Tax Planning in Singapore – Offshore Financial Center – Company Taxation

 

Being based in Singapore means that it is a jurisdiction that we believe in and actively promote.  When talking to international entrepreneurs considering their options for structuring their businesses, Singapore always comes up.

I also write about it frequently - https://htj.tax/?s=singapore

Today I thought I would go into it more deeply.

Singapore generally imposes tax on income sourced in Singapore as well as foreign-sourced income remitted into, or deemed to be remitted into, Singapore under the Income Tax Act, Chapter 134 of Singapore (ITA).

The Singapore tax regime affords flexibility to corporations to carry out tax planning depending on their commercial objectives, as opposed to adopting an overly prescriptive and onerous approach.

Income tax in Singapore is generally administered by the Inland Revenue Authority of Singapore (IRAS).

A business in Singapore can be structured in various forms, including the following commonly used vehicles:

  • a company;
  • a partnership;
  • a limited partnership (LP); and
  • a limited liability partnership (LLP).

In determining which vehicle would be most appropriate for the specific business activities to be carried out in Singapore, one would have to consider various factors, including ring-fencing of liability, scope of business activities intended to be carried out in Singapore and ability of the vehicle to hold property in its own name.

A company has a separate legal personality from its members. Accordingly, a company is subject to tax on chargeable income under the ITA. The prevailing tax rate for income received by companies, both resident and non-resident, is 17 per cent.

A company may be eligible for the start-up exemption scheme (the SUTE scheme) or the partial tax exemption scheme (the PTE scheme). Under the SUTE scheme, with effect from the year of assessment (YA) 2020, qualifying companies will be eligible for tax exemption on 75 per cent of the first S$100,000 of chargeable income, and exemption of 50 per cent on the next S$100,000 of chargeable income. The SUTE scheme is available to all new companies for the first three YAs, except companies whose principal activity is investment holding and companies that undertake property development for sale, investment or for both investment and sale. Under the SUTE scheme, the new company must be incorporated in Singapore and tax-resident in Singapore for the particular YA. In addition, the total share capital of the new company must be beneficially held directly by 20 or fewer shareholders throughout the basis period for the relevant YA, with all shareholders being individuals or at least one shareholder being an individual holding 10 per cent or more of the issued ordinary shares in the company.

Under the PTE scheme, from YA 2020 onwards, tax exemption will be granted on 75 per cent of the first S$10,000 of chargeable income and an exemption on 50 per cent of the next S$190,000 of chargeable income.

Under both schemes, the remaining chargeable income (after the tax exemption) will be taxed at the applicable corporate tax rate.

Unlike a company, a partnership does not have a separate legal personality from its partners. A partnership is regarded as a tax-transparent entity and the partners are then taxed on their share of income in the partnership due to them for a basis period, at their applicable income tax rates. If a partner is a company, the partner will be charged tax on its share of the income from the partnership at the prevailing corporate tax rate. As mentioned above, the tax rates for companies (whether tax-resident in Singapore or not) is 17 per cent. Singapore tax-resident individuals are taxed at a progressive rate currently ranging between zero and 22 per cent, depending on the amount of income received. Non-resident individuals, subject to certain exceptions, are subject to income tax on income accrued in or derived from Singapore at the rate of 22 per cent.

While an LLP is regarded as having a separate legal personality under Section 4 of the Limited Liability Partnership Act, Chapter 163A of Singapore, it is treated as a partnership for the purpose of income tax. Accordingly, the partners are taxed on their respective share of the income received from the LLP and the LLP itself is not subject to tax. In addition, the total amount of a partner's share of capital allowances and trade losses arising from the LLP, which are set off against income from sources other than the LLP cannot generally exceed such partner's contributed capital in the LLP (the Deduction Restriction).

An LP is accorded similar tax treatment as a LLP in that each partner is taxed on its share of income from the LP at the applicable tax rates as the LP is also regarded as a tax-transparent vehicle. A limited partner in an LP, like a partner in an LLP, is generally also subject to the Deduction Restriction. An LP is usually used for the purpose of establishing private funds, given that the features of such partnership (such as subscriptions and redemptions) are more aligned with the commercial objectives of private funds.

The variable capital company (VCC) is a new corporate structure introduced in 2018 to further develop Singapore as a hub for fund management and domiciliation, by providing greater operational flexibility and allowing consolidation of fund management activities. A VCC may be structured on a stand-alone basis or as an umbrella VCC with sub-funds.

In the Budget Statement for the Financial Year 2018 (Budget 2018) delivered on 19 February 2018, the Minister for Finance, Mr Heng Swee Kiat (the Minister), announced that a VCC will be treated as a legal person and should be able to claim benefits under the various double tax treaties Singapore has entered into. The various tax exemptions for fund management in Singapore would also be extended to VCCs.

Singapore does not tax capital gains but taxes gains of an income or trading nature (i.e., revenue gains). We will elaborate on the distinction between capital and revenue gains later.

As mentioned above, Singapore does not tax foreign-sourced income, unless such income is received (or deemed to be received in Singapore). Under the ITA, the following are deemed as income received in Singapore from outside Singapore:

  • any amount from any income derived from outside Singapore that is remitted to, transmitted to or brought into Singapore;
  • any amount from any income derived from outside Singapore that is applied in or towards satisfaction of any debt incurred in respect of a trade or business carried on in Singapore; and
  • any amount from any income derived from outside Singapore that is applied to purchase any movable property then brought into Singapore.

