Paying taxes is essential because it helps to fund public services and infrastructure, which benefit everyone. It also allows the government to provide tax breaks and other incentives to businesses, which can help them to grow and create jobs. Corporate tax in Singapore is imposed on the taxable income of all companies resident in Singapore and non-resident companies carrying on business in Singapore. Read on to learn more.
What is corporate tax?
Corporate tax is a tax levied on the taxable income of companies. It is one of the major sources of government revenue. A company’s taxable income is its total income less allowable expenses.
What is the difference between income tax and corporate tax?
Personal income tax is levied on individuals, while corporate tax is levied on companies. Personal income tax rates are progressive, which means that the higher your income, the higher your tax rate. Corporate tax rates are flat, which means that all companies are taxed at the same rate regardless of their income.
What is the effective corporate tax rate (taxable income)?
The corporate tax rate is 17% of it’s chargeable income (‘CI’). Chargeable income (‘CI’) is the amount of income that is subject to tax after allowable expenses have been deducted.
Regulation for reporting and declaring corporate tax?
You need to report and declare corporate tax by 30th November of the year following the assessment year. For example, if your company’s financial year ends on 31 December 2021, you will need to file your income tax return by 30 November 2022.
What if I fail to file Singapore corporate tax?
Failure to file Singapore corporate tax return to IRAS by the due date is an offence. IRAS may take enforcement actions such as making an estimation of assessment based on past income which may be higher, fined for late filing not exceeding S$5,000, issue notice to company’s director to furnish IRAS information and / or court summon if you fail to file by the due date.
Late payment of Singapore tax
If you do not pay your corporate tax by the due date, you will have to pay a late payment penalty of 5% of the unpaid tax, plus interest at the prevailing rate. IRAS may appoint your agent (e.g. bank) to recover the unpaid tax amount or take legal action against the company.
Are there any exemptions or reliefs available?
Yes, there are several exemptions and reliefs available for companies. These include:
- Allowances: Company can claim such as capital allowances, merger and acquisition allowances, intellectual property rights, industrial building allowances, land intensification allowances on the qualifying fixed assets incurred during the year.
- Reliefs: Company can claim foreign tax credit for foreign tax paid against Singapore tax for the same income declared in Singapore. You may also claim other reliefs such as group relief and loss carry back relief in the Year of Assessment.
- Tax Incentives: Company can utilise tax incentive under Singapore Income Tax Act (‘ITA’) and Economic Expansion Incentive Act 1967 (‘EEIA). Common incentive such as double tax deduction for internationalisation scheme, your company may claim double tax deduction on qualifying expenses incurred in the qualifying activities such as overseas business development, overseas study trip, trade fairs, advertising and etc.
- Start-up exemption: Newly set up eligible Singapore incorporated company can claim Singapore corporate tax exemption for their first 3 consecutive Year of Assessment. Singapore tax exemption are following, 75% of their first S$100,000 and further 50% on the next S$100,000 of their taxable income.
- Partial exemption: All companies including investment holding company is eligible for 75% on their first S$10,000 and further 50% tax exemption on S$190,000 of their taxable income. The amount of exemption will depend on the company’s overall tax liability.
Find out more about reliefs and exemptions with us
At Aura Partners (Singapore) Pte Ltd, we offer a wide range of tax services to help businesses with their corporate taxes. We can help you to determine which reliefs and exemptions you are eligible for, and we can also prepare and file your income tax return on your behalf. Contact us today to find out more about how we can help.