to applicable tax exemptions and tax incentives, depreciationrules, etc.

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    General Tax Incentives

    Listed below are general tax exemptions/incentives currently available to Singapore residentcompanies. Once these tax exemptions are applied to the taxable income, the effective incometax rate for small-to-midsize Singapore companies is reduced significantly.

    0% tax on S$100K taxable incomeThe corporate income tax rate is 0% on the first S$100,000 taxable income for each ofthe first three tax filing years for a newly incorporated company that meets the followingconditions:

    o be incorporated in Singaporeo be tax resident in Singaporeo has no more than 20 shareholders of which at least one is an individual

    shareholder holding at least 10% of shares. 8.5% tax on taxable income of upto S$300K

    All Singapore resident companies are eligible for partial tax exemption which effectively

    translates to about 8.5% tax rate on taxable income of upto S$300,000 per annum. Thetaxable income above S$300,000 will be charged at the normal headline corporate taxrate of 17%.

    Effective Corporate Tax Rate

    The above general tax incentives mean very attractive tax rates for small-to-midsizecompanies. For example, a typical Singapore resident company with S$2,000,000 annual taxableincome will be taxed as below:

    First Three Years of Income Tax Filings

    Taxable Income (S$) Tax Rate

    0100,000 0%

    100,001300,000 8.5%

    300,0012,000,000 17%

    After First Three Years of Income Tax Filings

    Taxable Income (S$) Tax Rate

    0300,000 8.5%300,0012,000,000 17%

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    One-off Corporate Income Tax (CIT) Rebate or SME Cash Grant for YA 2011

    According to the Singapore Budget 2011, every Singapore company will be eligible foreither a corporate income tax rebate or a cash grant for YA 2011, depending on whicheveramount is higher. Singapore companies can claim a one-time 20% corporate income tax rebate

    on corporate income tax payable for YA 2011, subject to a cap of S$10,000 or a one-time SMECash grant of 5% of the companys revenue for YA 2011, subject to a cap of S$5,000. However,the cash grant can be availed only if the company has made CPF contributions for at least oneemployee in 2010.

    Income tax filing due date

    Income tax filing due date for Singapore companies starting year 2009 is November 30.

    The company has to file a complete set of returns including Form C, audited/unauditedaccounts, and tax computation. The Form C is a declaration form for a company to declare its

    income whereas tax computation is a statement showing the adjustments to the net profit/loss asper the accounts of a company to arrive at the amount of income that is chargeable to tax. Formore details, seeannual filing requirements for Singapore companiesguide.

    Income tax basis period

    In Singapore, corporate income is assessed on a preceding year basis. This means that thebasis period for any Year of Assessment (YA) generally refers to the financial year ending(FYE) in the year preceding the YA. For example, in year 2008 you will be filing corporate taxreturn for your companys financial year that ended anytime between January 1, 2007 to

    December 31, 2007. Your companys accounts are prepared up to the FYE each year.

    Income tax audit exemption

    In order to ease the burden on smaller businesses, a) exempt private companies (i.e nocorporate shareholders and individual shareholders < 20) with annual revenue of less than S$5million; and b) dormant companies (i.e. no accounting transactions during the year) areexempted from auditing their accounts and can file unaudited accounts. Where the financial yearis less than 12 months, the said limit of S$5 million must be pro-rated.

    An Exempt Private Company (EPC) is defined under Section 4(1) of the Companies Act as a

    company which has no more than 20 shareholders and its shares are held by individuals only. Itsimportant to note that all companies (regardless of exempt or not) are required to submit a FormC, tax computation and the audited/unaudited accounts annually.

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    Withholding tax

    Singapore has implemented a withholding tax law (on certain types of income) to ensurethe collection of tax payable to non-residents on income generated in Singapore. The taxwithholding does not apply to Singapore resident companies or individuals. Under the law, when

    a payment of a specified nature is made to a non-resident company or individual, a percentage ofthe payment has to be withheld and paid to Income Tax Authorities. The amount withheld iscalled the withholding tax.