However, foreign-sourced income in the form of dividends, branch profits and service income received or deemed to be received in Singapore by a Singapore-resident company would be exempt from tax if:

  • such income is subject to tax of a similar character to income tax under the law of the territory from which it is received; and
  • at the time such income is received in Singapore, the highest rate of tax of a similar character to income tax levied under the law of the territory from which income is received on any gains or profits from any trade or business carried on by any company in that territory at that time is not less than 15 per cent.

In the case of dividends paid by a company resident in a territory from which the dividends are received, the 'subject to tax' condition in point (a) above is considered met where tax is paid in that territory by such company in respect of its income out of which such dividends are paid (i.e., underlying tax) or tax is paid on such dividends in that territory from which such dividends are received (including withholding tax).

In addition, as a concession, the subject to tax condition would be considered met for specified foreign income that is exempt from tax in the foreign jurisdiction from which the specified foreign income is received if the exemption is resulting from a tax incentive granted by the foreign jurisdiction for carrying out substantive business activities in that jurisdiction. Generally, substantive business activities refer to business activities that are carried out through staff with certain expertise and actual expenditure is incurred to carry out the activities.

With respect to the condition in point (b) above that the headline tax rate of the relevant foreign tax jurisdiction is at least 15 per cent, the IRAS has announced that where: 

(1) the specified foreign income received in Singapore is chargeable to tax under a special tax legislation of that foreign tax jurisdiction instead of its main tax legislation; 

(2) the special tax legislation imposes tax at a rate lower than the highest tax rate applicable to other companies in that foreign tax jurisdiction under its main tax legislation; and 

(3) the application of the lower rate of tax under the special tax legislation is not a tax incentive for carrying out substantive activities in that foreign tax jurisdiction; the headline tax rate for the purposes of the condition in point (b) shall be the highest tax rate stipulated in the special tax legislation, instead of the highest tax rate stipulated in the main tax legislation.

The IRAS has also announced that if the conditions for exemption of specified foreign income described above are not met, the IRAS may nevertheless consider granting an exemption on such income received by resident taxpayers on a case-by-case basis under certain specified scenarios and subject to certain conditions being met.

Singapore has also implemented various tax incentives (such as tax exemption of international shipping profits, a concessionary tax rate for finance and treasury centres, a concessionary tax rate for global trading companies and a concessionary tax rate for financial sector incentive companies), to attract foreign investment and promote certain sectors. To qualify for such incentives, substantive economic activities must generally be carried out in Singapore, including meeting certain targets and thresholds for minimum business spending requirements and minimum number of employees to be employed in Singapore.

 

 

 

Domestic income tax

Singapore does not tax capital gains but taxes gains of an income or trading nature (i.e., revenue gains). We will elaborate on the distinction between capital and revenue gains later.

 

 

International tax

As mentioned above, Singapore does not tax foreign-sourced income, unless such income is received (or deemed to be received in Singapore). Under the ITA, the following are deemed as income received in Singapore from outside Singapore:

  1. any amount from any income derived from outside Singapore that is remitted to, transmitted to or brought into Singapore;
  2. any amount from any income derived from outside Singapore that is applied in or towards satisfaction of any debt incurred in respect of a trade or business carried on in Singapore; and
  3. any amount from any income derived from outside Singapore that is applied to purchase any movable property then brought into Singapore.

However, foreign-sourced income in the form of dividends, branch profits and service income received or deemed to be received in Singapore by a Singapore-resident company would be exempt from tax if:

  1. such income is subject to tax of a similar character to income tax under the law of the territory from which it is received; and
  2. at the time such income is received in Singapore, the highest rate of tax of a similar character to income tax levied under the law of the territory from which income is received on any gains or profits from any trade or business carried on by any company in that territory at that time is not less than 15 per cent.

In the case of dividends paid by a company resident in a territory from which the dividends are received, the ‘subject to tax’ condition in point (a) above is considered met where tax is paid in that territory by such company in respect of its income out of which such dividends are paid (i.e., underlying tax) or tax is paid on such dividends in that territory from which such dividends are received (including withholding tax).

In addition, as a concession, the subject to tax condition would be considered met for specified foreign income that is exempt from tax in the foreign jurisdiction from which the specified foreign income is received if the exemption is resulting from a tax incentive granted by the foreign jurisdiction for carrying out substantive business activities in that jurisdiction. Generally, substantive business activities refer to business activities that are carried out through staff with certain expertise and actual expenditure is incurred to carry out the activities.

With respect to the condition in point (b) above that the headline tax rate of the relevant foreign tax jurisdiction is at least 15 per cent, the IRAS has announced that where:

(1) the specified foreign income received in Singapore is chargeable to tax under a special tax legislation of that foreign tax jurisdiction instead of its main tax legislation;

(2) the special tax legislation imposes tax at a rate lower than the highest tax rate applicable to other companies in that foreign tax jurisdiction under its main tax legislation; and

(3) the application of the lower rate of tax under the special tax legislation is not a tax incentive for carrying out substantive activities in that foreign tax jurisdiction; the headline tax rate for the purposes of the condition in point (b) shall be the highest tax rate stipulated in the special tax legislation, instead of the highest tax rate stipulated in the main tax legislation.

The IRAS has also announced that if the conditions for exemption of specified foreign income described above are not met, the IRAS may nevertheless consider granting an exemption on such income received by resident taxpayers on a case-by-case basis under certain specified scenarios and subject to certain conditions being met.

Singapore has also implemented various tax incentives (such as tax exemption of international shipping profits, a concessionary tax rate for finance and treasury centres, a concessionary tax rate for global trading companies and a concessionary tax rate for financial sector incentive companies), to attract foreign investment and promote certain sectors. To qualify for such incentives, substantive economic activities must generally be carried out in Singapore, including meeting certain targets and thresholds for minimum business spending requirements and minimum number of employees to be employed in Singapore.

