Starting a business in Singapore has many advantages. From the types of structures available for incorporation to the taxation system it offers, Singapore is one of the best countries in Southeast Asia to do business in according to several reports.
Taking them one by one, in terms of companies which can be established here, the limited liability company is preferred by foreign investors. Secondly, when it comes to taxation, the Singapore limited liability company is also one of the best choices when it comes to the tax exemptions or incentives it is subject to.
Our company formation specialists can offer information on the corporate tax imposed in the city-state and can also assist clients who want to open a company in Singapore.
The Singapore taxation system comprises various taxes which apply to natural persons and corporations. The limited liability company, no matter if it is a private or a public company, will be subject to the following taxes:
What should be noticed is that in order to know the amount a limited liability company must pay it must first verify the income which can be taxed and then file the returns based on which the Inland Revenue Authority in Singapore will calculate the taxes the company will pay.
Our Singapore company formation agents can help those interested to register a limited liability company here.
The corporate tax which is also the most important tax imposed to a limited liability company in Singapore has a rate of 17%. However, startup companies registered as limited liability companies can benefit from exemptions from the corporate tax.
The other rates the taxes imposed to limited liability companies in Singapore are:
It should be noted that Singapore has signed numerous double tax treaties which provide for exemptions or deductions for certain taxes paid by foreign investors who open limited liability companies in Singapore. The best example are the withholding taxes.
For full information on the taxation of limited liability companies, please contact our company formation consultants. We can also help you open a company in Singapore.
The corporate income tax is one of the main taxes levied on companies in Singapore. The tax burden in this city is a low one compared to other locations throughout Asia and this is one of the main reasons why investors choose to set up a business here. The income tax for companies in Singapore has a 17% rate and two partial exemptions apply for the year of assessment 2020 and onwards, in case of new start-up companies:
The tax exemption scheme for new companies was introduced in 2005 as a way of encouraging new businesses. companies that qualify are offered this exemption for the first three consecutive years of assessment in their existence. Right now, this scheme applies when the first three years fall into two categories, namely, the year 2020 and onwards and the year 2019 and before this date. Maximum exemptions apply, as per the following example designed for a private limited company in Singapore that was incorporated in the year of assessment 2019:
Please keep in mind that this is only an example and different rates may apply when the company is incorporated in a different year. Investors who wish to know more about the scheme can reach out to our agents specializing in the registration of the private limited company in Singapore. In case you want to open a limited company in another country, for example in Hungary, our partners from CompanyIncorporationHungary.com can help you.
The main qualifying conditions for this scheme are the following: it applies to all companies except those for which the primary activity is an investment holding and those that are engaged in property development for sale, investment or both. In order to qualify, companies must be incorporated in Singapore, be a Singapore tax resident and have a total share capital that is beneficially held directly by no more than 20 shareholders. Our agents can provide more details on the qualifying conditions and can help investors who are interested in setting up a company in Singapore.
All other types of companies, including companies limited by guarantee, are subject to the following partial tax exemption:
– 75% exemption on the first 10,000 $ of normal chargeable income;
– 50% exemption on the next 190,000 $ of normal chargeable income.
From 2010 to 2019, this exemption had different rates. One of our agents specializing in the Singapore limited company and its taxation can provide more details about how these schemes changed over the years.
Branches in the city are taxed at the same 17% rate and benefit from the same partial exemption. Moreover, branches are subject to the provisions of the double tax treaties signed by Singapore.
A corporate tax rebate is also available in Singapore and it is offered to all companies for the purpose of reducing the burden of the business costs and encouraging the restructuring of companies. In the year of assessment 2020, companies receive a corporate income tax rebate of 25%, capped at 15,000 $. This corporate income tax rebate is calculated on the tax that is to be paid, after the tax set-offs, such as foreign tax credit, gave been deducted. For more details on this rebate, please reach out to our private limited company Singapore agents.
Companies need to consider accounting in Singapore and the reporting requirements which are specific to the city-state. One of our experts in the registration of private limited companies in Singapore can answer your questions related to these issues.
Singapore has a low tax regime. However, apart from the corporate income tax, these are the other main taxes for limited liability companies in Singapore:
There is no capital gains tax in Singapore. The goods and services tax is the equivalent of the value-added tax and has different rates, with a standard rate of 7 percent. One of our agents can provide more details on the goods and service tax and can help businessmen in the process of setting up a company in Singapore.
The policies on the corporate income tax as well as other applicable taxes for LLCs in Singapore are overseen by the Ministry of Finance.
Apart from observing the applicable taxation schemes, investors who open a private limited company in Singapore will also need to observe the general accounting and reporting principles. All companies, not only LLCs, are required to keep proper records of their business transactions. These records are to be stored for a period of five years from the year of assessment. Failure to comply with these terms may result in penalties as well as a cancellation of the expenses that might be claimed by that company.
Below, we present a short summary of the tax filing submissions that are expected from a Singapore company after the end of a year of assessment (calculated here as the end of the year in question, the 31st of December):
Dormant companies are subject to different policies, for example, they may not be subject to the requirement to file the corporate income tax return.
