Series on Singapore tax laws – Part 1

Global competition between countries to attract and retain multinationals will remain. But the global tax world is changing rapidly. Singapore’s tax system has been effective in supporting the growth of the economy, and one reason for this is that tax framework constantly evolves to meet the changing needs of the country as well as the global economic environment.

Residence of company

The incorporation of a company in Singapore does not automatically mean that it is tax resident in Singapore. They are tax resident in Singapore, if control and management is exercised in Singapore.

Scope of tax system

Tax system in Singapore operates on territorial basis. Income tax is payable if the income accrues to or is derived by a person from Singapore or from outside Singapore but received in Singapore.

Hence, if income is sourced outside Singapore and is not received or deemed to be received in Singapore, the income will not be assessable to tax in Singapore.

Income received from outside Singapore would be any amount derived from outside Singapore which is –

  • remitted to, transmitted or brought into Singapore
  • applied towards a debt incurred in respect of a trade or business carried on in Singapore
  • applied to purchase any movable property which is brought into Singapore

Tax exemption on specified foreign income received by resident persons

General conditions for exemption –

  • specified foreign income was subject to tax in foreign jurisdiction from which income is received
  • in the year the specified foreign income is received, the rate of taxation in foreign jurisdiction is atleast 15% and
  • the Comptroller of Income tax is satisfied that the tax exemption would be beneficial to the person resident in Singapore

However, there are certain exceptions to the above general conditions of exemptions.

Sources of income

Sources of income of companies includes –

  • gains or profits from any trade or business;
  • income from investment such as dividend, interest and rental;
  • royalties, premiums and any other profits from property; and
  • other gains that are revenue in nature

Pertinent to note that Singapore does not have capital gain tax regime.

Taxable period

Taxable income is computed by reference to the taxpayer’s annual accounting period, whether calendar year ( 12 month period ending on 31 December) or financial year (i.e. 12 month period ending on any other day other than 31 December, usually the last day of any month other than December).

<<I have started write-ups on corporate taxation mechanism in Singapore. Anyone interested in knowing Singapore corporate tax system can stay tuned up with my write-ups>>

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