 

 

 

Capitalisation requirements

Singapore does not have any thin capitalisation rules in place under the ITA. However, in order for interest and certain other borrowing costs to be tax-deductible, such expenditure should be incurred for the production of taxable income, and the relevant financing documents should also clearly state the purpose of such financing.

Ultimately, the appropriate group structure depends on the commercial objective of the group as well as the nature of business activities undertaken by the group. Common transaction structures encountered in practice include locating a holding company in Singapore to hold and provide services to various subsidiaries in the Asia-Pacific region.

Group relief is generally available under the ITA, such that unabsorbed capital allowances, trade losses and donations for the current year may be transferred by a Singapore-incorporated company to another Singapore-incorporated company within the same group, provided certain conditions are met, including that 75 per cent or more of the total number of issued ordinary shares in one company are beneficially held by the other company through Singapore-incorporated companies.

Under the ITA, there is no concept of controlled foreign corporations.

 

 

 

 

Domestic intercompany transactions

 

Intercompany transactions, whether domestic or cross-border, must adhere to the arm's-length principle – that is, transactions between related parties must be made under comparable conditions and circumstances as a transaction with an independent party would have been (the Transfer Pricing Requirement).

Under the ITA, the Comptroller of Income Tax (the Comptroller) has wide powers to adjust for tax purposes actual payments and receipts made under non-arm's length circumstances between related parties under various circumstances.

In addition, with effect from YA 2018, taxpayers are required to report certain details of related-party transactions, where the value of such transactions in the audited accounts for the financial year exceeds S$15 million in the Form for Reporting Related Party Transactions, to be submitted with the tax return to the IRAS.

With effect from YA 2019, taxpayers must prepare and maintain transfer pricing documentation for their related-party transactions undertaken in a basis period where gross revenue derived from their trade or business is more than S$10 million for that basis period. However, there are certain exceptions to such requirement, including where the loans owed to all related parties are less than S$15 million per financial year.

 

 

 

International intercompany transactions

The same considerations for domestic related-party transactions in relation to the Transfer Pricing Requirement generally apply to cross-border related-party transactions as well. However, the IRAS is more likely to scrutinise and raise queries for cross-border related-party transactions, whereby one party is located in an offshore jurisdiction or has limited economic activities. In this regard, it would be even more critical to prepare and maintain transfer pricing documentation to substantiate that the Transfer Pricing Requirement is satisfied in such circumstances.

 

 

Third-party transactions

There are opportunities for tax planning in third-party transactions, depending on the commercial objectives of the relevant parties.

 

 

 

Sales of shares or assets for cash

Singapore does not impose tax on capital gains, but imposes tax on income. There are no specific laws or regulations that deal with the characterisation of whether a gain is income or capital in nature. Gains arising from the disposal of shares for cash may be construed to be of an income nature and, accordingly, subject to Singapore income tax, especially if they arise from activities that the IRAS regards as the carrying on of a trade or business in Singapore. Case law has generally held that the most significant factor is the taxpayer's intention upon acquisition of the asset (i.e., whether the asset was acquired for investment or trading purposes (and assuming there is no subsequent change of intention)). The test to determine if gains derived on the disposal of assets are revenue or capital in nature is also an objective one, as opposed to the stated intention of the taxpayer and is arrived at after having considered the activities of the taxpayer and all the circumstances relating to the purchase and sale of the securities in question. The local courts have also endorsed the six badges of trade (as evolved from the United Kingdom) as relevant in determining whether a transaction of purchase and sale is, or is not, to be regarded as a trading transaction. Such badges of trade include the length of period of ownership, frequency of similar transactions, circumstances responsible for the disposal and the motive for acquisition.

However, the ITA provides for a safe harbour provision under Section 13Z. Gains derived by a divesting company from its disposal of ordinary shares in a target entity from 1 June 2012 to 31 May 2022 are not taxable if, immediately prior to the date of disposal, the divesting company has held at least 20 per cent of the ordinary shares in the target for a continuous period of at least 24 months. The above rule applies irrespective of whether the investee company is incorporated in Singapore or elsewhere, but does not apply to a divesting company whose gains or profits from the disposal of shares are included as part of its income as an insurer; or an unlisted investee company that is in the business of trading or holding Singapore immovable properties (other than the business of property development).

In addition, stamp duty relief may be available for the transfer of shares between associated permitted entities and for reconstruction or amalgamation of companies. Stamp duty is chargeable on instruments effecting a transfer of shares of a Singapore-incorporated company (or a foreign company maintaining a share register in Singapore) at 0.2 per cent of the higher of consideration or the net asset value of such shares; and on instruments with respect to transactions relating to immovable property in Singapore (including mortgages, and leases) and in particular, the following based on the higher of the purchase price or market value of the property:

  • buyer's stamp duty (BSD): BSD is payable by the purchaser at approximately 3 per cent for non-residential properties, and approximately 3 per cent to 4 per cent for residential properties;
  • additional buyer's stamp duty (ABSD): ABSD is payable by the purchaser for residential property, at a rate depending on the profile of the purchaser and the number of residential properties in Singapore owned by the purchaser, up to 20 per cent for foreigners and 25 per cent for entities, with an additional 5 per cent for housing developers; and
  • seller's stamp duty (SSD): SSD is payable by the seller for certain disposals of residential or industrial properties within a specified holding period on a sliding scale depending on the nature of the property and when it was acquired.

