TAXATION IN SINGAPORE

• Presented By

Aditya Tiwari Pratik Roy

About Singapore

Conti..• GDP (PPP) - $ 327.557 billion

• Total Area - 716.1 km • Per capita - $ 61,046

• Population - 5,399,200

• HDI - 0.895

• President - Tony Tan Keng Yam

• Prime Minister - Lee Hsien Loong

History of Taxation

• The end of World War II highlighted the need for new infrastructure and fresh sources of revenue.

• In 1947 Income Tax was introduced in Singapore under the British colonial government.

• 1948 the Income Tax Act was imposed.• With Independence in 1965, Singapore promoted a policy

of rapid industrialisation and building an export oriented industrial base.

• The Economic Expansion Incentives Act was introduced in 1967

• Goods and Services Tax (GST) in 1994.

Singapore Tax Governing Authority

Singapore Tax Governing Authority

• The Inland Revenue Authority of Singapore (IRAS), was formed in 1960.

• An efficient tax administrator and a service-friendly tax collector

• Responsible for collecting income tax, property tax, goods & services tax, estate duty, betting taxes and stamp duties.

• Plays a role in tax policy formulation by providing policy inputs.

TAXES PAYABLE IN SINGAPORE

1. Income Tax 6. Goods & Services Tax (GST)

2. Property Tax 7. Betting Taxes

3. Estate Duty 8. Stamp Duty

4. Motor Vehicle Taxes 9. Others

5. Customs & Excise Duties

INCOME TAX

TAX JURISDICTION

Singapore essentially adopts a “territorial” tax system.

Generally, income is taxable in Singapore if it is:-a. accrued in or derived from Singapore; orb. received in Singapore from outside

Singaporeand falls in one of the heads of charge.

HEADS OF CHARGE

Gains or profits from any trade, business, profession or vocation

Employment income (including stock options, accommodation allowance and car)

Dividends, interests or discount; Pension, charge or annuity Rent royalties, premiums and any other

profits arising from property Any gain or profits of an income nature

YEAR OF ASSESSMENT

Singapore adopts a preceding year basis of assessment.

Tax for any given year of assessment is paid on the income earned:

– for individuals: in the preceding calendar

– for companies: in the financial year ending in the year preceding that year of assessment

TAXATION OF INDIVIDUALS

OVERVIEW

Different tax rates and tax treatment apply to tax resident and non-tax resident.

Who are tax residents ? – Singapore citizens – Permanent residents who established

Singapore to be their permanent home– Foreigners who stayed or worked in

Singapore for more than 183 days in the calendar year

TAX TREATMENT

Tax Resident Non- Tax Resident

1. Expenses* Yes Yes

2. Donations** Yes Yes

3. Personal Reliefs Yes No

4. Tax treaty between Singapore and another country

Yes No

* Expenses must be wholly and exclusive incurred in the production of income and not specifically prohibited.** Donations must be a approved charity or a registered grant-making philanthropic organisation.

Personal income tax rates

TAX RATES

Tax residents – Taxed at a progressive tax rate– First $20,000 at 0% and subsequent amounts

at marginal tax rate ranging from 3.5% to 20% with effect from YA 2010

Non-Tax residents – Employees : 15%– Director’s fees, consultation fees and all other

income: 20%

TAXATION OF CORPORATIONS

OPTIONS AVAILABLE FOR FOREIGN COMPANIES

Foreign companies can carry out business in Singapore in one of the following forms:-

Representative Office;Permanent Establishment;Subsidiary company or Branch.

REPRESENTATIVE OFFICE

Representative office is:-

(a) not allowed to engage in commercial activities or provide any services for

a fee; and

(b) generally not regarded as a taxable entity for tax purposes.

PERMANENT ESTABLISHMENT

Singapore follows the OECD model tax convention - Generally, a foreign company would be liable to tax in Singapore if it has a permanent establishment in Singapore and the permanent establishment has income accrued or derived from Singapore or any foreign income received in Singapore.

In Singapore, permanent establishment is defined as a fixed place where a business is wholly or partially carried on.

Permanent establishment includes:(a) a place of management;(b) a branch;(c) an office;(d) a factory;(e) a warehouse;(f) a workshop;(g) a farm or plantation;(h) a mine, oil well, quarry or other place of extraction of natural resources; and(i) a building or work site or a construction, installation or assembly project.

PERMANENT ESTABLISHMENT

Companies (whether foreign or local) are taxed at a flat rate of 17% on their chargeable income with effect from 2009.

Who are tax residents ? – Companies whose control and management

is exercised in Singapore.

Like individuals, different tax treatment apply to tax resident companies and non-tax resident companies.

