If you intend to start a company in Singapore, Singapore offers excellent tax benefits for small-to-midsize enterprises (SMEs). If the profits of the company is about S$300,000, the overall tax rate is as low as 17%. Startups that meet certain qualifying conditions can claim for tax exemption under the Tax Exemption For Start-ups scheme.
Singapore has one of the most competitive tax regimes in the world and a number of interesting tax incentive schemes to attract investors. However, any research prior to where to establish a business operations would not be complete without a thorough investigation of the tax impact. This should reflect the following:
- Tax aspects of the investor’s home country
- Tax aspects in the country where the investment is made
- How the tax regimes interact
- Tax impact to the individual taxation of executives
Singapore adopts a ‘territorial’ basis of taxation, i.e. companies and individuals are taxed on Singapore sourced income. Foreign source (‘offshore’) income is not taxable until received in or remitted into Singapore.
Tax exemption applies on foreign-sourced dividends, foreign branch profits, and foreign-sourced service income of the following conditions are met:
The foreign income was subject to tax in the foreign country from where it was received. A company is a tax resident of Singapore if the control and management of its business is exercised in Singapore. Foreign income earned by a Singapore company may be subjected to taxation twice – once in the foreign country, and a second time when the foreign income is remitted into Singapore.
Singapore has signed several Double Taxation Agreements (DTA) which serve to relieve double taxation of income and provide for reduction or exemption of tax on certain types of income. See here for a List of Singapore’s DTAs.