Additional conveyance duties (ACD) may also be payable for the sale and acquisition of certain shares in property-holding entities (PHEs) acquired on or after 11 March 2017, if the seller or purchaser is or becomes a significant owner, after such acquisition or disposal. ACD is chargeable at 12 per cent for the disposal of shares in a PHE. For the acquisition of shares in a PHE, ACD is chargeable at, for the existing BSD 1 per cent to 4 per cent, and for ABSD at 30 per cent.

Unutilised trade losses, capital allowances and donations may be carried forward and deducted against subsequent income of a company, provided that there is no substantial change in the shareholding of the company – that is, that 50 per cent or more in shareholders and their respective shareholdings at the relevant dates have remained the same (the Substantial Shareholding Test). A sale of shares in third-party transactions may thus result in the Substantial Shareholding Test not being met. Companies may apply for a waiver of the Substantial Shareholding Test, provided that the Comptroller is satisfied that such substantial change in shareholders was not to seek any tax benefit.

For a sale of assets, a balancing charge or allowance may be applicable, if capital allowances had previously been claimed in respect of the asset, including a plant or machinery. A balancing charge is applicable where the consideration for the sale of the asset exceeds the total tax written-down value of such asset, whereas a balancing allowance may be claimed where the consideration for the sale of the asset is less than the total tax written-down value of the asset.

 

 

 

Tax-free or tax-deferred transactions

There are no tax-free or tax-deferred transactions available in Singapore.

 

 

 

 

International considerations

 

Withholding tax may be applicable on certain payments to a person not tax-resident in Singapore (other than non-resident individuals) including the following, which are deemed to be derived in Singapore:

 (1) any interest, commission, fee or any other payment in connection with any loan or indebtedness or with any arrangement, management, guarantee, or service relating to any loan or indebtedness; 

(2) any royalty or other payments in one lump sum or otherwise for the use of or the right to use any movable property; or

 (3) any payment for the use of or the right to use scientific, technical, industrial or commercial knowledge or information; where such payments are borne, directly or indirectly, by a person resident in Singapore or a permanent establishment in Singapore (except in respect of any business carried on outside Singapore through a permanent establishment outside Singapore or any immovable property situated outside Singapore), or deductible against any income accruing in or derived from Singapore.

The applicable rate of withholding tax depends on the nature of the payment and whether such income is derived through a trade or business in Singapore and the recipient is tax-resident in a country that has a tax treaty with Singapore.

 

 

 

Indirect taxes

GST regime

GST is form of value added tax charged on goods and services supplied in Singapore by GST-registered persons and on the import of goods into Singapore. The current rate of GST imposed on standard rated supplies is 7 per cent. Input GST incurred by a GST-registered person for the purpose of making GST-taxable supplies is generally recoverable from the IRAS (subject to certain exceptions) by way of a refund or credit against the output GST payable on supplies made by such GST-registered persons.

Persons in Singapore whose total value of GST-taxable supplies exceeds or is expected to exceed S$1 million over four quarters (i.e., 12 months) will have to register for GST purposes. However, entities may also register voluntarily to claim any input GST incurred on GST-taxable supplies made to such entities (which are used by such entities to make their own GST-taxable supplies).

GST on imported services

Singapore does not currently impose GST on services imported into Singapore and provided by a foreign supplier without an establishment in Singapore.

However, in the 2018 Budget, the Minister announced that GST on imported services will be introduced on or after 1 January 2020 to ensure a level playing field by according the same GST treatment to imported and local services.

For imported services provided by a business outside Singapore to a business in Singapore, GST will be charged through a reverse charge mechanism (i.e., the Singapore entity is to account to IRAS for GST chargeable on services it imports and is entitled to make input tax claims on such GST, provided the relevant input tax requirements have been complied with). In addition, for imported digital services between a business outside Singapore and a customer in Singapore, foreign businesses with a global turnover exceeding S$1 million per annum and making supplies of digital services to customers in Singapore exceeding S$100,000 per annum, including electronic marketplace operators, will be required to register for GST, and such services will be subject to tax through an overseas vendor registration mode.

Change in GST rate

The Minister announced in the 2018 Budget that the government plans to raise the GST rate to 9 per cent at some point in the period from 2021 to 2025.

 

 

Singapore Personal Income Tax Guide

 

Personal income tax in Singapore is based on a progressive structure. Find out what which income types are taxable and how the income tax applies to you as a resident vs non resident.

Personal income tax rate in Singapore is one of the lowest in the world. In order to determine the Singapore income tax liability of an individual, you need to first determine the tax residency and amount of chargeable income and then apply the progressive resident tax rate to it. Key points of Singapore income tax for individuals include:

  • Singapore follows a progressive resident tax rate starting at 0% and ending at 22% above S$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 a 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.

 

Personal Income Tax Rates

 

Individuals resident in Singapore are taxed on a progressive resident tax rate as listed below. Filing of personal tax return for tax resident is mandatory if your annual income is S$20,000 or more. Tax residents do not need to pay tax if your annual income is less than S$20,000. However, you may still need to file a tax return if you have been informed by Singapore tax authority to submit your tax return. Note that additional earned income relief is also given to further reduce the tax payable depending on age.