    For more details on withholding taxes, seeSingapore withholding taxguide.

    Industry specific and special purpose tax incentives

    In additional to the general tax exemptions/incentives listed above, there are certainindustry specific and special purpose income tax incentives and concessionary tax rates offered

    under the Singapore Income Tax Act. For overview of these additional tax incentives, refer toindustry-specific tax incentives in Singapore.

    Tax residence of company

    A company is considered as resident in Singapore if the control and management of thebusiness is exercised in Singapore. Although the term control and management is notdefined explicitly by authorities, a generally accepted consensus is that it refers to the policylevel decision making at the level of Board of Directors and not the day-to-day decision makingand operations.

    In general, a company is considered non-resident in Singapore if the directors manageand control the business and hold board meetings from outside Singapore. This is true even if,for example, the lower level operations are taking place in Singapore. A companys residencemay change from one year of assessment to the next depending on the circumstances. ASingapore branch of a foreign company is generally not treated as a Singapore tax resident sincethe control and management is vested with an overseas parent company.

    The basis of taxation for a resident company and non-resident company is generally the samewith the exception of certain benefits that are available to resident companies. These include:

    A Singapore resident company is eligible for income tax exemption scheme available fornew start-up companies.

    A Singapore resident company can enjoy income tax exemption on foreign-sourceddividends, foreign branch profits, and foreign-sourced service income under section 13(8)of the Income Tax Act.

    A Singapore resident company is entitled to benefits conferred under the Avoidance ofDouble Taxation Agreements (DTA) that Singapore has concluded with treaty countries.

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    Singapore tax treaties

    A tax treaty between two countries is generally an agreement that specifies how theincome earned will be taxed by the authorities of each country when a company is involved indoing business in both countries. The main benefit and objective of a income tax treaty is to help

    businesses avoid double taxation of their income.

    Singapore has concluded tax treaties with more 50 countries and the list continues togrow. The treaties reflect Singapores continual efforts to help businesses in relieving doubletaxation and to encourage and facilitate the trade and investment opportunities across-borders.

    Starting 2008, Singapore has gone a step further in providing unilateral tax credits toSingapore companies. According to the new policy, all Singapore companies that earned incomefrom countries that dont have double tax agreement with Singapore, will be allowed a tax crediton their foreign-sourced income from those countries.

    For more details, seeSingapore tax treaties and double tax agreementsguide.

    Net income vs taxable income

    A companys income means gains or profits from any trade or business income frominvestment such as dividends, interest and rental royalties, premiums and any other profits fromproperty other gains of an income nature.

    As per Income Tax Act of Singapore, corporate tax is imposed on the income that isA) accruing in or derived from Singapore; B) received in Singapore from outside Singapore.

    Part A is the income that has a source in Singapore. Part B is the income with a sourceoutside Singapore and received in Singapore. For Part B however, there are certain qualifiedexemptions commonly known as Exemptions On Foreign Sourced Income. For more details,seetaxation of foreign-sourced incomeguide.

    A companys net profit/loss alone does not provide an accurate picture of the taxableincome. For instance, some of the expenses incurred by your company may not be deductible fortax purposes or some of the income received may not be taxable or it may be taxed separately asa non-trade source income. For more details, seecalculating taxable income for Singaporecompanies.

    Certain company income may be exempted from tax under the provisions of theSingapore Income Tax Act. Examples include general tax exemptions available to all companies,exempt income for certain industries such as shipping income derived by a shipping company,foreign-sourced dividends, branch profits & service income received by a resident company thatsatisfies the qualifying conditions, exemptions on qualified foreign sourced income, etc.

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    Tax treatment of losses

    In general, a company can deduct losses against the income for taxation purposes inSingapore. The loss can be carried forward indefinitely (subject to certain conditions), however,it must be deducted in the first available year where there is a statutory income. The deduction of

    the loss follows the proceeding year basis. Its important to note that the losses can be utilizedonly as long as there is no substantial change in the shareholding.

