A company is taxed on the income earned in the preceding financial year.
The Year of Assessment (YA) is the year in which the income is assessed to tax. The income and expenses during the financial year is used to assess the amount of tax. In tax terms, this financial year is known as the “basis period“.
The basis period is a 12-month period preceding the YA.
Examples Based on Different Financial Year Ends
|Financial Year End||Basis Period||YA|
|31 Jan of each year||1 Feb 2014 – 31 Jan 2015||2016|
|30 Jun of each year||1 Jul 2014 to 30 Jun 2015||2016|
|31 Dec of each year||1 Jan 2015 – 31 Dec 2015||2016|
Annual Filing to IRAS
All companies need to submit two corporate income tax forms to IRAS every year:
Estimated Chargeable Income (ECI) form within three months from the company’s financial year end except for (a) companies that fulfil the conditions under the Administrative Concession; and (b) certain entities that are not required to file ECI; and
Corporate Income Tax Returns commonly known as Form C-S or Form C by 30 Nov of each year except dormant companies for which IRAS has waived the requirement to file. Companies must ensure that the form gives a full and true account of the company’s income.
Proper records of its financial transactions and retain the source documents, accounting records and schedules, bank statements and any other records of transactions connected with your business must be maintained and a company must retain the records for a period of five years from the relevant YA.
Singapore adopts a one-tier corporate tax system under which tax paid by a company on its chargeable income is the final tax. All dividends paid by a company are exempt from tax in the hands of the shareholders.
A company is taxed at a flat rate of 17% (2010) on its chargeable income regardless of whether it is a local or foreign company.
Capital gain such as gains on sale of fixed assets or gains on foreign exchange on capital transactions is not taxable.
Some Income such as foreign-sourced dividends, branch profits & service income received by a resident company that satisfies the qualifying conditions may be exempted from tax under the provisions of the Singapore Income Tax Act.
- Productivity and Innovation Credit
- Business expenses
- Capital allowances
- Industrial building allowance
- Land intensification allowance
- Unutilised losses, capital allowances and donations
- Group relief
- Loss carry-back relief
Tax Exemption Schemes
(1) Tax Exemption Scheme for New Start-Up Companies
A qualifying company can claim
- full tax exemption on the first $100,000 of normal chargeable income (excluding Singapore franked dividends) for its first three consecutive YA.
- a further 50% exemption is given on the next $200,000 on a qualifying company’s normal chargeable income (excluding Singapore franked dividends).
|First $100,000||@ 100%||= $100,000|
|Next $200,000||@ 50%||= $100,000|
How to qualify for the start-up exemption
- be incorporated in Singapore
- be a tax resident in Singapore for that YA
- have no more than 20 shareholders throughout the basis period for that YA where
- all of the shareholders are individuals beneficially and directly holding the shares in their own names; OR
- at least one shareholder is an individual beneficially and directly holding at least 10% of the issued ordinary shares of the company.
(2) Partial Tax Exemption for all companies
A partial tax exemption is given to companies on normal chargeable income (excluding Singapore franked dividends) of up to $300,000 as follows:
|First $ 10,000||@ 75%||= $ 7,500|
|Next $290,000||@ 50%||= $145,000|
(3) Corporate Income Tax Rebate
Corporate income tax rebate is given to all companies to help them with rising business costs and is applicable for YA 2013 to YA 2017
All companies will receive a 30% corporate income tax rebate, capped at:
- $30,000 per YA for YA 2013 to YA 2015
- $20,000 per YA for YA 2016 and YA 2017
Corporate income tax rebate is computed on the tax payable after deducting tax set-offs (e.g. foreign tax credit).