Basic Guide to Corporate Income Tax for Companies in Singapore

income tax singapore

When it comes to income tax in Singapore, the country is renowned for its business-friendly tax system, which supports economic growth and attracts global investors. Singapore’s corporate income tax (CIT) plays a crucial role in creating this environment, enabling businesses to thrive while maintaining a fair and straightforward tax framework.

Understanding corporate income tax in Singapore is a vital step toward effective financial planning. By learning how CIT works, you can make informed decisions for your business, and optimize your tax liabilities.  In this article, we’ll provide a comprehensive guide to help you navigate Singapore’s corporate tax system with confidence.

What is Corporate Income Tax in Singapore?

Singapore’s corporate income tax (CIT) system is straightforward and designed to support businesses. The flat CIT rate is 17 percent, one of the lowest in the ASEAN region, making Singapore a highly attractive hub for businesses. The country employs a single-tier tax system, meaning that taxes are only levied once—on the company’s profits. Any dividends distributed to shareholders are exempt from further taxation, ensuring no double-taxation burden. 

Businesses are required to pay CIT on all chargeable income earned or derived from Singapore. This includes profits from trade, royalties, rental property income, and even returns on investments like interest. Whether the income is generated locally or remitted from overseas, it is subject to the same 17 percent rate. 

Looking ahead, Singapore is set to introduce a 15 percent minimum effective tax rate for large multinational enterprises (MNEs) starting January 1, 2025. This aligns with the Base Erosion and Profit Shifting (BEPS) 2.0 initiative under the Pillar Two Global Anti-Base Erosion (GloBE) Model Rules. The rule will apply to MNE groups with annual revenues of €750 million or more in at least two of the preceding four financial years, ensuring fair taxation across jurisdictions.

What Types of Income are Taxable?

What Types of Income are Taxable?

When it comes to corporate income tax in Singapore, understanding what types of income are taxable and non-taxable is essential for businesses. Let’s break it down into simple terms so you can navigate the complexities of Singapore’s tax system with ease.

Taxable Income

In Singapore, companies are taxed on income that is either accrued or derived within Singapore or received in Singapore from foreign sources. Simply put, if your business earns money locally or brings income from overseas into Singapore, it may be subject to taxation. For instance, profits generated from a business operating in Singapore are considered taxable.

What is considered taxable income?

  • Profits from trade or business: Any earnings from business activities in Singapore are taxable.
  • Investment income: This includes dividends, rental income, and interest earned.
  • Royalties and premiums: Earnings from intellectual property or property leases fall under taxable income.
  • Other revenue-like gains: Any other revenue in nature, such as recurring fees or commissions, is also taxable.

To ease the tax burden, Singapore allows businesses to claim deductions, such as business expenses, capital allowances, and reliefs. These deductions help reduce taxable income, ultimately lowering the tax you need to pay.

Non-Taxable Income

Not all income is subject to taxation in Singapore. Let’s explore the types of income that are exempt from tax. 

a. Capital Gains

Capital gains are not taxable in Singapore, offering a significant advantage to businesses. These include:

  • Profits from the sale of fixed assets, such as equipment or property.
  • Gains from foreign exchange transactions related to capital investments.

b. Income Exempted from Tax

Certain types of income are specifically exempted under the Income Tax Act 1947. These exemptions come with conditions and include:

  • Foreign-sourced income: Dividends, branch profits, and service income received by a resident company under Section 13(8).
  • Equity investment gains: Profits earned by a company on the disposal of equity investments under Section 13W.

These exemptions make Singapore an attractive destination for businesses by providing relief in specific circumstances. 

Tax Incentives and Exemptions for Companies

Singapore’s tax system is known for its business-friendly policies, and the government offers a range of tax incentives and exemptions to support businesses at different stages of growth. Let’s dive into the details. 

Partial Tax Exemption (PTE) Scheme

The Partial Tax Exemption (PTE) Scheme provides tax relief to most companies in Singapore, helping businesses manage their tax liabilities. This scheme applies to all companies, except those claiming the Start-Up Tax Exemption (SUTE). 

What does the exemption look like?

For the Year of Assessment (YA) 2020 onwards, companies enjoy:

  • 75% tax exemption on the first $10,000 of normal chargeable income.
  • 50% tax exemption on the next $190,000 of normal chargeable income.

Before YA 2020, companies benefited from:

  • 75% tax exemption on the first $10,000 of normal chargeable income.
  • 50% tax exemption on the next $290,000 of normal chargeable income.

Summary of Benefits:

Under the current rules, companies can save taxes on up to $200,000 of their chargeable income each year, making the PTE scheme an effective tool to reduce operational costs.

