Singapore Corporate Tax in a Nutshell

singapore corporate tax

Singapore rocks when it comes to paying corporate tax. This isn’t news that’s hot off the presses but if you’re intending on building your first business here, it’s always something that’s nice to hear.

Coupled with the ease of doing business, cheap and available funding options and lack of corruption, it’s no wonder Singapore has become one of the preferred jurisdictions for registering a startup.

In Singapore, startups are taxed on profits derived within Singapore as well as overseas income that is repatriated back to Singapore. Companies are taxed at a flat rate of 17% on their chargeable income regardless of whether they are local or foreign companies. This corporate tax rate is widely known to be amongst the world’s lowest, and the effective tax rate can be even lower if a startup takes advantage of the numerous government incentives, grants and schemes.

The deal gets even sweeter. Singapore introduced a tax exemption scheme (the Start-up Tax Exemption Scheme) for startups in 2005.

In order to be eligible for the scheme, your startup has to fulfill the following criteria:

1). Must be incorporated in Singapore.

2). Must have no more than 20 shareholders and the shareholders must (i) be individuals “beneficially and directly” holding the shares in their own name and (ii) have at least one shareholder “beneficially and directly” holding at least 10% of the issued ordinary shares of the company.

3). Property and investment holding companies are not eligible.

Tax exemption for these newly incorporated companies can be broken down in the following manner for the first three years.

Full Tax Exemption

Qualifying companies enjoy FULL tax exemption for the first S$100,000 of chargeable income.

Further Tax Exemption

Qualifying companies enjoy a further 50% tax exemption on the next S$200,000 of chargeable income.

From the fourth year onwards, the startup is eligible for partial tax exemption.

Partial Tax Exemption

75% tax emption on first S$10,000

50% tax exemption on next S$290,000

In addition, Singapore doesn’t tax capital gains. Many startups start up in the hope of having an IPO or getting acquired by a larger entity and while the odds are against either happening, the founders won’t have to pay a single cent of taxes on the profits received from the sale of equity. If that’s not enough, Singapore doesn’t tax dividend distributions either. This is fantastic for the shareholders of the company as they get to keep the entire dividend payment for themselves.

To learn more about the corporate tax system in Singapore, click here.