Introduction

Singapore stands as a beacon of economic success, consistently ranking as one of the most business-friendly countries in the world. Its robust infrastructure, strategic location, and progressive regulatory environment make it an attractive destination for multinational corporations and emerging enterprises alike. According to the World Bank’s Ease of Doing Business Index, Singapore remains one of the top global economies for business setup and operational efficiency.

However, navigating the tax landscape is crucial for businesses seeking to establish or expand operations in Singapore. This guide provides a comprehensive overview of the tax framework, incentives, and key considerations for global companies eyeing Singapore as their next business hub.

Understanding Singapore’s Tax System

Singapore’s tax regime is built on simplicity, predictability, and competitiveness. The Inland Revenue Authority of Singapore (IRAS) administers tax policies with an emphasis on transparency and efficiency. The following are key elements of the country’s tax structure:

1. Corporate Income Tax (CIT)

• Territorial Tax System: Singapore follows a territorial taxation model, meaning only income derived from or remitted into Singapore is taxable. Furthermore, there are specific tax rules in Singapore which allow for tax exemption on foreign sourced dividend income, foreign sourced service fee income and foreign sourced Branch profits received into Singapore by a Company tax resident in Singapore.

• Flat Rate: Singapore imposes a corporate tax rate of 17%, one of the lowest in the world, compared to 21% in the US and 25% in China.
• Tax Exemptions & Incentives: Start-ups and small businesses benefit from the Partial Tax Exemption (PTE) and Start-Up Tax Exemption (SUTE) schemes:
  • Partial Tax Exemption (PTE) for all companies:
    • First SGD 10,000 of chargeable income: 75% exemption
    • Next SGD 190,000: 50% exemption
    • Effective tax savings: SGD 102,500 on the first SGD 200,000 of chargeable income
  • Start-Up Tax Exemption (SUTE) for qualifying new businesses:
    • First SGD 100,000 of chargeable income: 75% exemption
    • Next SGD 100,000: 50% exemption
    • Effective tax savings: SGD 125,000 of the first SGD 200,000 of chargeable income in the first three years

In addition to the partial and start-up tax exemption scheme discussed above, for the Year of Assessment 2025, a CIT Rebate of 50% of the corporate tax payable will be granted to all taxpaying companies, whether tax resident or not. Active companies that have employed at least one local employee in 2024, will receive a minimum benefit of SGD 2,000 in the form of a CIT Rebate Cash Grant. The total maximum benefits of CIT Rebate and CIT Rebate Cash Grant that a company may receive is SGD 40,000.

Based on the above, it can be noted that even though the corporate tax rate imposed on all companies (tax resident or non-resident) is at a flat rate of 17%, the effective tax rate incurred by companies doing business in Singapore goes way below the flat rate of 17% after taking into the partial/ start-up tax exemption schemes and CIT rebate granted by the Singapore government.

Furthermore, given that Singapore tax law provides for tax exemption on certain types of foreign income remitted into Singapore (as explained above), this makes Singapore a very favourable place to do business whereby Companies are intending to use Singapore as a springboard to move into the Asia-Pacific region.

2. Goods and Services Tax (GST)

• GST Rate: Singapore’s GST increased to 9% as of January 1, 2024, This is lower than the VAT rates in the UK (20%) and Germany (19%).
• GST Registration: Businesses with an annual taxable turnover exceeding SGD 1 million to register for GST on compulsory basis.
• Zero-Rated and Exempt Supplies: Certain industries, such as financial services and export-oriented businesses, benefit from zero-rated or exempt GST treatment.

3. Withholding Tax (WHT)

Under domestic tax law, Singapore levies withholding tax on the following payments made to non-residents, which includes:

• • Royalties: 10%
  • Interest payments: 15%
  • Technical service fees/ management fees: 17% (for onshore services rendered in Singapore)
  • Rental or other payments for the use of movable property: 15%

Reduced WHT under Tax Treaties: Singapore has over 90 Double Taxation Agreements (DTAs) that reduce these domestic WHT rates on payments made to non-residents (subject to meeting tax treaty conditions).

4. Personal Income Tax

• Singapore follows a progressive personal tax system, with rates ranging from 0% to 24% for tax residents.
• Top tax rate of 24% applies to incomes exceeding SGD 1 million, making Singapore an attractive destination for high-net-worth individuals. Compared to countries in Europe such as the United Kingdom where the highest marginal tax bracket goes up to 40%, Singapore’s tax rates are relatively low and attractive.
• Employment income of non-residents is taxed at a flat 15% or progressive resident rates (whichever is higher).
• As a non-resident individual working in Singapore for 60 days or less in a calendar year, the individual will be exempt from tax on his/her employment income derived from Singapore during that period.
• As a tax resident individual of Singapore, the individual is exempt from tax on all foreign-sourced income (e.g. Rental income from overseas property) received into Singapore but this excludes such income received by the individual through a partnership in Singapore.

5. Capital Gains and Dividend Tax

• No Capital Gains Tax: Unlike China (20%) and France (30%), Singapore does not tax capital gains (unless the gains fall within the scope of Section 10L of the Income Tax Act (“ITA”) – as explained below), making it an attractive location for holding investments.
• Under Section 10L of the ITA, gains from the sale or disposal of foreign assets (excluding intellectual property rights) received in Singapore on or after 1 January 2024 by a covered entity that has inadequate economic substance in Singapore will be taxed (unless specific exclusions apply) even if such gains are capital in nature or such gains are exempted from tax pursuant to the tax exemption under Section 13W of the ITA (further discussed below).
• Subject to the provisions of Section 10L of the ITA, Section 13W of the ITA provides certainty regarding the non-taxation of gains arising from the disposal of ordinary shares in an investee company made between 1 June 2012 and 31 December 2027 (both dates inclusive), subject to qualifying conditions. In the recent Singapore budget 2025, it was announced that Section 13W of the ITA was further expanded to cover the gains from the disposal of preference shares and the sunset date of 31 December 2027 has been removed. As such, this enhancement of Section 13W of the ITA gives investors more flexibility in structuring their equity investments.
• No Dividend WHT: Dividends paid by Singapore-tax resident companies to non-resident shareholders are exempt from WHT in Singapore.

