Tax and Accounting Regulations
Updated on: February 26th, 2016
A coherent offshore tax planning strategy is essential to maximize the effectiveness of offshore companies. Eltoma can assist by structuring the most tax efficient strategy to satisfy your requirements. Eltoma will guide you as to which jurisdictions offer the best tax structure by identifying the types of tax payable as well as applicable exemptions and incentives. Eltoma will provide tax planning advice that will identify which is the most favourable tax efficient jurisdiction in which to incorporate.
All private limited companies must comply with the statutory regulations set out by ACRA (Accounting and Corporate Regulatory Authority) and the IRAS (Inland Revenue Authority of Singapore).
- The corporate income tax rate in Singapore is 17% for 2013 & 2014 respectively.
- Singapore operates a territorial taxation principle therefore income derived in Singapore is subject to tax.
- Sales proceeds originating from outside Singapore but received in Singapore are subject to tax. Prior approval must be obtained by the Singapore Inland Revenue Authority before profit can be classified as non-Singapore Income (i.e. not derived from Singapore) and therefore be exempt from Singapore Income Tax.
Difference of tax treatment for income from different sources:
Foreign source income is exempt from income tax if it is not remitted into Singapore.
Income is not considered to be derived from Singapore if:
- A contract is concluded and signed outside of Singapore.
- Services rendered are outside of Singapore.
- Capital is employed outside of Singapore.
- If the title of goods is passed outside of Singapore.
- Receipt of sales proceeds are outside of Singapore.
- Payment of expenses incurred in the provision of services or delivery of goods conducted outside of Singapore.
- Place where goods are stored and maintained is located outside of Singapore.
Capital gain tax (CGT):
- There is no capital gains tax in Singapore.
- Stamp duty on transactions with securities is 0.2% Stamp duty exemption applies to offshore loan agreements and some other documents.
- Interest received is subject to Income Tax. The tax system of Singapore does not have a separate tax treatment for foreign or Singapore source interest income.
- Interest paid to non-residents of Singapore is subject to withholding tax of 15% unless it is regulated under a Double Tax Treaty.
- Royalty income received is subject to income tax.
- Foreign source royalty income is exempt from income tax unless remitted to Singapore.
- Royalty paid to non-residents of Singapore is subject to withholding tax of 15% unless it is regulated a double tax treaty.
- Foreign dividend income is exempt from income tax.
The tax incentives outlined below can ensure that the effective income tax rate for small to mid-sized companies is significantly reduced.
- 0% tax on S$100,000 taxable income – For the first three tax years after incorporation the corporate income tax rate is 0% providing the company meets the following criteria; be incorporated in Singapore, be tax resident in Singapore, has no more than 20 Shareholders at least one of which must be an individual and must hold at least 10% of shares.
- 8.5% tax on taxable income up to S$300,000 – All Singapore companies are eligible for a partial tax exemption which translates to 8.5% tax rate on taxable income up to S$300,000. Above S$300,000 the normal tax rate of 17% will apply.
- Deductions are allowed for expenses that are wholly and exclusively incurred in the production of income.
- Expenses must be revenue in nature.
- Expenses must be incurred.
- Deductions must not be prohibited by the Income Tax Act.
Corporate Income Tax (CIT) Rebate:
- Applicable for Years of Assessment 2013, 2014 & 2015.
- All companies will receive a 30% CIT rebate, capped at $30,000 per year of assessment.
- CIT rebate is computed on the tax payable after deducting tax set-offs. (E.g. foreign tax credit).
Income tax return:
- Form C – S (Simplified Tax Filing for Small Companies) – For companies that meet qualifying conditions.
- Form C and Appendix on Additional Information on Income and deductions (Form IRIN 301).
Productivity and Innovation Credit (PIC) Scheme
The 6 activities covered under the scheme:
- Training of employees.
- Purchase/Leasing of PIC IT and automation equipment.
- Acquisition/In-licensing of Intellectual Property.
- Registration of Intellectual Property.
- Research & development.
- Approved Design Project.
Benefits under PIC Scheme
- 400% tax deductions/allowances on expenditure on each 6 activities (YA 2011 to YA 2015).
- Opt for cash payout in place of tax deductions/allowances (YA 2011 to YA 2015).
