Singapore's tax system and types of taxes
Singapore is internationally recognized for its efficient and competitive tax system that allows companies and entrepreneurs to enjoy low tax rates and avail numerous types of tax relief. This article offers a general overview of Singapore’s tax policies and covers the following topics:
The Inland Revenue Authority of Singapore (IRAS) is the government body that levies and collects taxes as well as enforces tax regulation in Singapore.The aim of IRAS is to create a reasonable and simplified tax system that limits the burden of regulations and fosters economic growth. In addition, IRAS represents Singapore in international tax treaty negotiations and aids the Ministry of Finance in drafting tax legislation.
Singapore companies and individuals are required to file and pay taxes to IRAS. When necessary, IRAS will apply penalties and fines for late or unpaid taxes.
Tax System – Key Facts
Territorial tax system: Singapore implements a territorial tax system that levies taxes primarily on income generated from activities in Singapore and only on very limited types of income generated from activities outside of Singapore.
Low tax rates: Singapore levies taxes on corporate profits at a flat rate of 17% and on a progressive rate for individual income ranging from 0% to 22%. Furthermore, companies and individuals can reduce their total income taxes by taking advantage of Singapore’s copious tax incentives and deductions.
No taxes on dividends, capital gains, or inheritance: Singapore’s single-tier tax system does not levy taxes on dividends. In addition, Singapore does not tax capital gains or inheritance.
Types of Taxes
The following list provides the most common types of taxes companies and individuals pay in Singapore.
Corporate income tax: Singapore company profits are charged a flat tax rate of 17%. However, with tax incentives and grants, many Singapore companies pay far less than the headline tax rate. For more information, refer to our corporate tax guide.
Individual income tax: Singapore levies taxes on individual income at a progressive rate ranging from 0% to 22%. Singapore does not tax income earned from employment outside of Singapore. Furthermore, qualifying foreign-sourced income does not need to be declared. For more details, refer to our personal tax guide.
Goods and Services tax:The Singapore government levies a 7% goods and services tax on general consumption and imported goods.
Withholding tax: In order to collect taxes on income earned by non-residents, Singapore levies withholding tax. Payments made to non-residents of Singapore such as interest payments, rent payments, royalties, and business management fees are all subject to withholding tax. Furthermore, non-resident employees and professionals are required to pay withholding tax. Withholding tax rates vary based on who receives the payment and the services rendered.
Customs and Excise Duty: Singapore is essentially a duty-free port. Singapore does not tax exports and import duty is levied only on petroleum products, tobacco products, motor vehicles, and liquor.
Property tax: Real estate owners in Singapore are required to pay annual property taxes. Singapore levies property taxes on a progressive scale based on the annual value (AV) of the property. AV is determined by estimating the gross income of the property if it were rented. Overall, Singapore property tax rates are considered very low especially for owner-occupied property.
Stamp Duty: Stamp duty refers to the tax paid on the transfer of real estate property and company shares.
How Tax System Benefits Businesses
Companies can quickly set up in Singapore and begin to take advantage of low corporate tax rates including tax schemes that help lower taxes for new businesses and startups. Furthermore, Singapore’s corporate tax structure rewards enterprising companies through tax incentives and grants.
With a single-tier tax system, Singapore only taxes company profits, but does not tax dividends issued to shareholders. Similarly, Singapore does not tax capital gains and most types of foreign-sourced income. For example, if you launch your startup and sell it for $100 million, you will pay ZERO taxes on your sale of shares in Singapore.
The extensive network of Avoidance of Double Taxation Agreements (DTAs) and Unilateral Tax Credits allow Singapore companies to limit or eliminate taxes on foreign-sourced income.
How Tax System Benefits Individuals
Singapore continues to attract top talent from around the world by offering low personal tax rates. Individuals can also greatly reduce their effective tax rate by taking advantage of the generous deductions offered by the Singapore government.
In general, individual income derived from a source outside of Singapore is not taxable. This includes income that has been received in a Singapore bank account. Furthermore, individuals do not have to pay taxes on dividends, capital gains or inheritance.
Lastly, non-resident individuals working in Singapore can seek tax relief through Singapore’s network of DTAs.
Current Tax Rates
Corporate tax rate
The current corporate tax rates in Singapore are as follows:
|Type of corporate tax||Tax rate (%)|
|Tax on corporate profits||17% (headline rate; various tax exemptions and incentives reduce the effective tax rate)|
|Tax rate on capital gains by the company||0%|
|Tax rate on dividends distributed to shareholders||0%|
|Tax rate on qualified foreign-sourced income||0%|
Individual tax rate
The current individual tax rates in Singapore are as follows:
|Taxable income||Income tax rate|
|Next S$10,000 (up to S$30,000)||2%|
|Next $S10,000 (up to S$40,000)||3.5%|
|Next S$40,000 (up to S$80,000)||7%|
|Next $S40,000 (up to S$120,000)||11.5%|
|Next S$40,000 (up to S$160,000)||15%|
|Next S$40,000 (up to S$200,000)||18%|
|Next S$40,000 (up to S$240,000)||19%|
|Next S$40,000 (up to S$280,000)||19.5%|
|Next S$40,000 (up to S$320,000)||20%|
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