Singapore's tax system and its advantages
Many investors choose the country to do business in because of the features of the tax system in Singapore in 2021. There is an opportunity to use various tax incentives and apply legally low tax rates. Taxes in Singapore in 2021 apply to all personal income, including corporations. To learn more about the nuances of taxation, contact our experts at IT-OFFSHORE.
Applicable rates in Singapore
The tax rate on corporate income under $300,000 is 8.5%. If the amount exceeds that number, the rate is 17%. Capital gains, dividends, and income from foreign sources are taxed at zero rate.
In Singapore, there is a territorial principle of taxation. This means that income that has been derived from Singaporean sources is taxed predominantly. The highest rate of levy on income does not exceed 17%. The country has a one-tier system of taxation for corporations.
Rates on income of individuals range from 0 to 20%. Interest and royalties, rent for movable property and commissions for asset management and technical services are taxed. There is no capital gains tax. The state has made many agreements to avoid double taxation.
Benefits available to resident firms:
- Exemption from income tax if company is less than 3 years old;
- Dividend tax exemption;
- Profits from foreign sources are not taxed.
The base is established at the end of the tax period, and the amount of the levy is calculated based on the previous year. It is possible to use preferential programs to legally reduce taxation. Dues may be reduced for young companies operating for less than 3 years, and there are also industry incentives.
Pros and cons of registering a company
One of the main advantages of registering a company in Singapore is the low income tax rates. Through incentives for young companies, payments can be reduced significantly. The rate from the first 100,000 Singapore dollars will be 4.25%, and from the next - 8.5%. After 3 years, it is possible to take a partial tax deduction.
There is 7% VAT in Singapore. Not everyone is required to pay it. Firms are not required to pay the fee, as long as the annual turnover is less than 1 million Singapore dollars.
Requirements for documentation in the country has not changed for a long time, and all reporting can be done remotely. Entrepreneurs who start their first company in Singapore can support such as grants. Participation in concessional lending programs is offered.
The territory is geographically advantageous and relevant for international entrepreneurship. There are free trade zones. Opportunities for further immigration are offered.
The disadvantage of registering a company is that a fairly large investment is required. Office rental prices are quite high. Banks are demanding their customers to provide a large number of documents required to open an account. To learn more about tax optimization, contact our specialists at IT-OFFSHORE.