- PIC Bonus (YA 2013 to YA 2015).
First 3 years of Income Tax Filing:
|Taxable Income (S$)||Tax Rate (%)|
|>0 – 100,000||>0%|
|>100,001 – 300,000||>8.5%|
|>300,001 – 2,000,000||>17%|
After the First 3 Years of Income Tax Filing:
|Taxable Income (S$)||Tax Rate (%)|
|>0 – 300,000||>8.5%|
|>300,001 – 2,000,000||>17%|
Checklist for Reference
|1.||File ECI||3 months after accounting year end|
|2.||Prepare financial accounts|
|3.||Prepare tax computation and supporting schedules|
|4.||File Form C (with (2) accounts and (3) tax computation & supporting schedules)||30 November|
|5.||File Form C – S (for qualifying companies)||30 November e-file Form C – S to enjoy extended filing due date to 15 December|
1. Taxable income
A company is liable to pay tax on income accrued in or derived from Singapore or income received in Singapore from outside Singapore in respect of:
- Gains or profits from any trade or business.
- Income from investment such as dividends, interest and rental.
- Royalties, premiums and any other profits from property.
- Other gains of an income nature.
2. Not taxable income
Capital gain is not taxable. Examples of receipts that are capital in nature are:
- Gains on the sale of fixed assets.
- Gains on foreign exchange on capital transactions.
Income may be exempted from tax under the provisions of the Singapore Income Tax Act. Some examples are:
- Exempt shipping income derived by a shipping company.
- Foreign-sourced dividends, branch profits & service income received by a resident company that satisfies the qualifying conditions.
3. Tax exemptions on foreign-sourced income.
Foreign-sourced income refer to foreign income that does not arise from a trade or business carried on in Singapore.
3.1 Specified foreign income
Under the Foreign-Sourced Income Exemption scheme (FSIE), specified resident taxpayers who receive:
(a) Foreign-sourced dividends.
For the purposes of the tax exemption, a dividend is a foreign-sourced dividend if it is paid by a non-Singapore tax resident company. This treatment also applies to foreign dividend, which may be the income of a trade or business carried on in Singapore by a specified resident taxpayer (e.g. dividends received by a bank tax resident in Singapore). In addition, there is no shareholding requirement to enjoy the tax exemption.
(b) Foreign branch profits.
A foreign branch is a business operation of a Singapore company registered as a branch in a foreign country. Foreign branch profits are profits from a trade or business carried on outside Singapore by the foreign branch. It excludes non-trade or non-business income of the foreign branch.
(c) Foreign-sourced service income.
Service income refers to income from professional, technical, consultancy or other services provided by a specified resident taxpayer in the course of its trade, profession or business. Such service income is considered foreign-sourced if the services are provided through a fixed place of operation in a foreign country. If the services are not provided through a fixed place of operation in a foreign country, the service income will be considered Singapore-sourced even though:
- The income is derived from services rendered outside Singapore; and
- Tax is payable in that foreign country in accordance with the provisions of a DTA with the foreign country.
3.2 Qualifying conditions.
From the 1st of June 2003 would be given tax exemption if they meet these qualifying conditions:
|Scenario||Is the “subject to tax” condition met?|
|- The specified foreign income is taxed in country A.- The income is remitted back to Singapore from Country A.||Condition is met.|
|- The specified foreign income is exempt from tax in Country A.- The income is remitted back to Singapore from Country A.||Condition is not met because no tax is suffered in country A. However, if the tax exemption is given due to substantive business activities carried out in Country A, as a concession, the condition will be met. (See paragraph 8.2(a) on the concession).|
|- The specified foreign income is taxed in country A.- The income is moved or reinvested in country B.- Country B does not levy any income tax on the income.- The income is remitted back to Singapore from country B.||Condition is not met because no tax is suffered in country B.|
(a) “Subject to tax” concession.
Some countries give tax exemption on the income of investors who carry out substantive business activities in their country as tax incentive. These investors would be liable to tax if not for the tax exemption. As a concession, specified foreign income given such tax exemption will be regarded as having met the “subject to tax” condition. This tax concession is applicable from the 30th of July 2004.
(b) Foreign-sourced dividend.
