Tax benefits of setting up Singapore company

Setting up a company in Singapore can offer several tax benefits, making it an attractive destination for business incorporation. As of my last update in January 2022, these benefits include:

• Low Corporate Tax Rates: Singapore's headline corporate tax rate is relatively low compared to global standards. The rate has been around 17%.

• Partial Tax Exemption and Tax Rebates: For newly incorporated companies, there are often partial tax exemptions and rebates available. For example, qualifying new start-up companies may pay no tax on the first S$100,000 of chargeable income for each of their first three consecutive years of assessment, with a further 50% exemption on the next S$100,000 of chargeable income.

• No Capital Gains Tax: Singapore does not impose a capital gains tax. This can be particularly advantageous for companies engaged in investment or trading activities where asset appreciation is significant.

• No Dividend Tax: Dividends paid by a Singapore company to its shareholders are not taxed in the hands of the recipients. This is known as a one-tier tax system, where the profits of the company have already been taxed at the corporate level.

• Foreign Source Income Exemption: Under certain conditions, foreign-sourced income (such as foreign-sourced dividends, foreign branch profits, and foreign-sourced service income) received in Singapore by a resident company may be exempt from Singapore tax.

• Extensive Double Taxation Agreements (DTAs): Singapore has an extensive network of DTAs with other countries, which can reduce the tax burden on income earned from cross-border activities.

• Tax Incentives for Specific Industries: Singapore offers various tax incentives for specific industries such as finance, maritime, research and development, and high-tech manufacturing. These incentives can include tax holidays or reduced tax rates for qualifying activities.

• Goods and Services Tax (GST) Refund for Tourists: While not directly a benefit for companies, Singapore's GST refund scheme for tourists can indirectly benefit businesses in the retail and tourism sectors.

• Productivity and Innovation Credit Scheme: Although this scheme has seen changes over the years, it has provided significant tax deductions for investments in innovation, research and development, and automation.

It's important to note that tax laws and incentives can change, and they may vary based on specific circumstances of the business. Therefore, it's advisable to consult with a tax professional or a corporate service provider in Singapore for the most current and applicable advice. Additionally, while tax benefits are important, companies should also consider other factors such as Singapore's political stability, strategic location, skilled workforce, and business-friendly environment when deciding to set up operations there.

T.K is an avid writer on business topics, he writes for Koh Management