subject: Singapore Corporate Tax: A Close Look [print this page] Singapore is considered as a business center in Asia and is speedily increasing. A lot of businessmen wants to do business in Singapore because of its elaborate legislation that made it possible the protection of intellectual property of businesses while helping them with the company's endeavor.
Furthermore, Singapore is favourably located at the centre of the expanding Asia economy.Hence, businesses located in Singapore benefit from productive ties with the other tiger economies while maintaining the name of a reputable and trustworthy jurisdiction. By executing a fair and competitive tax rates, Singapore has uphold its attributes of being the ideal place for setting up a business.Truly, Singapore has been internationally recognized as a country for business for the past years and a for several years to come.
All in all, the main reason behind why Singapore has been so popular with businessmen and corporate entities is that of it's cooperate tax policy.
Corporate Tax in Singapore
The foreign and the local companies in Singapore pay the same tax rates. It only emphasized how Singapore value the importance of businesses in the country may it be local or foreign, though it may sound unfair to the locals but this is what the country practises.
All income from Singapore are taxed-- income remitted in Singapore or derived in Singapore. What this means is a company that is incorporated in Singapore but does most of its business with other Asian countries and receives its income overseas, is legally not liable to tax in Singapore. For some practical reasons, businessmen who wants to set up a company in Singapore are advise to seek a professional guidance regarding Singapore tax policy for them to be able to adhere to the tax incentives and policies accordingly.
In the later part of the article, the basic corporate tax rates will be discussed. One should also take note of the significant tax incentives offered to entrepreneurs and newly incorporated companies.
In 2010 Singapore's corporate tax rate was reduced from 18% to 17%. Depending on the amount of income received, the tax is charged in blocks.A mere 4.5% is the tax rate for the first S$10,000 income incurred. The next S$290,000 of profits is charged at 8.5% and thereafter, all income is charged at 17%. Therefore, a small company that makes S$8,000 in 2010 will be taxed a mere S$360. A medium sized company that makes S$250,000 in 2010 will be taxed a total of S$20,850, an effective rate of 8.34%. A larger company making S$1 million in 2010 will be taxed a total of S$144,100, an effective rate of 14.41%.
Over the years Singapore has also gained a lot of respect from entrepreneurs specifically, as its corporate tax policy accommodates to the general issues and needs of most newly incorporated companies.The Singapore government has implemented tax exemptions for new companies, in order to facilitate the process of starting and growing a business from scratch.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. Unfortunately, not all countries like Singapore understand the need to provide solutions to alleviate concerns and cost of newly built corporations.
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 exemption applies only to companies that are (i) tax residents in Singapore (ii) have 20 shareholders or less (iii) at least 10% of its 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 that do comply with the full exemption, also benefit from partial tax exemption on the next S$200,000 of profits. 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.This works out to a tax rate of approximately 8.5% on the first S$300,000 of profits, an extremely low rate for an OECD member country.
Without being detrimental to the society in Singapore including its environment and the people, Singapore provides a favorable tax environment for businesses in the country. With such low tax rates working effectively in a nation that maintains prestige, efficiency and high quality of life, many may begin to question the need for such high tax rates in other nations. All in all, it is through tax incentives among other benefits that stand out as one of the factors that make Singapore attractive to businessmen all over the world.No wonder, Singapore has continued to be a vital business location not just in Asia but also worldwide.
