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Taxation in Singapore

Taxation in Singapore

Updated on Thursday 05th May 2016

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Taxation-in-SingaporeBoth individuals and legal entities are taxed on all the profits they make in Singapore. The exceptions consist in the profits from the sale of capita assets in Singapore and certain earning made outside the city-state, among which trading and business activities, or professions. Singapore’s taxation system is made of several types of levies:

 

  • ·         - the income tax applied to individuals and companies,
  • ·         - the Singapore property tax,
  • ·         - the motor vehicle tax,
  • ·         - the Goods and Services Tax (GST) which is the equivalent of the value added tax in Europe,

An estate duty was also levied in Singapore, but it was abolished in 2008.

Establishing tax residency in Singapore

It is very important to know that Singapore’s taxation laws provide for the concept of tax residency. In order to take advantage of the levies imposed by the Inland Revenue Authority in Singapore (IRAS), one must be a Singapore resident. With respect to foreign individuals, they can be treated as tax residents for the respective Year of Assessment (YA) if:

  • -       they have a permanent residence permit or have gained citizenship;
  • -       they have been living or working in Singapore for at least 183 days prior to the Year of Assessment.

Companies must be registered in Singapore in order to be considered tax residents.

The income tax in Singapore

The personal income tax in Singapore is one of the lowest in the world because it is applied progressively. The Singapore personal income tax starts at 0% and reaches a maximum of 20%. The Singapore income tax is calculated based on tax residency and the chargeable income of the individual. Also, individuals are taxed only on the income they make in Singapore. The Singapore income tax is applied as it follows:

  •          - the first 20,000 S$ are taxed at 0% rate, while the following 10,000 S$ are taxed at 2% rate,
  •          - the first 30,000 S$ are taxed at 0% rate, while the following 10,000 S$ are taxed at 3.5% rate,
  •          - the first 40,000 S$ are taxed 0% rate, while the following 40,000 S$ are taxed at 7% rate,
  •          - the first 80,000 S$ are taxed at 0% rate, while the following 40,000 S$ are taxed at 11.5% rate,
  •          - the first 120,000 S$ are taxed at 0% rate, while the following 40,000 S$ are taxed at 15% rate,
  •          - the first 160,000 S$ are taxed at 0% rate, while the following 40,000 S$ are taxed at 17% rate,
  •          - the first 200,000 S$ are taxed at 0% rate, while the following 120,000 S$ are taxed at 18% rate.

 

Other taxes in Singapore

Companies in Singapore are levied the corporate tax at a 17% tax rate, which is the main reason the city-state keeps attracting foreign investors. In 1994, Singapore introduced the Goods and Services Tax (GST) that has a 7% rateWithholding taxes apply to interests, royalties and rentals. However, withholding taxes may be reduced or deducted based on the numerous tax treaties Singapore concluded with other countries. For complete details about the taxation system and investment opportunities you can ask our lawyers in Singapore.

All income above 320,000 S$ is taxed at a 20% rate. Foreign individuals are applied a flat tax of 15%. These tax rates are available until the end of 2016. For the tax rates that will be implemented with the beginning of 2017 you can contact our law firm in Singapore.

 

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