    Singapore Double Tax Treaties Guide

    The development of international trade and multinational corporations has increased theissue of double taxation. As a company or individual looking beyond your own country forbusiness opportunities and investments you would naturally be concerned with the problem ofdouble taxation. Consequently you would seek to structure your operations at a minimum taxcost. This is where Singapores DTAs or tax treaties come into play.

    Tax treaties enable you to access relief from double taxation, either by way of tax credit,tax exemption or a reduced tax rate. These reduced rates and exemptions vary among countriesand specific items of income. Treaty provisions generally are reciprocal (apply to both treatycountries). If there is no treaty between your country and Singapore, you may be able to takeadvantage of unilateral tax credit. Singapore currently has more than 50 comprehensive DTAs totake advantage of and provides specific guidelines for double taxation relief on various types ofincome.

    This article focuses on Singapores double tax agreements. To get an overallunderstanding of corporate taxes in Singapore, seeSingapore corporate taxguide.

    What is Double Taxation?

    Double taxation arises when two or more countries impose taxes on the same taxpayer inrespect of the same taxable income or capital. In other words, the same income is being taxedtwicethe country of source where the income arises and the country of residence where theincome is received. To relieve taxpayers from the burden of double taxation, countries providevarious types of reliefs either under their domestic tax laws or under the tax treaties they haveentered into with other countries.

    What is a Double Tax Agreement?A Double Tax Agreement (DTA) is a bilateral agreement between two countries to avoid

    double taxation, resulting from the application of their respective domestic tax laws.

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    Benefits of Double Tax Agreements

    1. The main objective of a DTA is to provide certainty regarding when and how tax is to beimposed in the country where the income-producing activity is conducted or payment ismade. As a result is defines the jurisdictional authority on cross-border transactions.

    2. It clearly defines the taxing right of each country.3. It seeks to prevent international tax evasion by sanctioning the exchange of information

    between the tax authorities of the contracting countries.4. It allows you to claim for relief for taxes paid overseas.

    Who benefits from Double Tax Agreements?

    Only Singapore tax residents and tax residents of the treaty country can enjoy the benefitsof a DTA. If your company is resident in Singapore (i.e. the control and management of itsbusiness are exercised in Singapore) and you earn foreign income from a treaty country, you are

    entitled to claim for relief under the relevant tax treaty by submitting a Certificate of Residenceto the foreign country. This is proof of your company being a Singapore tax resident. If on theother hand, you are a tax resident of a treaty country you will have to submit to the InlandRevenue Authority of Singapore, a completed Certificate of Residence from Non-Residents(Claim for relief from Singapore Income Tax Under Avoidance of Double Taxation Agreement)that is duly certified by the tax authority of the treaty country.

    Contents of Double Tax Agreements concluded by Singapore

    Although each DTA concluded by Singapore has specific terms and may differ from onecountry to another, there are certain key general principles of a typical DTA, as outlined below:

    1. Scope of the DTA is limited to tax residents of Singapore and the treaty country. DTAsare not applicable to non-residents of either country.

    2. Taxes covered by the DTA is limited to taxes on income and excludes customs andexcise duties.

    3. Defining the concept of Permanent Establishment (PE), as a fixed place of businessthrough which the business of an enterprise is wholly or partly carried on, and normallyincludes a place of management, a branch, an office, a factory, a workshop and a place ofextraction of natural resources, etc. This definition is important as business profitsattributable to that PE is taxable in that country.

    4. Income from immovable property, such as rental income from real estate, is usuallytaxed both in the country of source (where the property is situated) and country ofresidence of the recipient. According to Singapore DTAs, the country of residence willhave to allow a credit for the tax paid in the country of source.