 

Resident Tax Rates

 

 Chargeable Income Rate (%) Gross Tax Payable ($)
On the first 20,000

On the next 10,000

0

2

0

200

On the first 30,000

On the next 10,000

-

3.50

200

350

On the first 40,000

On the next 40,000

-

7

550

2,800

On the first 80,000

On the next 40,000

-

11.5

3,350

4,600

On the first 120,000

On the next 40,000

-

15

7,950

6,000

On the first 160,000

On the next 40,000

-

18

13,950

7,200

On the first 200,000

On the next 40,000

-

19

21,150

7,600

On the first 240,000

On the next 40,000

-

19.5

28,750

7,800

On the first 280,000

On the next 40,000

-

20

36,550

8,000

On the first 320,000

In excess of 320,000

-

22

44,550

Non Resident Tax Rates

 

Type of Income Non-resident individual tax rate / withholding tax rate from YA 2017
Director's remuneration 22%
Income derived from activity as a non-resident professional (consultant, trainer, coach, etc.) 15% of gross income or 22% of net income
Income derived from activity as a non-resident professional (consultant, trainer, coach, etc.) 10% concessionary rate (No change)
Other income e.g. rental income derived from a Singapore property 22%
SRS withdrawal by a non-citizen SRS member 22%
Interest, royalty etc. Reduced final withholding tax rate (subject to conditions) as follows:
Interest: 15%
Royalty: 10%OR22% if reduced final withholding tax rate is not applicable.
Pension 22%

Source: IRAS

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

 

Personal Tax for Singapore Residents

Tax residents pay taxes on their chargeable income as per the resident tax rate table above. The chargeable income (i.e. income subject to taxation) for tax residents is determined as below:

Whereas

Total income means

  • gains or profits from carrying on any business, trade, profession or vocation either as a sole proprietor or partner in a partnership
  • gains or profits from any employment
  • dividends, interests, investment income
  • rents, royalties, premiums and other profits arising from properties
  • exclude qualified income earned overseas (more details provided later in the guide).

Expenses means

  • qualified employment related expenses
  • qualified rental related expenses

Donations means

  • donations to qualified charitable organisations

Personal Reliefs means

  • 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 in the picture above).

 

 

Personal Tax for Singapore Non-residents

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

  • Your employment income is exempted from tax if you are here on short-term employment for 60 days or less in a year. This exemption does not apply if you are a director of a company, a public entertainer or exercising a profession in Singapore. Professionals include foreign experts, foreign speakers, queen’s counsels, consultants, trainers, coaches etc.
  • If you are in Singapore for 61-182 days in a year, you will be taxed on all income earned in Singapore. You may claim expenses and donations to save tax. However, you are not eligible to claim personal reliefs. Your employment income is taxed at 15% or the progressive resident tax rate (see rate table above), whichever gives rise to a higher tax amount.
  • Director fees and remuneration, consultant fees and all other incomes are taxed at a range of 15% to 22%.

 

 

Filing Personal Income Tax Returns

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

You do not need to pay tax if your annual income (applicable for tax residents only) is less than S$22,000. However, you may 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 April (paper) or 18 April (e-filing). It is compulsory for you to file tax returns if your annual income is S$22,000 or more.

You can choose to file your returns online or by mail. IRAS will send you the appropriate paper tax form, upon request, the online form will be available from 1 March every year.

  • For tax resident individuals – Form B1
  • For self-employed – Form B
  • For non-resident individuals – Form M

You will be subject to penalties for late filing or not filing. IRAS might also take legal actions against the individual for non-filing of tax return or non-payment of the tax.

After you have filed your returns, you will receive your Notice of Assessment or tax bill in May to September. The tax bill will indicate the amount of tax you have to pay. If you disagree with your tax amount, you need to inform the Singapore tax authority within 30 days from the date of your tax bill and state your reasons for objection.

You need to pay the full amount of tax within 30 days of receiving your Notice of Assessment. This is regardless of whether you have informed tax authority about your objection. If your tax remains outstanding after 30 days, penalties 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 declare overseas income that is not taxable.

There are certain circumstances, however, in 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 of Singapore on behalf of the Singapore Government.

You need to declare the qualified taxable overseas income under ’employment income’ and ‘other 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 they are specifically exempt 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 you in respect of employment. Examples of taxable benefits received from your employer:

  • Car provided by employer
  • Reimbursements of medical and dental treatments for dependants other than yourself, your spouse and children
  • Overtime payments
  • Per diem allowances (daily allowance given to employees on overseas trips, out of Singapore, for business purposes), provided the amount is in excess of acceptable rates
  • Fixed monthly allowance for transport or if mileage on private cars are reimbursed
  • Fixed monthly meal allowance

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

 

Capital gains tax, Inheritance tax, Estate duty

Capital gains may refer to “investment income” that arises in relation to real assets, such as 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 the financial estate that you leave behind. In Singapore, it is commonly referred to as Estate Duty. Estate Duty in Singapore has been abolished with effect from 2008.

 

 

Going to or leaving Singapore

 

Local tax information for Singapore.

Local information Details
Tax authority Inland Revenue Authority of Singapore (IRAS)
Website www.iras.gov.sg This link will open in a new window
Tax year 1 January to 31 December
Tax return due date 15 April
Is joint filing possible No
Are tax return extensions possible No

Singapore income tax rates for year of assessment 2020

 

Singapore income tax rates for year of assessment 2020.

Taxable income band SG$ National income tax rates
1 to 20,000 0%
20,001 to 30,000 2%
30,001 to 40,000 3.5%
40,001 to 80,000 7%
80,001 to 120,000 11.5%
120,001 to 160,000 15%
160,001 to 200,000 18%
200,001 to 240,000 19%
240,001 to 280,000 19.5%
280,001 to 320,000 20%
320,001 + 22%

A person who is a tax resident in Singapore is taxed on assessable income, less personal deductions, at the above rates for the 2020 assessment year (income from the 2019 calendar year).

