The tax system in Singapore

What sort of taxation ?

The creation of an offshore company in Singapore offers several tax advantages.

1. On profits earned in the territory

In the first 3 years of the company, profits up to SGD 100 000 are exempt from taxes. Then between SGD 100 001 and SGD 300 000, the company will have to pay 8.5%, and finally 17% above SGD 300 000.

To benefit from this exemption, the company must satisfy the following criteria:

• Be incorporated in Singapore
• Be tax resident in Singapore
• Not have more than 20 shareholders, at least one of which holds a minimum of 10% of the shares.

2. On profits earned overseas.

Companies are completely exempt from all taxes on all profits earned overseas as well as profits from financial securities.

In addition, Singapore has opted for a single level tax policy; that is, if the company was taxed on the profits, dividends may be distributed to the shareholders which will be free of taxes.

The tax declaration

Every year Singapore companies must provide the following documents to IRAS, the Inland Revenue Authority of Singapore :

• Estimate of the company’s taxable income (ECI)
• The declaration of taxes on the company’s income (Form C)

The estimate of taxable income (ECI) must be sent within 3 months following the end of the company’s financial year; and that date must be notified to IRAS if it isn’t 31 December.
If the ECI is submitted well within the time limits, the company will have the opportunity of paying its taxes in several instalments; the earlier the ECI is sent, the more opportunity the company will have to spread the payments.

Then in March or April each year IRAS sends Form C, which is the company’s declaration of income. The declaration must be completed by the 30 November each year. The tax declaration must be accompanied by the company’s accounts, audited or not in accordance with the level of profits earned.

Finally, Singapore allows companies to declare their income directly online, on the IRAS website.