    5. Tax Credit. Singapore (as the Country of Residence) will give a tax credit in respect ofthe foreign income based on the lower of Singapore tax payable or foreign tax paid. Inaddition, foreign-sourced income is also tax exempt in Singapore subject to twoconditionsthat the year the income is received in Singapore, the headline tax rate (i.e.

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    highest corporate tax rate) of the foreign jurisdiction from which the income is received isat least 15% and that the foreign income has been subjected to tax in the foreign country.

    6. Airline or shipping profits derived by an enterprise of one country from the othercountry are entitled to either full or partial exemption. Where full exemption is providedfor, this means that the air transport or shipping income will be taxed in the enterprises

    Country of Residence only.7. Dividend incomemay be taxed in the recipients country of residence and that thecountry of source (i.e. the country in which the company paying the dividend is resident)has the right to tax the dividend income. Normally the country of source would grant fullor partial tax exemption or impose a reduced dividend withholding tax rate. SinceSingapore follows a one-tier corporate system it does not levy dividends withholding tax.Whether they are taxable in the treaty country would depend on the domestic tax laws ofthat country and what the treaty specifies.

    8. Interest will be exempted or taxed at a reduced rate in the country in which the interestincome arises (source country). In the Belgian and Netherlands tax treaties, residents ofthese countries deriving interest from Singapore are taxable at the rate of 15% and 10%

    respectively. In the Japanese treaty, if the interest arises from a loan that is made to anapproved industrial undertaking, such interest is exempt from Singapore tax, otherwise atax of 15% is chargeable. The treaty with Malaysia does not provide for any reduction oftax on interest.

    9. Royalty income tax treatment varies from complete to partial exemption.10.Professional services income is normally taxed in the country of residence of the

    individual performing the services. When the individual has a fixed base in Singapore(office or clinic) his income from the professional services will be taxed in the samemanner as his business profits. Professional services cover physicians, lawyers,engineers, architects, dentists, accountants, etc. Some tax treaties (e.g. with Australia,Netherlands, Pakistan) provide tax exemption if the individual is present in Singapore fornot more than 183 days in a tax year and where the services are performed for a residentof the other contracting country.

    11.Income from employment will be taxed in Singapore if the employment is exercised inSingapore unless: a. the employee is not present in Singapore for more than 183 days in atax year b. His employer is a resident of the contracting country c. His remuneration isnot borne by a permanent establishment in Singapore of an enterprise of a contractingcountry. Singapores tax treaty with Malaysia, UK, Denmark, Norway, Federal Republicof Germany and Sweden requires an additional condition to be fulfilledthe employeesincome must be subject to tax in the other contracting country.

    12.The source of directors fees is in the country in which the company paying the fee isresident. The full domestic tax rate would apply as there is no exemption or reduced taxrate.

    13.Government paymentsAny salary, wage, pension, or similar rewards for personalservices paid by the government of a contracting country to persons performing servicesin Singapore on behalf of that government are exempt from tax in Singapore and willonly be taxed in the contracting country.

    14.Remuneration paid to visiting professors or teachers, by a contracting country, forteaching at a Singapore based educational institute is exempt from tax in Singapore.

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    15.Self-employed persons are liable to Singapore income tax on the full amount of theirincome which is earned in Singapore, net of any tax-deductible expenses which theymight have incurred in order to earn that income.

    16.The right to tax gains arising from the sale of immovable property and gains from saleof shares varies from DTAs signed with different countries.

    Methods of relieving double taxation in Singapore

    The methods of relieving double taxation are given either under a countrys domestic tax laws orunder the tax treaty. The available methods in Singapore are as follows:

    Tax Credit Relief

    A tax credit will be given for the foreign tax suffered by a tax payer against his domestictax imposed on the same income. The amount of tax credit relief is normally restricted to thelower of the paid/payable in the foreign and home country. This is known as the ordinary credit

    method vis-a-vis the full credit method, where the tax paid in the country of source is allowed asa credit in full.