We invite you to watch a video on the taxation of an LLC in Singapore:
The tax exemption for new start-ups and the partial exemption for all companies, described above, are two of the common tax relief options that are available to those who open a Pte Ltd in Singapore. Another method through which companies can reduce their bills is the deduction of expenses that have been incurred before the business was commenced (even though ordinarily only expenses that are incurred after the business is commenced are deductible for tax purposes).
A concession to the ordinary tax deduction regime takes place for revenue expenses that have been incurred one year before the first day of the financial year in which the company has actually earned profits. The following situation can be used as an example: a company that was incorporated in June 2017 earns its first income from a business receipt in September 2019. In this case, the revenue expenses incurred between January and December 2018 (the year before the financial year in which the company earned its first business income) is also deductible in the following year of assessment (in this case, the year of assessment 2020). Using the same example, the revenue expenses incurred between the month of incorporation and the end of the financial year (December 2017, the year of assessment 2018) are non-deductible as they are not incurred one year before the date of the commencement of the business.
A private limited company in Singapore can be regarded as one that has commenced its business activities even if it has not year earned its first income of the business. This can occur when the company has determined its profit-making structure and started its first commercial activity.
We recommend that interested company owners reach out to our agents specializing in setting up a private limited company in Singapore for detailed information about tax relief on expenses that have been incurred before the commencement of business.
The employment assistance payment or the re-employment of older employees (EAP) is tax-deductible. A company may choose to offer this to an eligible older employee who was normally retired when the company cannot find a suitable candidate.
The incentive offered by a company to its employees in the form of employee stock options is tax-deductible. These stock options allow employees to purchase shares in the company at a fixed price.
Donations are non-deductible expenses for companies in Singapore, however, business owners can claim deductions for certain donations, made to approved Institution of a Public Character or to the Singapore Government. The following types of donations are deductible ones:
Donations are non-tax deductible when the donor is advertising at the event or programme of the Institution of a Public Character (the donor displays his products or banners at the event, for example).
Businesspeople who are interested in knowing more about the approved donations can reach out to our agents who specialize in setting up a private limited company in Singapore.
The 250% tax deduction for qualifying donations is extended until 31 December 2021.
It is useful to note that the donation receipt that is issued by the approved Institution needs to indicate its character, meaning that it will include the words “tax-deductible”. For this purpose, companies are required to state their identification number to the Institution when making their donation.
Investors who open a private limited company in Singapore can claim tax deductions that were made in the preceding year. For example, a donation made in 2019 will be included for deduction purposes on the tax assessment for the year 2020. The donation amount does not need to be declared when submitting the income tax return. These deductions are included in the tax assessment based on the data received from the Institution that received the donation. The Inland Revenue Authority does not accept claims for tax deductions based on donation receipts.
The manner in which a business entity is taxes depends on its form. Companies, like the Singapore LLC, are taxed on their profits at the aforementioned rates. However, this is not the case for all types of companies and those who are interested in setting up another business form, apart from setting up a private limited company in Singapore, can read the list below for more information:
Company: the profits of the company are taxed at the corporate tax rates mentioned in this article; other costs related to opening a company in Singapore are those for the name application (15$) and the incorporation fee (300$); the company is distinct from its founders and it can have a pre-determined number of members, according to its type; the Pte Ltd in Singapore can have 50 members or less; as part of its obligations, the company will appoint a secretary within 6 months of incorporation, and auditor within 3 months and will file annual returns.
Partnerships: these are the regular partnership, the limited partnership and the limited liability partnership in Singapore. They are different from a company in terms of legal status and they can have a limited number of partners, according to their form (and a minimum of 2 partners in all cases); the partnerships are subject to taxation under the personal income tax rates in most cases (or at the corporate tax rate if the partners are companies, where applicable).
Sole proprietorship: it is the simplest business form, not a separate legal entity so the owner has unlimited liability; it is taxed according to the personal income tax rates that apply to the owner; certain requirements apply in terms of appointing an authorized representative who is a Singapore resident (this is also applicable in case of partnerships).
As seen above, part of the business entities in Singapore are not subject to the corporate tax rate, but to the personal income tax rate which in Singapore starts at 0% for the first SGD 20,000 chargeable income and continues with progressive rates of 2% (for the next SGD 10,000), 3.5%, 7%, 11.5%, 15%, 18%, 19%, 19.5%, 20% and 22% over SGD 320,000. The non-resident individual income rate is calculated in a different manner, with a flat rate available. Compared to these personal income tax rate, the corporate income tax rate of 17% used for the taxation of an LLC in Singapore can be more advantageous in some cases, depending on business income.
Our specialists advise investors to consider all relevant aspects when choosing the business form for setting up a company in Singapore, with a focus on taxation and compliance but also on legal status, yearly statutory obligations, registration requirements and the need to use an authorized representative who is ordinarily a Singapore resident.
Singapore is a business-friendly location with promising advantages for investors in many different business fields. Setting up a private limited company in Singapore is suitable both for starting a new business as well as for expanding an existing one.
Here are some of the key reasons why Singapore is a business hub:
Many international companies have chosen o take advantage of the pro-business environment in Singapore and there are many startups and new companies that use this location as their gateway to clients worldwide. Singapore is an innovative city and the taxation regime for a limited liability company is one of the top advantages, as highlighted in this article.
Investors who need more information on the applicable taxes for a Singapore LLC, as well as those who require more information on accounting and reporting can contact us for more details.