Personal deductions are granted to individuals resident in Singapore.

Additional information

 

A person is subject to tax on employment income for services performed in Singapore, regardless of whether the remuneration is paid in or outside Singapore. Resident individuals who derive income from sources outside Singapore are not subject to tax on such income. This exemption does not apply if the foreign-source income is received through a partnership in Singapore. Foreign-source dividend income, foreign branch profits and foreign-source service income received by any individual resident in Singapore through partnerships may be exempted from Singapore tax if certain prescribed conditions are met. Individuals who carry on a trade, business, profession or vocation in Singapore are taxed on their profits. Whether an individual is carrying on a trade is determined based on the circumstances of each case. Foreign-source income received in Singapore by a non-resident is specifically exempt from tax.

Individuals are resident for tax purposes if, in the year preceding the assessment year, they reside in Singapore except for such temporary absences from Singapore as may be reasonable and not inconsistent with a claim by such persons to be resident in Singapore. This also includes those who are physically present or who exercise employment other than as a director of a company in Singapore for at least 183 days during the year preceding the assessment year.

A concession is available for foreign employees whose employment period straddles two calendar years. Under this concession, which is commonly known as the “two-year administrative concession”, the individual is considered resident for both years if they stay or work in Singapore for a continuous period of at least 183 days straddling the two years, even if fewer than 183 days were spent in Singapore in each year.

Non-resident individuals employed for not more than 60 days in a calendar year in Singapore are exempt from tax on their employment income derived from Singapore. This exemption does not apply to a director of a company, a public entertainer or a professional in Singapore.

Under the Not Ordinarily Resident (NOR) scheme, a qualifying individual may enjoy tax concessions for five consecutive assessment years, including time apportionment of Singapore employment income, if certain conditions are satisfied.

Employment income - Taxable employment income includes cash remuneration, wages, salary, leave pay, directors’ fees, commissions, bonuses, gratuities, perquisites, gains received from employee share plans and allowances received as compensation for services. Benefits-in-kind derived from employment, including home-leave passage, employer-provided housing, employer-provided automobiles and children’s school fees, are also taxable. Certain types of these benefits receive special tax treatment. Effective from the 2020 assessment year, the prescribed formula to calculate the taxable car benefit in Singapore has been revised to better reflect the actual benefits enjoyed by the employees and to simplify tax compliance.

Under the Not Ordinarily Resident (NOR) scheme, a resident employee whose resident status is not accorded under the two-year or three-year administrative concessions may benefit from certain concessions for five consecutive assessment years provided certain conditions are met. Under a 2019 budget proposal, the last such NOR status will be from the 2020 assessment year to the 2024 assessment year. Individuals who have been accorded the NOR status will continue to enjoy NOR tax concessions until their NOR status expires if they continue to meet the conditions of the concessions.

Self-employment and business income - Self-employment income subject to tax is based on financial accounts prepared under generally accepted accounting principles. Adjustments are made to the profits or losses according to tax law. Business income is aggregated with other types of income to determine taxable income.

Income from a trade, business, profession or vocation paid to a non-resident is taxed at 22%.

Income from professional services paid to a non-resident is taxed at 15%. This is a final withholding tax on the gross amount, unless the non-resident professional elects to be assessed at a rate of 22% on net income.

Losses and excess capital allowances from the carrying on of a trade, business, profession or vocation may be offset against all other chargeable income of the same year. Any unused trade losses and capital allowances can be carried forward indefinitely for offset against future income from all sources, subject to certain conditions.

Relief is also available for the carry back of current year unused capital allowances and trade losses, subject to the satisfaction of certain conditions.

Investment income - Under the one-tier system, dividends paid by Singapore tax-resident companies are exempt from income tax in the hands of shareholders, regardless of whether the dividends are paid out of taxed income or tax-free gains.

Dividends, other than tax-exempt and one-tier dividends, are taxed at the applicable income tax rates.

Singapore-source investment income (that is, income that is not considered to be gains or profits from a trade, business or profession) derived directly by individuals from specified financial instruments, including standard savings, current and fixed deposits, is exempt from tax. Examples of such income include interest from debt securities, annuities and distributions from unit trusts.

Interest (excluding tax-exempt interest from approved banks, finance companies, qualifying debt securities and qualified project debt securities) paid to non-residents is taxed at 15%.

Royalties for the use of, or right to use, movable property and scientific, technical, industrial or commercial knowledge or information paid to non-residents are taxed at 10%.

Net rental income is aggregated with other types of income and taxed at the applicable rates.

Rent or other payments for the use of movable property paid to non-residents is taxable at 15%.

Taxation of employer-provided stock options and share ownership plans - Employer-provided stock options are taxed at the time of exercise, not at the time of grant. Share awards are taxable at the time of award or at the time of vesting, if a vesting period is imposed. The taxable amount is the open market value of the shares at the time of exercise, award or vesting, less the amount paid by the employee, if any.

Stock options and share awards granted during overseas employment are not subject to tax even if the gains derived are remitted into Singapore while the employee is a tax resident, because all foreign-source income received in Singapore (other than through partnerships) by resident individuals is exempt from tax. Stock options and share awards granted on or after 1 January 2003 while the employee is engaged in employment in Singapore are subject to tax, regardless of where the options are exercised or shares are vested. These options and awards are deemed exercised or vested at the time of cessation of employment (including being seconded outside Singapore for an assignment or leaving Singapore for a period more than three months) for a foreign national employee, and tax is due immediately on the deemed gains.

