Singapore Corporate Tax Rate: A Definitive Guide for 2022

Singapore is frequently highlighted as a leading example of a country that continues to lower its corporate income tax rate and create various tax incentives in order to attract and retain international investment. The country’s effective tax rates, which are among the lowest in the world, and business friendliness are two significant drivers to economic growth and foreign investment.

This guide provides a comprehensive explanation of Singapore’s corporate tax rate, tax system, and tax incentives. Our online tax calculator can help you determine your projected Singapore taxes and compare them to those in your home country.

Singapore corporate tax rate

Singapore corporate tax rate is capped at 17% of a company’s chargeable. This tax rate applies to both local and foreign companies.  Chargeable income refers to the company’s taxable income (after deducting tax-allowable expenses) for a Year of Assessment (YA).

Thanks to the Singapore government’s tax exemption and incentive programs, the effective tax rate for companies can be significantly lower. 

Current tax rates

How to determine whether your income is taxable

Income earned in or derived from Singapore, as well as income received from outside the country, is generally taxable. Below are more details about what is taxable and what is not. 

Taxable income

Qualifying income earned in Singapore and income remitted to the country from a foreign source is both taxable under the country’s territorial tax system. In Singapore, taxable income includes the following items:

• Gains or profits from any trade or business
• Income from an investment such as interest and rental property income
• Royalties, premiums and any other profits from property
• Other gains that are considered revenue

Non-taxable income

Capital gains are not taxable. These include:

• Gains on sale of fixed assets
• Gains on foreign exchange on capital transactions

Singapore corporate tax exemptions

Tax reliefs such as the tax exemption scheme for startups and the partial tax exemption scheme are available to help businesses lower their tax payments.

The tax exemption scheme for startups

To encourage entrepreneurship and the growth of local companies, the tax exemption plan for startups was implemented in the YA 2005. In addition, budget 2018 announced the revision of the tax exemption under the scheme with effect from YA 2020 to further support businesses to develop their capabilities.

The following are the tax exemptions for qualified companies for the first three years of their existence:

YA 2020 onwards

New companies that meet the criteria receive a 75% tax exemption on their first S$100,000 in taxable income, followed by a 50% exemption on the next S$100,000 in taxable income.

YA 2010 to YA 2019

New companies that meet the criteria are given a complete tax exemption on their first S$100,000 in taxable income, as well as a 50% tax exemption on their following S$200,000 in taxable income.

Qualifying criteria

All startup companies are eligible for the tax exemption scheme, except for the following:

• Companies whose principal activities are that of investment holding
• Companies that undertake property development for sale, investment, or both

To qualify for the tax exemption scheme, startup companies must:

• be incorporated in Singapore;
• be a tax resident of Singapore for that YA, and
• have its total share capital beneficially held directly by no more than 20 shareholders throughout the basis period for that YA where all the shareholders are individuals or  at least one shareholder is an individual holding a minimum of 10% of the issued ordinary shares of the company.

The Partial Tax Exemption (PTE) scheme for companies

Unless the company has already claimed under the tax exemption scheme for new startups, all companies are eligible for PTE. Companies benefit from the following exemptions under PTE.

YA 2020 onwards

Tax exemptions of 75% on the first $10,000 of normal chargeable income and 50% on the next $190,000 of normal chargeable income

YA 2010 to YA 2019

Tax exemptions of 75% on the first $10,000 of normal chargeable income and 50% on the next $290,000 of normal chargeable income 

Abuse of the tax exemption scheme

The Singapore Inland Revenue Authority (IRAS) takes seriously of companies that are set up to abuse this scheme and not incorporated for entrepreneurship and genuine commercial motives.  When such wrongdoing is discovered, IRAS will not hesitate to act.

Abuse of the tax exemption scheme involves the following:

• Allocating the income of an existing profitable going concern to a few shell companies so that the chargeable income of each shell company is within the threshold for tax exemption.
• Charging fees/expenses to an existing profitable going concern by shell companies without any bona fide commercial reasons.

More than 300 organizations had been audited as of January 31, 2021, for possible exploitation of the tax exemption provision for new start-ups. This has resulted in total tax recovery and penalties of more than $25 million.

Tax evasion or fraud is a criminal offense punishable by law, and the Court imposes harsh penalties on offenders. Businesses or people who engage in abusive tax arrangements, such as the formation of shell companies to take advantage of the tax exemption plan for new start-up companies or who aid others in engaging in abusive tax arrangements, should promptly disclose such abuse. IRAS will regard such disclosure as a mitigating factor when reviewing the penalty charges.

Documents required for filing corporate tax in Singapore

To complete its corporate tax obligations, a company must file two documents with IRAS.

Estimated Chargeable Income (ECI) 

This document outlines a company’s chargeable income. The filing of this document is a legal requirement for all businesses. Companies must e-submit this document three months prior to their fiscal year-end.

However, if a company’s annual revenue is less than or equal to $5 million and has no YA chargeable income, it does not need to file an ECI.

From YA 2020 onwards, all companies must file their corporation tax filings electronically, according to the most recent guidance. Physical document filing is gradually being phased out.

For additional information, please refer to:

A Guide to Filing Estimated Chargeable Income (ECI) with IRAS

Form C and Form C-S

The Form C document must be used to file a company’s returns. Additional documents must be submitted, such as tax computations and financial statements.

If a company’s annual revenue is less than or equal to S$5 million, it can use the simplified Form C-S document to file its taxes. This only applies if the following conditions are met:

• Singapore is where the company was founded.
• The income is taxed at a fixed rate of 17 percent for corporations.
• The company does not claim tax benefits under any special schemes. 

The due date for filing the corporate tax in Singapore

The deadline for Singapore companies to file their corporate tax returns is November 30 (for hard copy forms) and December 15 (for e-filing).

Companies must file a complete set of returns, including Form C, audited and unaudited financial statements, and tax computation. Tax computation is a statement that shows the adjustments to the net profit/loss as per the company’s accounts to arrive at the amount of income that is chargeable to tax. Form C is a declaration form for a company to declare its income. On the other hand, Form C is a statement showing the adjustments to the net profit/loss as per the company’s accounts to arrive at the amount of income that is chargeable to tax. 

Wrap up

Now that you have learned about the Singapore corporate tax rate, how to determine whether your income is taxable, how to qualify for the tax exemption scheme, required documents you should submit to IRAS, and when to file your corporate tax returns. If you need help with your tax obligations in Singapore, you can rely on us. Check out our accounting services and options available for your company.

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