Taxes for offshore companies in Singapore 2023

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 significant benefits related to taxes for offshore companies in Singapore, which should be known.

Taxable income in Singapore

Singapore taxes any income earned in the jurisdiction. Concerning 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 the 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. It 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 businesses engaged in investment holding, real estate sales. The company must be registered in Singapore and be a tax resident to take advantage of it.

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 government 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, does impose a tax on profits. Therefore, it isn't possible to say whether profits are income or capital. For example, earnings derived from selling 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 between companies and related parties must be handled cleanly and transparently. Companies must report to the regulator if internal cash transactions for the fiscal year exceed 15 million Singapore dollars. 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 Singapore dollars per fiscal year, the company must prepare and maintain documentation of all transactions related to internal transactions, including those with related parties.

How to open a business and not pay taxes

Contact IT-OFFSHORE, and we will help you to open an offshore company in Singapore in 2023.