1) One of the LOWEST TAX RATES in the world
With effect from 2010, Singapore corporate income tax rate has further reduced from 18% to 17%, being one of the lowest tax rates in the world. Singapore Government has declared a new start-up tax exemption and partial tax exemption for newly incorporated and existing companies:
Tax Exemptions for Newly Start-up Companies in Singapore vs Malaysia
4.25% tax on first S$100K chargeable income
For a newly incorporated company (1), the corporate income tax rate is 4.25% on the first S$100k (≈RM300k) of chargeable income for the first 3 years of assessment consecutively.
8.50% tax on chargeable income of above S$100K up to S$200K
The newly incorporated companies are continued to enjoy for the partial tax exemption which effectively translates to about 8.5% tax rate on
chargeable income of above S$100,000 up to S$200,000 per annum. The chargeable income above S$200,000 will be charged at the normal
headline corporate tax rate of 17%.
Tax Exemptions for Existing Companies in Singapore vs Malaysia
The 4th years of assessment and onwards, the companies pay only 4.25% tax on their first S$10,000 of chargeable Income and 8.50% for the next
S$190,000. The chargeable income above S$200,000 will be charged at the normal headline corporate tax rate of 17%.
1. (a) It is incorporated in Singapore and a tax resident of Singapore for that Year of Assessment. (b) It has no more than 20 shareholders throughout the basis period
relating to that Year of Assessment and all its shareholders are individuals throughout the basis period relating to that Year of Assessment; or there is at least one
individual shareholder with a minimum of 10% shareholding. c) Its principal activity is not related to (i) investment holding, or (ii) property developer for sales, investment, and both.
2) Engage in TRIANGULAR or TETRAGONAL trade
The companies engaged in international transactions among two or more countries, for instance, the companies purchase goods from e.g. China,
and then sell them to e.g. America or trade domestically, Malaysia. This is when the companies need a lower tax trading company (2) to act as the intermediary to issue invoice and packing list in order to strengthen their competitive power in the international or local market.
2. To consider a company as resident in Singapore, the control and management of the business must be exercised in Singapore. Though the term “control and
management” is not clearly defined by authorities, a generally accepted consensus is that it refers to the policy level decision making at the level of Board of Directors.
Overview of government incentives
Depending on your company’s business plans, you may consider various tax incentives and grants as follows:
4) TAX EXEMPTION on Dividend declared from Singapore
Dividend declared out of the profit derived from Singapore Company and received in Malaysia is exempted from tax (3).
Singapore has entered into Double Taxation Agreement (“DTA”) with 88 countries. Please refer to APPENDIX I.
6) AUDIT EXEMPTION of a Singapore Company
A company incorporated on or after 1 July 2015, if a private company that fulfils at least two of the following three quantitative criteria in each of
the immediate past two financial years is exempted from audit (4)
: (a) Total annual revenue of not more than SGD 10 million; (b) Total assets of
not more than SGD 10 million; (c) Number of employee of not more than 50.
3. Section 127 (1) – Exemptions from tax. Any income specified in Part 1 of Schedule 6 shall be exempt from tax. Part 1 Schedule 6, para 28 (1), Income of any
person, other than a resident company carrying on the business of banking, insurance or sea or air transport, for the basis year of assessment derived from sources
outside Malaysia and received in Malaysia Part 1 schedule 6, para 28(1), exempt income of any person derive from sources outside Malaysia and received in
Malaysia (See also exception).
4. Existing safeguards will however be retained, such as requiring all companies to keep proper accounting records, and empowering shareholders with at least 5%
voting rights to require a company to prepare audited accounts.
