Although Singapore is one of the lowest tax regime country in the world, many entrepreneurs end up paying much more than the actual tax amount. This was either due to the businesses not utilizing the benefits or exemptions provided by the government, or they were fined by the authorities as they did not submit the correct documents to comply with the tax laws in Singapore. All these could have been avoided if they have the knowledge of the tax system in Singapore or if they had engaged a professional accounting firm in Singapore.
In this post, we are sharing some pointers on understanding the corporate taxation system in Singapore and how it can benefit your Company.
When starting a business in Singapore, the type of company entity you choose to incorporate will have an impact on tax rates. For instance, sole proprietorship and partnership companies in Singapore are taxed based on the owner's personal income bracket as if the business' profits were also the owner's salary. Private limited companies and subsidiary companies are considered separate legal entities, and are taxed at the corporate tax rate of 17%.
If the entity is not a tax resident in Singapore, they may not be able to enjoy the tax benefits given.
Entrepreneurs who are interested to know more about the tax regime in Singapore should consult a professional company
incorporation service provider to
determine the best business structure in line with their requirements.
Bookkeeping is important as it enables the user to know the actual financial state of their Company. Each business transaction should be recorded in a systematic manner in accordance with Singapore Financial Reporting Standards (SFRS) to aid in timely decision making. This includes the analysis of transactions, profit and loss statements, budgeting cash flow statements and preparing year-end forecasts.
According to Inland Revenue Authority of Singapore (IRAS), you should keep proper records and accounts that are supported with invoices, receipts, vouchers and other supporting documents must be kept for 5 years so that the income earned and business expenses claimed can be determined.
The most time-saving and fuss-free way is to hire a professional team for Bookkeeping
service in Singapore,
so the entrepreneur concentrates on running and growing his business.
Late filing and non-filing of tax returns is a punishable offense in Singapore.
GST-registered businesses are required to pay the GST collected to IRAS, within a month from the end of each accounting quarter. If payment is not received by the due date, a 5% penalty will be imposed for overdue tax with an additional 2% on subsequent overdue tax amount.
Companies that do not file their audited or unaudited accounts, tax computation and Form C or Form C-S by 30 November or 15 December (if e-filing) of the year would be liable to pay fines and late fees and may also be summoned to court.
Late filing or non-filing personal tax return (Form B1) than 15 Apr (for paper returns) or 18 Apr (for e-Filing) is a punishable offense
with late fee up to twice the taxation amount assessed.
Specific tax rebates can also be made available to certain types of companies as part of the government's schemes to promote business for a particular segment.
In fact, for the purpose of encouraging new investment and maintaining a conducive business environment, the Start-up Tax Exemption Scheme (SUTE) was introduced in 2004 that provides newly-incorporated qualifying companies exemption on their taxable profits in their first three years of operations.
1. The company must be incorporated in Singapore;
2. The company must be a tax resident in Singapore for that year;
3. The company must not have more than 20 shareholders throughout the basis period for that year.
Under SUTE, tax exemption is given on normal chargeable income of up to S$300,000 for each of the first three consecutive years of operation as under:
Finally, to ensure fairness to the tax treatments on the company, only the revenue expenses incurred one year before the first day of the financial year in which you earn your first dollar of business receipt is tax-deductible.
By understanding the various government schemes, your company can ensure that the correct amount of taxes are paid to IRAS. This will help you minimize your company corporate tax exposure in Singapore. It is therefore recommended for you to engage a professional tax service provider for their professional help.
Whether you have a company incorporated or still looking to start a business in Singapore, Precursor has the expertise, years of proven experience and an award-winning team to handle all parts of your business operations right from advisory, documentation, registration, accounting, bookkeeping, business process outsourcing to various other corporate services.
[Latest Budget 2018 announcement changes to the Start-Up Tax Exemption Scheme (SUTE)]
For YA2020 (Year of Assessment 2020), which refers to revenue and income for the period ending in 2019, the changes to tax exemption are as follows:
Tax exemption is given on normal chargeable income of up to S$200,000 for each of the first three consecutive years of operation as under:
[Latest Budget 2018 announcement changes to the Partial Tax Exemption (PTE)]
For YA2020 (Year of Assessment 2020), which refers to revenue and income for the period ending in 2019, the changes to partial tax exemption are as follows: