Series on Singapore tax laws – Part 2

Applicable tax rates and exemptions

Companies (both resident and non-resident) are generally taxed at a flat rate of 17% on the normal chargeable income. Further all companies (excluding those that qualify for new start-up exemption scheme) are eligible for partial tax exemption on the first $300,000 of their normal chargeable income for each year of assessment, as follows –

  • Upto first $10,000 of the normal chargeable income, 75% of the income is exempt from tax
  • Upto next $290,000 of the normal chargeable income, 50% of the income is exempt from tax

For new start-up companies

For new start up companies, tax exemption is granted on the first $3,00,000 of the qualifying company’s normal chargeable income for the first three consecutive years of assessment, as follows –

  • Upto the first $100,000 of normal chargeable income, 100% of the income is exempt from tax
  • Upto the next $200,000 of normal chargeable income, 50% of the income is exempt from tax

Income tax returns for companies

At the beginning of each assessment, income tax returns are issued to every person who is known to be chargeable to tax. Companies are required to file Form C or Form C-S by 30 November (15 December for e-filing) of each year together with a copy of the audited or non-audited accounts, whichever is applicable.

Assessments

Assessments are issued by the Inland Revenue Authority of Singapore (IRAS) based on the income tax returns submitted by the taxpayer or they can be based on IRAS’s estimate. Assessments are usually of following types –

  • Original assessments – This is the first assessment to be issued based on either the taxpayer’s submission or the IRAS’s estimate
  • Additional assessments – This is generally issued when tax is undercharged, i.e. final tax is more than the tax previously assessed
  • Amended assessments – This is generally issued when tax is overcharged, i.e. final tax is less than the tax previously assessed
  • Advance assessments – This is generally issued if the source of income has ceased or going to cease or where IRAS deems fit that an assessment be made in relation to income derive by the company from the carrying on of a trade
  • Best Judgment Assessment – IRAS can also raise a ‘best judgment assessment’ on the estimated income of the taxpayer, where the taxpayer has failed to file a return, or where the return filed is incorrect or incomplete
  • Protective Assessment – This can be issued to prevent assessments from being time barred

Appeals against assessment

The deadline to file a Notice of Objection with supporting information is 2 months from the date of service of the Notice of Assessment. If a taxpayer requires more time to provide the details for the basis of an objection, IRAS is prepared to extend the 2-month deadline on a case-by-case basis. A written request must be forwarded to IRAS
within 2 months from the date of service of the Notice of Assessment.

If no objection is made within the prescribed period, the assessment will become final and conclusive.

Collection of taxes

Tax is payable within one month from the date of the issue of the notice of assessment. If taxes are not paid by due date, a 5% penalty is imposed and a demand note will be issued. If the tax is still not paid, an additional penalty of 1% of the unpaid balance per month is added to the total due up to a maximum of 12%.

Advance Ruling System

An application can be made to the IRAS for an advance ruling on the tax treatment of the proposed business arrangements. A ruling is binding in two ways:

  • the ruling will only apply to the applicant and the particular arrangement that was the subject of the ruling request and, where applicable, to the year(s) or period(s). The applicant will not be able to rely on a ruling given for a different arrangement, even though the circumstances may appear to be similar, nor can the applicant rely on a ruling given to someone else for a similar transaction;
  • the ruling will bind IRAS to apply those statutory provisions in the manner set out in the ruling that has been issued.

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