BRANCH AND SUBSIDIARY

Changes in Corporate income tax rates

1997-00 2001 2002 2003-04 2005-06 2007-09 2010-13

26% 25.5% 24.5% 22% 20% 18% 17%

• No double-taxation for stakeholders.• Tax paid by a company on its chargeable income is

the final tax and all dividends paid by a company to its shareholders are exempt from further taxation.

Single-tier income tax system

Current Tax Rates in SingaporeIncome Tax Rate

Tax rate on corporate profits for up to 300,000 SGD 8.5%

Tax rate on corporate profits above 300,000 SGD 17%

Tax rate on capital gains accrued by the company 0%

Tax rate on dividend distribution to shareholders 0%

Tax rate on foreign-sourced income not brought into Singapore

0%

Tax rate on foreign-sourced income brought into Singapore 0 – 17% subject to conditions

Tax Resident Non- Tax Resident

1. Expenses* Yes Yes

2. Donations** Yes Yes

3. Capital allowance Yes Yes

4. Tax treaty between Singapore and another country

Yes No

* Expenses must be wholly and exclusive incurred in the production of income and not specifically prohibited.** Donations must be a approved charity or a registered grant-making philanthropic organisation.

TAX TREATMENT

CAPITAL ALLOWANCES

Capital allowance is granted in place of depreciation.

To claim for capital allowance:-- capital expenditure was incurred on the provision of plant and machinery; and- the plant and machinery is used for the claimant’s trade, business or profession.

WITHOLDING TAX

Generally, the payer is obliged to withhold tax where he is liable to pay the following types of income to another person not known to him to be resident in Singapore:- interest;- royalties and know-how payments;- fees for technical assistance or services; and- management fees.

WITHHOLDING TAX RATE

Depending on the nature of the payment, the withholding tax rate applicable to a payment made to a non-resident could be 10%, 15%, 17% or the rate specified under a tax treaty.

GOODS AND SERVICES TAX

SCOPE OF GST

GST is chargeable on any supply of goods or services made in Singapore

GST is a consumption tax that is levied on the supply of goods and services in Singapore and the import of goods into Singapore.

GST is an indirect tax, expressed as a percentage (currently 7%) applied to the selling price of goods and services provided by GST registered business entities in Singapore.

Annual Turnover exceeds S$1 million.

IMPORT OF SERVICES

Generally, the importation of services in Singapore is subject to GST.

A person who belongs in Singapore has to account for GST if a person who belongs outside Singapore supplies a service to him.

EXPORT OF SERVICES

• Where a person supplies an international service to a person who belong outside Singapore, such service is zero-rated.

• International services broadly includes, inter alia,:- services connected to international transportation;- services connected with offshore goods;- services supplied to persons and business abroad;

and- international telecommunication services.

PROPERTY TAX

OVERVIEW

A tax on immovable properties including all houses, land, buildings and tenements but excluding inter alia, chattels and industrial plant and machinery used for the manufacture of goods.

PROPERTY TAX RATES

Current Tax Rate:

- 4% per annum of one owner-occupied residential property’s annual value- 10% per annum of a property’s annual value

STAMP DUTIES

OVERVIEW

A tax imposed on certain legal and commercial instruments.

The main categories of instruments currently liable to tax are sale or any disposal (including gifts) of immoveable property and shares.

STAMP DUTIES RATE The rates of duties on the various types of instruments

range from a fixed amount of $10 on an instrument of partition to ad valorem rates depending on the amount or value of the consideration paid in a sale and purchase agreement.

Ad valorem: A tax based on the assessed value of real estate or personal property. Ad valorem taxes can be property tax or even duty on imported items. Property ad valorem taxes are the major source of revenue for state and municipal governments.

CUSTOMS AND EXCISE DUTIES

Overview

• Excise duties are imposed principally on motor vehicles, tobacco, petroleum products and liquors.

• All dutiable goods imported into or manufactured in Singapore are subject to Customs duty and/or Excise duty in accordance with the Schedule to the Singapore Customs Duties Order

Calculation and Rate• An ad valorem rate is a percentage of the Customs

value of the imported goods such as 20% ad valorem. A specific rate is a specified amount per unit of weight or other quantity such as $293.00 per kg.

• Formulae for computation of duty payable on liquors:• a) Formula

Duty = Total quantity in litre x $70.00 x % of alcoholic strength

• b) Example : Importation of 100 litres of Port Wine with alcoholic strength of 19%Duty = 100 x $70.00 x 0.19 = $1,330.00

Conclusion

• The ease of setting up and operating businesses is a prime motivator. Another central determinant is Singapore’s tax regime – well-known for its attractive corporate and personal tax rates, tax relief measures, absence of capital gains tax, one-tier tax system, and extensive double tax treaties.

Webiliography

• http://www.customs.gov.sg• http://www.guidemesingapore.com• https://www.iras.gov.sg• http://en.wikipedia.org/wiki/Singapore