Tax Incentives for Foreign Businesses

Singapore has developed multiple tax incentives to attract foreign investment. Some key incentives include:

1. Global Trader Programme (GTP)

• Offers a reduced concessionary tax rate of 5% or 10% on qualifying trading income for global trading companies.

2. Regional Headquarters (RHQ) and International Headquarters (IHQ) Incentives

• Companies establishing regional headquarters in Singapore can benefit from a concessionary tax rate of 5% to 15% on qualifying income.

3. Research & Development (R&D) Tax Incentives

• Under the Enterprise Innovation Scheme (“EIS”) granted by the IRAS from YA2024 till YA2028, businesses can claim up to 400% tax deductions/allowances for qualifying R&D activity undertaken in Singapore, registration of intellectual property rights and Acquisition and Licensing of Intellectual Property rights.

• Companies doing business in Singapore should take advantage of this EIS scheme to see if they meet the qualifying criteria to enjoy the tax benefits from the EIS.

4. Financial Sector Incentives

• The Financial Sector Incentive (FSI) scheme provides a 5% or 10% concessionary tax rate for financial institutions engaged in qualifying activities, reinforcing Singapore’s role as a financial hub.

5. Refundable Investment Credit Scheme (“RIC” scheme)

• The RIC scheme seeks to enhance Singapore’s attractiveness for investments. The RIC scheme encourages companies to make sizeable investments that bring economic activities to Singapore, in key economic sectors and new growth areas.
• Examples of such activities include – investing in new productive capacity, expanding or establishing the scope of activities in digital services, professional services, and supply chain management, carrying out of R&D and innovation activities.
• When the RIC award is granted, it will be for a qualifying period of up to 10 years and the credits under this scheme can be offset against the Company’s corporate income tax payable. Any unutilised credits will be refunded to the Company in cash within 4 years from the date when the Company satisfies the conditions for receiving the credits.
• Companies can receive up to 50% support on each qualifying expenditure category. The total quantum of RIC that a company is eligible for will be determined by EDB or Enterprise SG.

Double Taxation Agreements (DTAs) and Transfer Pricing

1. Extensive DTA Network

• Singapore has over 90 DTAs covering major economies like India, China, and the UK.
• These treaties eliminate or reduce withholding taxes and provide certainty on cross-border taxation.
• For example, if a Company sets up its headquarters in Singapore and has overseas business operations in the Asia-Pacific region like Indonesia, Philippines, India, Malaysia and Vietnam, there could be cross border issues such as the inter-charging of service fees/ management fees and global movement of staff between these countries.  As a result of such transactions and global mobility of staff between countries, there is a possibility of the Singapore company having a permanent establishment in these various countries. The Double taxation agreement between Singapore and such network countries becomes very useful in such a situation to determine whether the permanent establishment exposure of the Singapore company can be reduced/ mitigated in the foreign countries and thereby reducing the overall worldwide effective tax rate of the Group through effective tax planning and management.

2. Transfer Pricing Regulations

• Singapore follows the arm’s length principle in transfer pricing.
• Companies must prepare contemporaneous transfer pricing documentation to substantiate intercompany transactions.
• The Advance Pricing Agreement (APA) program allows businesses to obtain certainty on transfer pricing methods.

 Emerging Trends

1. Carbon Tax and ESG Incentives

• Singapore introduced a carbon tax of SGD 5 per tonne of emissions, increasing to SGD 50-80 per tonne by 2030.
• Businesses engaging in green projects can benefit from ESG grants and tax deductions.
• Singapore’s Green Finance Action Plan has allocated SGD 100 million to sustainability-linked financing incentives.

2. Digital Services Tax and BEPS 2.0

• Singapore has aligned its policies with the OECD’s Base Erosion and Profit Shifting (BEPS) 2.0 framework, implementing a global minimum tax of 15% for large multinational enterprises (MNEs) from January 1, 2025.
• Digital service providers must assess indirect tax obligations under GST for digital services.

 Key Takeaways

• Leverage Singapore’s tax incentives: Utilize exemptions, rebates, and reduced tax rates to maximize profitability.

• Ensure compliance with transfer pricing regulations: Maintain proper documentation to align with IRAS requirements.
• Monitor international tax developments: Stay updated on BEPS 2.0 and ESG-related tax obligations.
• Optimize business structure: Choose the right entity type to enhance tax efficiency and operational flexibility.
• Capitalize on Singapore’s strategic location: The country’s port and logistics infrastructure rank among the top 5 globally, making it a prime hub for trade and investment.

Conclusion

Singapore’s tax landscape is designed to attract businesses while maintaining compliance with global tax standards. With low corporate tax rates, an extensive treaty network, and forward-looking tax policies, Singapore remains a premier destination for companies looking to establish a strong foothold in Asia. By understanding and strategically leveraging the country’s tax framework, businesses can optimize operations, drive long-term growth, and ensure sustainable profitability in an evolving global economy.

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