The Comptroller of Income Tax (CIT) will regard the “subject to tax” condition as met although the foreign-sourced dividend may be temporarily deposited into a foreign custodian account before its remittance into Singapore. Temporarily deposited into a foreign custodian account means:
- The dividend is remitted to Singapore within one year from the date it was deposited into the foreign custodian account, and
- The deposit in the foreign custodian account generates no income other than the incidental interest on the standing balance.
Any interest from the foreign custodian account must be segregated and not form part of specified foreign income under the FSIE scheme.
For the purpose of this “subject to tax” condition, tax paid or payable on foreign-sourced dividend received in Singapore includes:
- The dividend tax, which is income tax levied on the dividend by the foreign country of source; and
- The underlying tax, which is income tax paid or payable to the foreign countries on the income out of which the dividend is paid.
3.3 Foreign headline tax rate of at least 15%.
The foreign headline tax rate refers to the highest corporate tax rate of the foreign country in the year the specified foreign income is received in Singapore. It must be at least 15%. The headline tax rate need not be the actual tax rate imposed on the specified foreign income in that country.
Effective from the 31st of May 2006, the headline tax rate is the highest stipulated tax rate in the special legislation instead of the highest tax rate in the main tax legislation. This applies when:
- The specified foreign income received in Singapore is chargeable to tax under a special tax legislation of the foreign country instead of its main legislation;
- The special tax legislation imposes tax at a rate lower than the highest tax rate under the main legislation for other companies; and
- This lower tax rate under the special tax legislation is not a tax incentive for carrying out substantive activities in that foreign country (e.g. special tax incentive for income derived from carrying out manufacturing activities in Special Economic Zones).
3.4 “Beneficial tax exemption” condition.
CIT must be satisfied that the tax exemption would be beneficial to the specified resident taxpayers. Where CIT considers that the tax exemption is not beneficial to them, they can claim reliefs for foreign tax paid.
Annual Reporting Requirements
- Submission of Annual Return – All Singapore private companies are required to file an annual return with ACRA which contains all information regarding the company and its financial accounts reports.
- Submission of Income Tax Return – The deadline for submission is the 31st of October.
Singapore companies are required to file annual audited accounts by a qualified Accountant. However as of 2016, the Singapore Companies Act and ACRA announced that Small Private Companies are now exempt from submitting audited statements.
A business qualifies as a small private company if:
(a) It is a private company within the current financial year and
(b) It meets 2 of the 3 following criteria for the passed two consecutive financial years:
- Total annual revenue less than $10m.
- Total assets less than $10m.
- Less than 50 total employees.
Read more about it here.
Double Taxation Agreements:
Singapore’s comprehensive avoidance of double taxation agreements includes provisions for the exchange of information for tax purposes. Treaty partners may make a request for information for tax purposes to the Comptroller of income tax. Comprehensive agreements have been signed with the following countries:
Australia, Austria, Albania, Bahrain, Bangladesh, Belgium, Brunei, Bulgaria, Canada, China, Chile, Cyprus, Czech Republic, Denmark, Egypt, Estonia, Fiji, Finland, France, Georgia, Germany, Hungary, India, Indonesia, Israel, Italy, Japan, Kazakhstan, South Korea, Kuwait, Latvia, Lithuania, Libya, Luxembourg, Malaysia, Malta, Mauritius, Mexico, Mongolia, Myanmar, Netherlands, New Zealand, Norway, Oman, Pakistan, Panama, Papua New Guinea, Philippines, Poland, Portugal, Qatar, Romania, Russian Federation, Saudi Arabia, Slovak Republic, Slovenia, South Africa, Spain, Sri Lanka, Sweden, Switzerland, Taiwan, Thailand, Turkey, Ukraine, UAE, UK, Uzbekistan, Vietnam
If you require a copy of the double taxation agreements between Singapore and any of the above countries please do not hesitate to contact us.
Singapore Corporate Access: CorpPass
All Singapore companies must first be authorised via CorpPass before they can log into IRAS digital services for the payment of taxes. For a guide on how to register with CorpPass, click here.
Documents Needed from Clients for Bookkeeping:
Applicable for all Jurisdictions for Newly Incorporated Companies:
- Detailed description of the company’s activities.
