A partial tax exemption is given on first S$300,000 of the chargeable
income (CI). Under this scheme, 75% of the first S$10,000 of CI is tax
exempt and 50% of the next S$290,000 of CI is tax exempt:
Income Exemption Exempt amount
First $10,000 @ 75% $7,500
Next $290,000 @ 50% $145,000
Total $300,000 $152,500
The exemption does not apply to Singapore dividends received by
companies enjoying a concessionary tax rate granted by a tax incentive
and income of a non-resident company subject to a final withholding
tax rate.
Qualifying newly Singapore-incorporated companies may enjoy a separate
tax exemption scheme for its first three consecutive years of
assessment. This scheme allows qualifying new companies to enjoy a tax
exemption on the first S$100,000 of CI and on 50% of the next
S$200,000 of CI:
Income Exemption Exempt amount
First $100,000 @ 100% $100,000
Next $200,000 @ 50% $100,000
Total $300,000 $200,000
Resident and non-resident companies are taxed on income accruing in or
derived from Singapore as well as on foreign income remitted (actual
or deemed) into Singapore. Remittance of foreign income (dividends,
branch profits, services income) may be tax exempt when remitted by a
resident company under certain conditions. A company is tax resident
in Singapore if the management and control of its business is
exercised in Singapore.
The tax year, referred to as the year of assessment (YA), runs from 1
January to 31 December of each year. Income for the YA is computed
based on the income derived in the preceding calendar year (known as
the basis year) from all sources. For a trade, business, profession or
vocation with a non-31 December accounting year end, the Inland
Revenue Authority of Singapore (IRAS) normally accepts the accounting
year as the basis year instead of the calendar year. Under such
circumstances, tax is assessed for each YA on the income for the
accounting year preceding that YA.
A company is required to provide an estimate of its CI within three
months after the end of its financial year. The estimated tax payable
can be paid via instalments. The number of instalments available
depends on when the estimated CI is filed within the three-month
window period and on the method of filing. The annual corporate income
tax return must be filed by 30 November of the YA. After the
submission of the tax return, IRAS will issue a notice of assessment
to collect any tax shortfall. The tax payment has to be paid within
one month after the date of issue of the notice of assessment.
STAMP DUTY
Stamp duty is levied on legal instruments relating to the sale,
mortgage or lease of immovable property and the sale or mortgage of
stocks and shares.
DETERMINATION OF TAXABLE INCOME
Singapore-incorporated companies are required to prepare their
financial accounts according to Singapore Financial Reporting
Standards (FRSs). The FRSs are closely modelled on the International
Accounting Standards (IAS) and International Financial Reporting
Standards (IFRS) issued by the International Accounting Standards
Board (IASB). The accounting profits are adjusted in accordance with
Singapore tax rules to arrive at the taxable income.
Companies are required under FRS to prepare their financial accounts
according to their functional currency. Those with non-Singapore
dollar functional currency accounts are required to furnish their tax
computations to the IRAS in that functional currency. Expenses must be
incurred wholly and exclusively for the production of income in order
to be tax deductible unless specifically disallowed or restricted
(e.g. noncommercial motor vehicles, medical expenses, expenses of a
capital nature). Special rules apply to expenses incurred by
investment holding companies, companies that commence business
activities during the financial year and expenses incurred in respect
of foreign sourced income.
INTEREST DEDUCTIONS
Interest is deductible to the extent it relates to funds borrowed for
income-producing purposes. There are no thin capitalisation rules in
Singapore.
STOCK/INVENTORY
There is no prescribed valuation methodology under the domestic income
tax law. As such, IRAS will generally accept the valuation methodology
under FRS.
CAPITAL GAINS AND LOSSES
There is no separate capital gains tax regime in Singapore. Gains of a
capital nature are not subject to income tax. Similarly, expenses of a
capital nature are not deductible for income tax purposes. IRAS will
look at the facts and circumstances of the transaction to determine
whether the gain is capital in nature or a trading gain which is
subject to income tax.
DIVIDENDS
Dividends paid by Singapore companies are exempt from tax in the hands
of the shareholder from 1 January 2008. Foreign sourced dividends
remitted into Singapore may be tax-exempt under certain circumstances.
CAPITAL ALLOWANCE
Capital allowances, instead of accounting depreciation, are granted
for plant and machinery acquired and used in a trade or business. Most
plant and machinery qualify for three-year straight line tax
depreciation. Low cost items (costing not more than S$1,000 per item)
may be tax depreciated in full, subject to a total claim of S$30,000
for each YA. Certain equipment (such as computers, automation
equipment, pollution-control equipment, energy-saving equipment) may
qualify for 100% tax depreciation in the year of acquisition.
Industrial buildings used for qualifying purposes can claim an initial
allowance of 25% plus an annual allowance of 3%.