 

Estate duty has been eliminated from the Singapore tax regime for deaths occurring on or after 15 February 2008.

Singapore does not impose a gift tax.

The Central Provident Fund (CPF) is a statutory savings scheme to provide for employees’ old-age retirement in Singapore. Only Singapore citizens and permanent residents working in Singapore are required to contribute to the CPF. All foreigners (including Malaysians) are exempt from CPF contributions. Foreigners may not make voluntary contributions to the CPF.

Both employees and employers must contribute to the fund. For individuals up to 55 years of age, the statutory rate of the employee’s contribution is 20%, and the rate of the employer’s contribution is 17%. Lower contribution rates apply to individuals over 55 years of age. Special transitional contribution rates apply to foreigners who become Singapore permanent residents.

Self-employed individuals who carry on a trade, business, profession or vocation may also participate in the CPF scheme.

A Supplementary Retirement Scheme (SRS) allows Singapore citizens and permanent residents to elect to contribute to private funds in addition to their CPF contributions. Foreigners working in Singapore may also participate in the scheme. Contributions are deductible but are subject to a cap.

An individual may pay the tax due for the assessment year in one lump sum within one month after the issuance of a tax assessment. Alternatively, the tax may be paid in instalments, up to a maximum of 12 per year.

 

 

 

Banking

 


About Singapore

Singapore is considered a world-class financial centre. It has a very vibrant banking sector. Most of the world’s largest and most reputable financial institutions can be found there.

Singapore has the fourth largest forex market in the world after London, New York and Tokyo. The Port of Singapore is the world’s largest in terms of total shipping tonnage, transhipment and containers.

Advantages Of Offshore Banking In Singapore

Generally, with financial markets, one can never give absolute guarantees, but opening an offshore bank account in Singapore is possibly as close as you’ll come to 100% safety for your wealth. There are a number of factors which contribute to Singapore being a jurisdiction of utmost safety and stability:

  • International banks in Singapore are among the safest and most respected in the world.
  • The Singaporean economy is extremely stable and continues to thrive.
  • There is strong regulatory oversight by a very capable government which has aided in the financial sector remaining unaffected even during worldwide crises.

Offshore Banking In Singapore Offers Attractive Tax Benefits

Generally, there would be no capital gains tax or other taxes on the income generated from deposits you hold with approved financial institutions in Singapore. Singapore also has Double Taxation Agreements (DTAs) with over 60 countries (this includes the US, although the agreement is not as comprehensive as with some), so you will most likely be safe from double taxation.

For the savvy investor, it is possible to structure an offshore company in Singapore in such a way as to pay very low to no start-up taxes (for the first three years) and also benefit from significant tax deductions. We won’t go into the finer details of this here, and it may be worthwhile speaking to a tax expert in Singapore for the best ways to structure your corporate profile.

It is important to note though that you will be unlikely to structure things in such a way as to pay absolutely zero taxes however an offshore account properly structured with a Singaporean offshore company will significantly reduce your tax burden.

Investment Banking And Asset Diversification Opportunities

There is an array of top-quality banking products and services available in Singapore to suit your specific needs and situation, as well as a number of quality banks to choose from. Singapore offers attractive currency diversification opportunities. You can hold multiple currencies in your Singapore offshore account. (DBS allows up to 12 currencies in a single account!)

This enables you to hedge your currency risk and also offers the advantage of having access to different currencies if and when it is needed.

 

Singapore has become an established international banking hub which means you can expect great efficiency and high-quality service.

Accessing your wealth from your Singapore offshore account is easy with much more efficient online transfers and transactions compared to other jurisdictions. For high-net-worth individuals, Singapore offers an array of accounts and financial services from offshore investment accounts to mutual funds.

Singapore banking services are amongst the best in the world, after Switzerland and Luxembourg, however, after the change in global tax laws, both Switzerland and Luxembourg has greatly restricted their accounts to foreigners.

Singapore has consistently ranked as one of the most stable banking jurisdiction to open an offshore bank account and together with its renowned service and expertise it's not hard to understand why.

Disadvantages Of Opening An Offshore Account In Singapore

 

Whilst Singapore is probably one of most ideal jurisdictions to hold your offshore account if you have the means, it may not necessarily be the easiest place.

First off, you need a lot of capital to open an account. Singapore banks are only interested in high net worth clients. Singapore citizens are among the richest, so banks are not really interested in your few thousand dollars, and frankly it’s not worth the trouble for them. So yes, if you are willing and able to invest a hefty amount for a personal account (some say minimum 200 000 USD will do, others will tell you that a million would be better), then Singapore is great. But if not, you may have to turn elsewhere.

Recently, it is becoming more difficult for foreigners to open offshore accounts in Singapore. This is especially the case for US citizens as Singapore banks don’t like having to share all the required information with the IRS and all the additional hassle that it involves. There is a lot of paperwork and background checks, and many banks may refuse your request to open an account. One sure way to be accepted though is to have a lot of money.

Opening an account remotely in Singapore can be complicated and you are likely to be rejected, so really the best way is to go in person. Even then, banks may reject you if you don’t have a lot of money.

How To Open An Offshore Bank Account In Singapore

 

There are a few additional points to take note of with respect to opening your offshore account.

  • Before you go, make sure you are up to speed with all the documents you will require to open an account. Depending on the bank, these will probably include: Passport, identity documents, copy of your bank statements, proof of address, and ideally a letter of recommendation from your home bank.
  • It is definitely best to visit in person. You will need to find the right bank to suit your needs, and you will also need to prove to them that you are a trustworthy customer who will invest large amounts.
  • Generally, it is easier to form a Singapore company and open an account in their name as opposed to opening a personal account as an individual. The initial deposit requirements are lower, and you would be more likely to be accepted by the host bank. If you would like to go this route, ensure that you understand all the ins and outs of incorporating in Singapore and hire an expert to help you take care of things.

