Singapore’s tax system is based on the principals of source and remittance. Only profits that are derived from or arise in Singapore, or any foreign-sourced profits remitted back to Singapore are subject to tax in Singapore. The current rate of Singapore Income Tax (SIT) is 17% – one of the lowest rates in the region. All companies in Singapore must be registered with the Accounting & Corporate Regulatory Authority (ACRA) and abide by the Companies Act, Chapter 50. While there are five different entities to choose from – sole proprietorship, partnership, company, limited liability partnership and limited partnership – the most common and flexible option is to set up a Singapore company. If the number of shareholders exceeds 50, it is deemed to be a public company. If the company has more than 20 but fewer than 50 shareholders, it is deemed to be a private company. Finally, if the number of shareholders is 20 or less – with no corporation holding any beneficial interest in the company’s shares – and the company has a turnover of less than S$5 million, it is deemed to be an Exempt Private Company (EPC). An EPC is exempt from tax from the first three years after incorporation for the first $100,000 of chargeable profits. The next $200,000 profit is 50% exempt from SIT, while any profits exceeding $300,000 are taxed at 17%. Dividend income from other Singapore companies is not subject to tax. Foreign-sourced dividends remitted back to Singapore are generally taxable but they can be completely exempted from tax if the following conditions are satisfied:
- The country from which the dividend was paid has a headline tax rate of 15% or higher;
- The dividend has suffered taxation, either because it is paid out of taxed profits or has suffered withholding tax.
Capital gains are not subject to tax. Singapore has entered into over 80 comprehensive agreements for the avoidance of double taxation (DTAs). It has one of the most comprehensive networks in the world and the list is still growing.