Income Taxes In Singapore
Singapore is one of the centers of attraction for world financial resources and investments. The country’s popularity for individuals and businesses is not least due to the loyalty of the fiscal system and foreign tax rates on dividends. Even though Singapore is not offshore, here, you can get significant tax benefits, avoid double taxation, and pay contributions to the budget from capital gains. The system of the country is one-level.
Residents and non-residents
The division by residence in the country is due to the territorial location of the company’s control and management apparatus. If key decisions regarding the organization’s activities are made in Singapore, the legal entity is recognized as a tax resident; if outside of it, by a foreign structure. Fiscal requirements for residents and non-residents are generally the same, although preferences and foreign tax rates on dividends apply to the former:
- use of agreements to avoid double taxation of the same sources of funds
- no need to pay income tax in Singapore attracted from foreign sources
- benefits for new companies as support in the first three years of activity
For newly created companies, there is a tax exemption for the first S $ 100,000. The next 200 thousand are reduced by a tax amount of 8.5%, provided that the organization is a resident of the country, contains a staff of 20 employees or less, but 10% of them are individuals. If these conditions are not met, payments are distributed as follows:
- the first 10,000 of income are taxed at a rate of 4.5%
- the next 290,000 – 8.5%
- receipts over 300,000 – 17%.
Foreign worker income tax
Taxes in Singapore are levied on a territorial basis. For corporate fiscal payment, the standard rate is 17%. The basis for the calculation is income received from domestic sources or transferred to the country from abroad. According to Singapore law, funds received in the country include:
- amounts physically moved into the country, transferred to local bank accounts
- funds raised from debt held in Singapore
- all income from employment, if carried out in the country, regardless of where the employer/company is, in favor of which the task was carried out.
The amount for taxation includes:
- trade income
- income from entrepreneurial activity, private practice
- dividends / interest
Funds that come from capital gains are tax-deductible. At the same time, one should not neglect the favor of the state and repeatedly carry out transactions with securities. In this case, the authorized service may recognize the activity as entrepreneurial and impose mandatory payments to the budget.
The standard procedure for foreign worker income tax is paid on income earned in a fiscal year. If a tax resident received part of the funds in another state, you could use the following to return the funds:
- the tax credit provided for by the terms of an agreement on the elimination of penalties twice from the same income, for countries with which there are such agreements;
- relief on taxes on income received in British Commonwealth countries.
Foreign worker income tax can be reduced for residents by the number of income payments if:
- in the country from which the funds were raised, there is a rate of 15% or more
- from income payment was levied in a foreign jurisdiction applies to dividends received from non-resident companies, fees for services rendered to external partners, the income of foreign branches of a company.
Consumption taxation, payments at source
Goods and services are taxed at 7%. The exception is products:
- sold outside the country
- bought/sold in warehouses located in bonded zones
Rental and some types of financial services are exempt. If the company works only with such goods/services, there is no need to register as a taxpayer and pay foreign worker income tax.
When working with non-residents, agents withhold payments at the source at differentiated rates:
- royalties, copyright payments, lump-sum payments 10%
- loan payments, commission fees, annuity 15%
- remuneration to the directors’ staff of non-residents, payments to foreign individuals, stalemate for technical assistance 20%.
Working with foreign personnel
The tax for the use of the labor of foreigners and foreign worker income tax is established in the country to regulate the labor market. Suppose a resident employer opens vacancies for citizens of other countries. In that case, they do not pay social insurance contributions but instead, they pay a monthly fee for employees with work permits using the Singapore income tax calculator for foreigners. The amount of deductions depends on quotas for a specific type of activity and staff qualifications. You can use the Singapore income tax calculator for foreigners to calculate the tax amount.
Collecting stamp duty
Income tax is not the only one payable in real estate transactions. The conclusion of contracts with legal force (fixing the terms of purchase and sale, rental housing, mortgage) is accompanied by the payment of stamp duty. Its payment precedes the signing of the papers. In some cases, the terms can be extended:
- up to 14 days from the date of the conclusion of the contract on the territory of the country
- up to 30 days after the day of signing the agreement outside the country.
The amount of the fee varies depending on the type of transaction and is calculated in monetary terms:
- 1-3 SGD for gift / transfer transactions for every S $ 100,000 property value
- SGD 1-4 for every 250 currency units of annual rental payments over the S $ 1,000 exempt minimum
- 4 SGD for every 1,000 SGD in the collateral value of the property
- SGD 0.20 for every S $ 100 share price under a transfer agreement or market valuation (whichever is higher).
Foreign tax credit IRAS
Subject to the Tax Interpretations (IRAS) section under clause 10 (25) (a), any amount of any income not derived from Singapore but credited is derived from Singapore. This rule applies to money, foreign tax rates on dividends, or any other form of monetary payment received by a bank into the account of a Singapore-registered company from a foreign source. These can be cash, checks, and other physical payments physically brought into Singapore and received by a company. The money that the company receives must be the result of the company’s business activities, such as sales, service fees, consultations, and so on. Any legal activity that makes a profit for the company.
Payment of debts
Subject to the Singapore Tax Interpretations (IRAS) section under clause 10 (25) (b), any amount of income generated outside of that is earmarked to pay off debts in Singapore arising from a trade or business shall be deemed to have been received in Singapore.
If your Singapore company owes money in Singapore to a supplier, bank, or legal action, and you use the funds earned abroad to cover some or all of this debt.
This money may be in the foreign bank account of your Singapore company for a long time. Still, if you use this money to pay debts in Singapore or foreign tax credit IRAS, this money is considered income received in Singapore. The key point is that debts in Singapore are paid within Singapore, and the money needs to be entered somehow.
Goods and movable property
According to the foreign tax credit section of the IRAS, under clause 10 (25) (c), any amount of non-Singapore income spent on purchasing movable property shipped to Singapore and used in Singapore is deemed to have been received in Singapore. Movable property is any property that can be moved instead of real estate, landholdings, and other types of real estate.
For an individual, movable property is personal property. For a company, movable property can be goods, raw materials, equipment, and other movable property directly related to your Singapore company’s business. If you use your funds of foreign origin or foreign tax rates on dividends stored abroad to buy equipment overseas and then transport that equipment to Singapore, then the money for these purchases is considered received in Singapore.
If you want to know how much foreign tax credit IRAS can charge tax for goods imported to Singapore if they have dropped in price. The tax office immediately explains that taxation will be based on how much was originally paid for real estate and not the value of the goods at the current date.