    Tax credit relief is commonly referred to as Double Tax Relief in Singapore. The claimfor DTR should be made while filing annual income tax returns (Form C) and should be shownin the companys tax computation. Documentary proof (e.g. withholding tax receipts, letter fromthe foreign tax authority, or dividend vouchers) to show that the remitted income has beensubjected to tax in the treaty country is required, before DTR claims can be considered.

    Tax exemption

    Double taxation can be avoided when foreign income is exempt from domestic tax. Theexemption may be given on the entire or part of the foreign income.

    Tax exemption for foreign-sourced dividends, branch profits, and service income Sec 13(8)

    A Singapore tax resident company can enjoy tax exemption on its foreign-sourced dividends,foreign branch profits, and foreign-sourced service income that is remitted into Singapore if thefollowing conditions are met:

    The highest corporate tax rate (headline tax rate) of the foreign country from which theincome was received is at least 15% and

    The foreign income had been subjected to tax in the foreign country from which theywere received. The rate at which the foreign income was taxed can be different from theheadline tax rate.

    Furthermore, tax exemption will be granted to all foreign sourced income earned/accruedoutside Singapore on or before 21 Jan 2009 to resident non-individuals and resident partners ofpartnerships in Singapore, and received in Singapore during the period from 22 Jan 2009 to 21Jan 2010.

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    To enjoy the tax exemption on the specified foreign income, you need not submit documents(such as dividend vouchers, notices of assessment issued by the relevant foreign jurisdiction etc)with your income tax returns to substantiate that their specified foreign income qualifies for theexemption. Instead you only need to declare in the appropriate section of your income tax returnsthat your specified foreign income qualifies for the tax exemption and furnish the following

    particulars:

    1. Nature and amount of income (i.e. foreign-sourced dividend, foreign branch profits orforeign-sourced service income)

    2. Country from which the income is received3. Headline tax rate of the country from which the income is received and4. Amount of foreign tax paid/payable in the country from which the income is received.

    Tax exemptions for individuals Sec 13(7A)

    For tax resident individuals in Singapore, all foreign income received in Singapore will

    be exempt from tax if the Comptroller is satisfied that the tax exemption is beneficial to theindividuals.

    Reduced tax rate

    Under this form of relief, income is taxed at a lower rate and is applicable to thefollowing classes of income: interest, dividends, royalties and profits from international shippingand air transport.

    Relief by deduction

    In this case, domestic tax is applied on the foreign income after deducting foreign taxsuffered. Singapore does not allow a deduction of foreign income tax. However a deduction isgiven indirectly as under the remittance basis, Singapore would tax the amount of foreignincome received (i.e. net of foreign tax) in Singapore.

    Tax sparing credit

    Under a DTA, tax credit is usually available in the country of residence only if theincome has been taxed in the country of source. Tax sparing credit is a special form of creditwhereby the country of residence agrees to give a credit of the tax which would have been paidin the country of source but was not, i.e., spared, under special laws in that country to promote

    economic development.

    The tax sparing credit provision is usually found in DTAs between a developing countrywhich offers tax incentives to attract foreign investment and a developed country which is capitalexporting. The credit is given by the capital-exporting country under its laws to promoteinvestments

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    Tax relief example under different methods

    Unilateral tax credit

    If you are a Singapore resident receiving the following foreign income from countries whichSingapore has yet to conclude an Avoidance of Double Taxation Agreement (DTA), you cannow get a unilateral tax credit for the foreign taxes paid on such income under Section 50A ofthe Singapore Income Tax Act.

    1. Income derived from any professional, consultancy and other services rendered in anyterritory outside Singapore.

    2. Dividends or3. Profits derived by an overseas branch of a Singapore resident company.

    Unilateral tax credit under Sec 50A would also apply to foreign sourced royalty from non-treatycountries, provided the royalty is not

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    1. borne directly or indirectly by a person resident in Singapore or a permanentestablishment in Singapore or

    2. deductible against any Singapore sourced income