Singapore is one of the critical financial and commercial centers globally, thanks to a particularly favorable tax system for both individuals and businesses. It combines a low level of ordinary tax rates with tax benefits aimed at attracting foreign investments and qualified personnel to its territory.
Taxation of individuals
Individuals’ income tax affects all income and benefits from internal sources deriving from dependent or self-employed work, businesses, income from capital, land, or others. On the other hand, payment originating from a foreign source and received in Singapore is not subject to tax, except income deriving from investments in Singapore companies or foreign activities incidental to those carried out in the country.
Corporate income tax
The corporate tax only affects Singapore source income and foreign source income but is received in both resident and non-resident companies. Dividends and other income from foreign sources that have been received by a resident company and that have been subject to taxation in the country of origin of at least 15% are exempt from tax.
Incentives and exemptions
The Singapore tax system provides a complex system of incentives to attract foreign investments and support investors in expanding their businesses. The complete exemption of the first 100 thousand dollars (starting from 2020, this exemption will be reduced to 75%) and to 50% for the next 200 thousand (100 thousand from 2020). These exemptions are valid for the first three years. The Pioneer Incentiveencourages introduced new industries in Singapore by granting up to 15 years of income tax exemption.
To incentivize productivity and innovation, a system of exemptions is envisaged for up to 100% of those invested in innovative activities up to a limit of 10 million. There is also an exemption of 75% on the first 10 thousand dollars and 50% on the following 290 thousand euros (reduced to 190 thousand from 2020). To this is added a discount on the tax due equal to 20% of the tax due to up to 10 thousand euros.
Goods and Services Tax (VAT)
Since 1993, in Singapore, indirect taxation is similar to VAT modeled on the British (and therefore European) system. It affects the transactions of goods and services on the national territory and imports at the time of their passage through customs. However, if exempt transactions are carried out for a monthly value not exceeding 40 thousand dollars, these represent less than 5% of the total (the “de minimis” rule). It is possible to deduct the entire VAT paid. The ordinary tax rate, which was initially 3%, is currently 7%, while a 0% tax rate is applied to exports and international services. The VAT return must be submitted quarterly.
Tax The tax applies to all real estate owned in Singapore by individuals and corporations. On the other hand, those reserved for religious worship, public schools, and buildings intended for charitable purposes and promote Singapore’s social development are exempt. The tax base is the annual amount of the lease of the property calculated by the administration based on its characteristics and market trends in the area. This value is communicated to the taxpayer in December to pay the tax by the end of January of the following year.