Current year unused capital allowances can be carried back (up to a
total of S$100,000 for both unused capital allowances and unused tax
losses) to the YA immediately preceding the YA in which the capital
allowance arose. The unused capital allowances can also be carried
forward indefinitely. The utilisation of unused capital allowances
carried back or carried forward is subject to the business continuity
test and the shareholding test. For the YA 2009 and YA 2010, the
unused capital allowances (together with unused losses) can be carried
back to the three YAs immediately preceding YA 2009 or YA 2010 and up
to a limit of S$200,000.
The business continuity test requires the business/trade for which the
capital allowances were granted to be carried on. The shareholding
test requires that there is no substantial change (no more than 50%)
in the ultimate shareholders and their respective shareholdings on
certain dates.
TAX LOSSES
Current year unused trade losses can be carried back (up to a total of
S$100,000 for both unused capital allowances and unused tax losses) to
the YA immediately preceding the YA in which the trade losses were
incurred up. The unused tax losses can also be carried forward
indefinitely. For the YA 2009 and YA 2010, the unused losses (together
with unused capital allowances) can be carried back to the three YAs
immediately preceding YA 2009 or YA 2010, as the case may be) and up
to a limit of S$200,000.
The carry back/forward of tax losses is subject to the same
shareholding test for the carry back/forward of unused capital
allowances.
TAX INCENTIVES
Singapore has a comprehensive list of tax incentives and development
schemes to attract investments and to assist investors in expanding
their businesses. Highlights of key incentives and schemes are
summarised below.
The Regional and International Headquarters Awards encourages
companies to use Singapore as a regional or global base. A customized
package of tax incentives (such as Pioneer Incentive, Development and
Expansion Incentive, Investment Allowances) and grants will be given
to qualifying companies.
The Pioneer Incentive encourages the introduction and growth of new
industries in Singapore. A pioneer enterprise is granted full income
tax exemption on its qualifying profits for up to 15 years.
Investors undertaking projects that will generate significant economic
benefits for Singapore may apply for the Development and Expansion
Incentive. The incentive provides preferential income tax rates on all
qualifying profits above a pre-determined base, for a set period.
Companies investing into new equipment that introduces new technology
to the industry or contributes to its efficiency can apply for
Investment Allowances. This is a capital allowance given to partially
offset the costs of acquiring qualifying equipment within a set period
and is in addition to the normal tax depreciation.
The Approved Royalties Incentive encourages companies to transfer
their cutting edge technology and knowhow to Singapore by providing
full or partial withholding tax exemption for royalty payments or
technical assistance fees payable to non-residents. Investors looking
into developing or bringing new R&D capabilities can apply for the
Research Incentive scheme. The project should result in an increase of
hiring and training of research scientists and engineers in Singapore.
The scheme provides grants to partially offset the R&D project costs
incurred for manpower training, equipment investment, intellectual
property management and professional services.
The Local Enterprise Finance Scheme (LEFS) is designed to assist and
encourage companies (with at least 30% local ownership) to upgrade and
expand their operations. LEFS loans are available for factories,
machinery and working capital.
The Local Enterprise Technical Assistance Scheme (LETAS) encourages
and assists companies (with at least 30% local ownership) in seeking
external expertise to improve their operations. Generally, assistance
provided is up to 50% of the cost of engaging an external expert to
implement quality management and IT systems (e.g. ISO certification,
upgrading computer systems).
FOREIGN TAX RELIEF
Under Singapore's network of 60 comprehensive double tax treaties,
Singapore will grant a tax credit for foreign tax suffered in the
treaty country. The tax credit granted is limited to the lower of the
foreign tax suffered and the Singapore tax payable on that income.
Singapore also grants a unilateral tax credit for certain income
derived from countries that have not entered into tax treaties with
Singapore.
CORPORATE GROUPS
A corporate group (comprising of a Singapore-incorporated holding
company and its Singapore-incorporated subsidiaries) can transfer
current-year unused losses, unused capital allowances and unused
donations within companies in the group. There is a 75% ownership
requirement that need to be maintained to remain within the group.
RELATED PARTY TRANSACTIONS
IRAS issued transfer pricing guidelines for the first time in February
2006. The purpose of the guidelines is to give guidance on applying
the arm's length principle and the recommended preparation and
maintenance of documentation to demonstrate compliance with the arm's
length principle. In February 2009, IRAS issued a supplementary guide
to provide further guidance and application of the arm's length
principle to related party loans and related party services.
Singapore is now in the process of legislating the arm's length
principle for related party transactions in the domestic tax law. This
will give the IRAS the basis for making adjustments if it is of the
opinion that the arms length principle is not applied appropriately by
the taxpayer
WITHHOLDING TAX
Interest, fees, payments in connection with any loan or indebtedness: 15%
Royalty or other payment for the use of movable property: 10% (final tax)
Payment for the use or right to use scientific, technical, industrial
or commercial knowledge or information: 10% (final tax)
Technical assistance and service fees and management fees: Prevailing
corporate tax rate (20% for individuals)
Rent or other payments for the use of movable properties: 15% (final tax)
Time charter fees and voyage charter fees, bareboat charter fees: Nil to 3%
Directors' remuneration/directors' fees: 20%
There is no withholding tax on dividends.
Source : http://www.taxrates.cc
No comments:
Post a Comment