Is It Worth Opening An Offshore Account In Singapore?

 

The bottom line is that Singapore is undoubtedly one of the most ideal places on earth to store your wealth in an offshore account. There are really very few downsides once you are successful in setting up your account.

However, it may not be so accessible to the masses. To open an offshore account in Singapore, you need to have a lot of money, plain and simple. So if you know that you are a very high-value customer and are looking for premier offshore banking service to match, then Singapore is definitely the place. If, however, you are not a 6 or 7 figure investor and are looking for more simple and easily accessible options, then you may need to turn elsewhere. Don’t worry, there are plenty of other good options to choose from.

 

Singapore Banks Listing

ANZ Singapore bank

ANZ singpore bankANZ Singapore is one of two designated ANZ regional hubs in Asia.
Founded as a representative office of Australia and New Zealand Banking Group in 1974, it was later converted to offshore bank status in 1980 and in 2002 was upgraded to a wholesale bank. Read more »

Bangkok bank Singapore

Bangkok bank SingaporeThe Singapore branch of Bangkok bank provides full commercial banking services in this one of the leading financial centres of the Asia Pacific region. Read more »

Bank of India Singapore

Bank of India SingaporeHolding both Domestic and ACU licenses, the Bank of India is active in Singapore since 4th June 1951.
The Singapore office is ideally located in the heart of the Central Business District for customers’ convenience. Read more »

BNP Paribas Singapore

bnp paribas singapore logoBNP Paribas Singapore is the South East Asian division of French-based international financial group, presented through its subsidiaries in Indonesia, Malaysia, Philippines, Thailand, and Vietnam. Read more »

CIMB Bank Singapore

CIMB Bank SingaporeCIMB Bank Berhad Singapore offers its clients regional coverage, taking into account local conditions. In order to transform small businesses into multinational companies, CIMB exploits its potential by offering a wide range of continuous banking products and services for small and medium-sized enterprises (SMEs) and medium-sized enterprises. Read more »

Citibank Singapore

citibank singapore logoCitibank Singapore is a part of the US-based global financial group Citigroup, the first American bank opened a branch in Singapore. Read more »

DBS Bank

DBS Bank LogoDBS Bank (previously known as The Development Bank of Singapore Limited) is a bank in Singapore, established by the Government in June 1968. Read more »

Hong Leong Finance

hong leong finance logoHong Leong Finance (HLF) is a subsidiary of the Hong Leong Group, that provides financial services in Singapore. Read more »

HSBC Singapore

hsbc singapore logoHSBC Singapore (subsidiary bank of The Hongkong and Shanghai Banking Corporation Limited) is one of the oldest banks established in Singapore, founded in December 1877. Read more »

ICICI Singapore bank

ICICI Singapore bankICICI Bank Singapore limited is a subsidiary of the India-based largest bank ICICI, presented globally in 19 countries. Read more »

Indian Overseas Bank Singapore (IOB Singapore)

indian overseas bank singapore logoIOB operates in Singapore as a branch of the Indian Overseas Bank, one of the major retail banks headquartered in Chennai.
The bank serves its customers operating via 3K+ branches in India and six overseas offices. Read more »

Islamic Bank of Asia

The Islamic Bank of Asia (IB Asia) is a bank in Singapore focused on merchant banking activities including direct investment, advisory, treasury, and capital markets services. Read more »

J.P. Morgan Singapore

JPmorgan singaporeJ.P. Morgan Singapore is the main office for all southeast Asian operations of leading global financial services company, operating in more than 60 countries with total assets of about USD2.3 trillion. Read more »

Maybank Singapore

maybank singapore logoMaybank Singapore is a fully licensed commercial bank, branch of largest Malaysian bank – Maybank.
It is active in Singapore since December 1960 and today provides highly-personalized services and locally-oriented approaches through a distribution network of 22 Branches and more than 35 ATMs. Read more »

OCBC Bank Singapore

OCBC Bank LogoOCBC Bank (Oversea-Chinese Banking Corporation Limited) is a financial company founded in 1932 and headquartered in Singapore.
In 2010 the bank was the largest local bank in Singapore by market capitalization. Read more »

RHB Bank Singapore

rhb bank singaporeRHB Bank Singapore is a completely authorized bank, branch of RHB Bank Berhad, one of Malaysian biggest banking groups. Read more »

SBI Singapore

SBI SingaporeSBI Singapore is a subsidiary of the State Bank of India, India’s largest commercial bank in terms of assets, deposits, profits, branches, customers, and employees. Read more »

Standard Chartered Singapore

standard chartered singaporeStandard Chartered Singapore is a subsidiary of the international financial group headquartered in London, UK.
The bank started operations in the country back in 1859 and now has a network of 19 branches, 7 Priority Banking centers, and 31 ATMs. Read more »

UOB Singapore

uob singapore logoUOB Singapore (United Overseas Bank Limited) in a bank headquartered in Singapore and operates mainly in South-east Asian countries. Read more »

Background Facts
Singapore is a Southeastern Asia islands between Malaysia and Indonesia

Population: 5,353,494 (2012 est.)
Capital: Singapore
Dialing code: 65
Currency:Singapore dollar
Exchange control:
There are no foreign exchange controls in Singapore
Government:
Parliamentary republic
Official language: Mandarin, English, Malay
Legal System:
English common law

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