Singapore Corporate Tax Overview
Singapore Corporate Tax Overview
Singapore is a rapidly growing hub for business in Asia. Due to the fact that Singapore possess an elaborate legislation which it possible for intellectual property to be protected while at the same time assisting transactions of the business, a lot of foreign individuals preferred Singapore over other countries. Also, Singapore's location which is at the heart of growing Asia also gives a competitive advantage. Therefore, aside from being able to uphold the prestigious name and trust of the jurisdiction, businesses set up in Singapore will receive innumerable benefits from the partnership they attain from other tiger economies. Furthermore, because of the policy of Singapore on corporate tax it made the location even more ideal for incorporating a company through the enforcement of reasonable and favorable tax rates. For all these reasons Singapore has taken the forefront over the past decade as a globally recognized business nation. By taking a look at Singapore's corporate tax policy it is possible to understand one of the many factors that contribute to Singapore's popularity with entrepreneurs.
In terms of payment of tax, equal treatment for businessmen is always a priority in Singapore. This may sound unfavourable at first glance but in fact, Singapore favours its own businesses as it does offshore companies, thus the entrepreneurial culture that exists within Singapore.
In Singapore companies are taxed on all income sourced in Singapore or remitted into Singapore. This literally means that if a businessman is doing a large amount of business in other countries, heshe is not accountable to pay tax in Singapore. It is highly recommended to consult help from a professional services firm in Singapore so that complications will be avoided and Singapore law will be complied into.
The general corporate tax rates that apply in Singapore are as follows. It should be noted, however, that substantial tax benefits exist for entrepreneurs and start-ups that will be explained later in the article. Recently, there has been a reduction of corporate tax in Singapore which was 18% to 17%. The tax is charged in blocks relative to the amount of income gained. A mere 4.5% tax rate is charged on the first S$10,000 of income. The succeeding income of S$290,000 of profits is taxed at 8.5% and after that, the rest of the income will be at 17% tax rate. Say for instance, a small company whose income is S$8,000 in 2010 will be taxed for only S$360. On the other hand, a medium sized company whose income is S$250,000 in 2010 will only be taxed for an amount of S$20,850 for an effective rate of 8.34%. Meanwhile, a bigger company whose earning an amount of S$1million in 2010 will only be taxed a total of S$144,100, an effective rate of 14.41%.
Singapore never fails to gain respect from their investors especially from the newly incorporated companies. In order to assist in setting up a business from scratch, tax exemptions for newly constructed companies are given in Singapore. Newly incorporated companies face costs, including the simple costs of registration, to the costs of hiring and building a company, and the costs of gaining a presence in the market. Unlike some other countries, Singapore has provided sufficient resources for newly incorporated business
In Singapore, a newly incorporated Singapore company, or foreign company incorporated in Singapore, is exempt from taxation on the first S$100,000 of annual profits for the first three years of business. This benefit is only given to some companies that are tax residents in Singapore, have 20 shareholders or less and with at least 10% of it's shareholders are individuals. For companies that do not comply with this criteria, although full tax exemption is not available for the first S$100,000 of profits, partial exemption still applies. Companies with a total annual income of S$200,000 are given the partial tax exemption scheme if they weren't able to comply withe full tax exemption scheme. Partial tax exemption involves a 50% tax exemption on a maximum of S$300,000 of profits - S$200,000 for those that benefit from full exemption as well. The above is applicable to those with a tax of 8.5% is given to companies with first S$300,000 of income which is considered to be a very low rate for an OECD member country.
Tax policy in Singapore is very effective causing no complications with the local residents and to the businesses registered. Singapore is a great example of a country with low tax rate policy yet a high quality of living. Tax benefits is always a factor considered by businessmen in putting up a business in Singapore. With this, Singapore is always one of the business capital in Asia.
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