- Bank Statements for the financial year for all accounts that are under the company’s name.
- Sales Invoices issued from the company during the financial year.
- Purchases Invoices received from the suppliers of the company during the financial year.
- Any expense receipts issued under the company’s name.
- Any agreements and contracts signed by the company during the financial year.
Documents needed from companies that were transferred from another agent:
- All the documents that are mentioned above in Part A.
- A set of the submitted financial statements of the previous financial year that were submitted to ACRA.
- A copy of the Annual Return by ACRA – proves the submission of the accounts.
- A copy of the Notice of Assessment – C Form.
- A copy of the Notice of Assessment – ECI Form.
This guide highlights the annual filing requirements for all Singapore Exempt Private Company (EPC) and private limited company. This is applied to both active and inactive private limited companies.
Conversion of financial accounts into XBRL format (cont’d)
Most of the companies need to file their financial statements in the format of eXtensible Business Reporting Language (XBRL). This is a standard implemented by ACRA to present financial statements.
Filing of Estimated Chargeable Income (ECI)
All Singapore companies are required to declare annual revenue amount and Estimated Chargeable Income (ECI) by filing ECI form with Inland Revenue Authority of Singapore (IRAS) within 3 months of the financial year end for the company.
Under administrative concession of IRAS, for companies with financial year ending October 2012 or after, ECI will not need to be filed if:
- Annual revenue is not more than S$1 million for the financial year, and
- ECI is NIL.
Filing of annual tax return
All Singapore companies must file its annual return with IRAS by 30 November. Singapore adopts the preceding year basis for taxation. The profits for the financial year ending in the preceding year will form the basis for filing the tax return in the current year.
The responsibilities and accountabilities for complying with the annual tax filing requirements are with the directors of a company. Failure to comply with the statutory compliance requirements is an offence and may result in fines or prosecution.
Withholding Tax (WHT)
Withholding Tax (WHT) is a tax suffered by a non-resident on income derived or deemed to be derived from Singapore. It is a tax deducted at source at a certain rate by the payer and remitted to IRAS within a stipulated deadline.
|Type of payments to non-residents||
|Interest, commissions, fees and other payments in connection with any loan or indebtedness||
|Royalty for the use of movable property||
|Know-how payments for the right to use scientific, technical, industrial or commercial knowledge or information||
|Rent or other payments for the use of movable property||
|Management and technical services fees||
|Distributions made by a trustee of any listed real estate investment trust||
|Proceeds from any sale of real property where the non-resident seller is a real property trader||
|Non-resident directors’ remuneration or fees||
15% or 20%
Where an Avoidance of Double Taxation Agreement (DTA) is applicable, the rates specified in the DTA of the respective countries would apply. If the rates in the DTA is applying, Certificate of Residence (COR) from the non-resident is required to be submitted to IRAS in order to prove that it is a tax resident of the treaty country.
WHT must be made to IRAS by 15th of the second month from the date of payment to the non-resident. The date of payment is defined as the earliest of the following dates:
- When the payment is due and payable based on the agreement or contract. In the absence of any contract or agreement, the date of invoice will be deemed the date of payment (credit terms should not be taken into consideration); or
- When payment is credited to the account of the non-resident or any other account(s) designated by the non-resident; or
- The date of actual payment.
The date of payment for director’s fees is the date they are voted and approved (example, company’s AGM).
Summarise important submission dates or deadlines for Singapore companies to take note are as follows:
|Annual General Meeting (AGM)||Within 6 months of the financial year end of a company||
|Annual Return (AR)||Within 1 month of its AGM||
|XBRL||Within 6 months of the financial year end of a company||
|Estimated Chargeable Income (ECI)||Within 3 months of the financial year end of a company||
|Annual Tax Return||30 November||
|Withholding Tax (WHT)||15th of the second month from the date of payment||
Feel free to contact us for more information or support.
CJEU: Defines Key Definitions for Tax & Beneficial Ownership Purposes
Last month, the Court of Justice of the European Union (CJEU) issued a series of important judgments dealing with tax avoidance and beneficial ownership in the context of the EU Parent-Subsidiary Directive (PSD) and the Interest and Royalties Directive (IRD).