Setting up a Business in Singapore

Corporate Income Tax

Singapore 's tax structure favours enterprise and business, with one of the lowest corporate tax rates in the world. The aim is to attract foreign investment, encourage entrepreneurship and business development. A host of tax schemes and incentives are in place to help companies grow their businesses.

A quick look at the key tax elements

Corporate Tax

	Key features
	Corporate Income Tax	20%
	Capital gains tax	None
	Withholding tax(refer to 2)
	- Dividends	None (refer to 3)
	- Interest	15%
	- Royalties	10%
	- Branch Remittance Tax	None
	Net operating losses(years)
	- Carry forward	Unlimited
	- Carry back	companies can carry back losses of up to $100000 from one year back(with effect from year of assessment 2006)

1. The tax rate of 20% is with effect from the year of assessment 2005. It applies to both Singapore-incorporated subsidiaries as well as branches of foreign companies. It applies equally to resident and non-resident companies.
2. Withholding taxes at the corporate income tax rate also apply to certain other payments to non-residents, such as technical assistance fees and management fees.
3. A one-tier corporate taxation system took effect on 1 Jan, 2003. It replaced the imputation system of taxing dividends, where taxes paid by a company can be imputed or passed on to shareholders.

Personal or Individual Income Tax

The personal income tax rates in Singapore are among the lowest in the world. The amount of tax payable dependson tax resident or non-resident status and income earned. Singapore taxes on a territorial basis of taxation. Only income derived in Singapore, or income derived overseas but received in Singapore are subject to tax. However, foreign income received in Singapore by non residents is not subject to tax.

A tax resident:

• All income earned in Singapore and any overseas income that is brought into Singapore will be taxed.
• After deducting personal relief, income will be taxed at graduated rates from 0% to 22%.
• Types of relief entitled to, subject to conditions, include support of dependants, course fees paid for attending academic and professional courses, and premiums paid on life insurance policies.

A non-resident will be exempted from paying income tax if the employment period is 60 days or less in a calendar year However, this rule does not apply if to a director, public entertainer or exercising a profession in Singapore. Tax rate for employment income for non-resident individuals is 15% or resident rates, whichever gives rise to higher tax.

Tax Bands (Rates)

Tax Rates for Resident Individuals

• For Year of Assessment 2006

			Chargeble Income($)			Rate(%)		Gross Tax Payable($)
	On the first On the next		20 000 10 000			0 3.75		0.00 375.00
	On the first On the next		30 000 10 000			5.75		375.00 575.00
	On the first On the next		40 000 40 000			8.75		950.000 3500.00
	On the first On the next		80 000 80 000			14.5		4450.00 11600.00
	On the first On the next		160 000 160 000			18		16050.00 28800.00
	On the first Above		320 000 320 000			21		44850.00

• Tax Rate For Non-Resident Individuals Receiving Director's Fees, Consultation Fees And All Other Income

	Year of Assessment		Tax Rate
	1997 – 2000		26%
	2001		25.5%
	2002		24.5%
	2003		22%
	2004		22%
	With Effect from 2005		20%

The various other taxes imposed in Singapore are:

Property Tax
Property tax is imposed on owners of properties based on the expected rental values of the properties.

Estate Duty
Estate duty is levied on the value of a deceased's net assets in excess of a threshold amount.

Motor Vehicle Taxes
These are taxes, other than import duties, that are imposed on motor vehicles. These taxes are imposed to curb car ownership and road congestion.

Customs & Excise Duties
Singapore is a free port and has relatively few excise and import duties. Excise duties are imposed principally on tobacco, petroleum products and liquors. Also, very few products are subjected to import duties. The duties are mainly on motor vehicles, tobacco, liquor and petroleum products.

Betting Taxes
These are duties on private lottery, betting & sweepstake.

Stamp Duties
This is imposed on commercial and legal documents relating to stock & shares and immovable property.

Others
The two main taxes are the foreign worker levy and the airport passenger service charge. The foreign worker levy is imposed to regulate the employment of foreign workers in Singapore.