Singapore is not considered an offshore haven in the full sense of the word. Corporate tax (17%) and VAT (7%) must be paid. At the same time the jurisdiction offers many interesting benefits that relate to taxes for offshore companies in Singapore, the existence of which should be known.
What income must be paid for
Singapore taxes any income earned in the jurisdiction. With regard to profits earned in another country, no tax is due, except in the following cases:
- The profits have been transferred to Singapore banks or brought into the jurisdiction by other means;
- The profits have been used to pay off debt in Singapore;
- Movable property (e.g. cars) has been purchased with the profits and brought into the country.
Taxes do not have to be paid if it has already been paid in the country where the income was earned and the amount was at least 15%.
What is SUTE and PTE
A company is a separate legal entity and does not depend on the nationality of the participants. This means: if the company has taxable income, the rate is 17%. At the same time, the government provides benefits to startups under the SUTE scheme, which has been in effect since 2020. The enterprise receives such benefits:
- 75% on the first $100,000 of taxable income;
- 50% on the next $100,000 of taxable income.
The SUTE exemption is available to almost all startups, except for businesses that are engaged in investment holding, real estate sales. To take advantage of it, the company must be registered in Singapore and be a tax resident.
The PTE scheme exemption for startups also provides a 75% exemption for the first $100,000. Thereafter, the business is given a 50% exemption on the next $190,000 of taxable income.
Other tax incentives
The government has also introduced other tax attractions for offshore businesses:
- Tax exemption for profits derived from international shipping.
- A preferential rate for financial treasury firms.
- Reduced rate for international trading enterprises.
- Tax incentives for the financial sector.
To qualify for these benefits offered by the taxation in Singapore in 2023, the main economic activity must be carried out in the jurisdiction.
What's important to know about capital gains tax
Singapore does not tax capital gains, but it does impose a tax on profits. Therefore, it is not possible to say for sure whether profits are income or capital in nature. For example, earnings derived from the sale of shares for cash may be regarded as profits, especially if earned in Singapore. Therefore, each case is different and requires consultation with a lawyer.
What is important to know about capital gains tax
Singapore does not tax capital gains, but it does tax profits. Therefore, it is not possible to say exactly whether profits are income or capital in nature. For example, earnings derived from the sale of shares for cash may be regarded as profits, especially if earned in Singapore. Therefore, each case is different and requires consultation with a lawyer.
Intra-company financial transactions
Monetary transactions within a company or with related parties must be handled cleanly and transparently. Companies must report to the regulator if the amount of internal cash transactions for the fiscal year exceeds 15 million Singdollar. For this purpose a special reporting form has to be filled out and submitted with the tax return to IRAS.
If the profit from trade or business exceeds 10 million Singles per fiscal year, the company must prepare and maintain documentation of all transactions, which concern internal transactions, including those with related parties.
How to open a business and not pay taxes
To open an offshore company in Singapore in 2023, contact IT-OFFSHORE and we will help you.