Start-Up Tax Exemption (SUTE) Scheme

For new companies looking to establish themselves in Singapore, the Start-Up Tax Exemption (SUTE) Scheme offers generous tax benefits. Introduced in YA 2005, this scheme supports entrepreneurship and promotes local enterprise growth. 

What’s the exemption for start-ups?

For the first three consecutive Years of Assessment (YAs), eligible start-ups receive:

  • 75% tax exemption on the first $100,000 of normal chargeable income.
  • 50% tax exemption on the next $100,000 of normal chargeable income.

Prior to YA 2020, the benefits were even more generous:

  • Full tax exemption on the first $100,000 of normal chargeable income.
  • 50% tax exemption on the next $200,000 of normal chargeable income.

Summary of Benefits:

Start-ups can save taxes on up to $200,000 of chargeable income annually during their initial years, providing much-needed financial breathing room to grow and scale their operations.

Tax Incentives

Singapore’s tax incentives target businesses that engage in high-value activities or operate in sectors critical to the country’s economic development. These incentives require companies to meet stringent conditions, such as investing in local talent, adopting innovative technologies, or contributing to research and development (R&D).

Here are some of the most prominent tax incentives:

1. Pioneer Tax Incentive

Companies manufacturing approved high-tech products or providing qualifying services may qualify for full tax exemptions for five to 15 years. After the pioneer period, businesses can apply for reduced tax rates under the Development and Expansion Incentive (DEI). 

2. Development and Expansion Incentive (DEI)

Designed for companies undertaking high-value projects, expanding operations, or upgrading existing activities, this incentive allows profits to be taxed at reduced rates (as low as 5%) for an initial period of up to 10 years. The total tax relief for each project can extend up to 40 years.

3. Investment Allowance

Companies investing in automation or other qualifying projects can claim tax exemptions of up to 100% of capital expenditures. For projects with substantial investment in automation, businesses can receive allowances of up to SGD 10 million per project.

Additional Opportunities

These incentives are just the tip of the iceberg. Other tax benefits are tailored to industries and activities that align with Singapore’s strategic goals, ensuring businesses that contribute to the economy are well-rewarded.

Corporate Tax Filing Requirements and Deadlines

Corporate Tax Filing Requirements and Deadlines

Filing corporate income tax (CIT) in Singapore can initially seem daunting and confusing, but understanding the process simplifies it significantly. Let’s explore what income tax you need to file and when it’s due.

1. Estimated Chargeable Income (ECI)

The Estimated Chargeable Income (ECI) is your company’s estimate of taxable profits for the Year of Assessment (YA). You’ll need to file this within three months from the end of your financial year. For example, if your financial year ends on 31 December 2024, you must submit your ECI by 31 March 2025.

However, some companies are exempt from filing ECI if they meet the following criteria:

  • Their annual revenue is S$5 million or below; and
  • Their ECI is nil, meaning they don’t have any taxable profits.

This waiver operates on a self-assessment basis. If you qualify, your status on the Inland Revenue Authority of Singapore (IRAS) website might still show “Ready to File”. However, there’s no need to inform IRAS as long as both conditions are met.

2. Form C-S/C-S (Lite)/C

The Form C-S/C-S (Lite)/C is a detailed declaration of your company’s actual income and is due on 30 November of the YA. This means if your financial year ends in 2024, you must submit the form by November 2025.

Here’s a quick guide to help you determine which form your company needs to file:

Form Criteria Annual Revenue
Form C-S Lite No claims for carry-back losses, foreign tax credits, or other exemptions. S$200,000 or below
Form C-S  No claims for carry-back losses, foreign tax credits, or other exemptions. S$5 million or below
Form C For companies that do not meet the criteria for Form C-S or C-S Lite. Above S$5 million

 

Both Form C-S and Form C-S Lite are simplified options for companies with straightforward tax situations, while Form C is for companies with more complex financials or claims.

Penalties for Non-Compliance

Missing tax deadlines can lead to serious consequences, so it’s essential to stay on top of your filing obligations. Here are the penalties for non-compliance:

1. Failure to Submit Tax Returns on Time

If your company misses the deadline, IRAS may issue an estimated Notice of Assessment (NOA), which requires payment within one month. Continued non-compliance can result in legal actions, including court summons.

2. Missed GST Return Deadlines

Companies that fail to submit Goods and Services Tax (GST) returns on time face additional penalties, such as:

  • A S$200 fine for late submission, with another S$200 added for every completed month of delay (up to a maximum of S$10,000 per outstanding GST return).
  • A 5% late-payment penalty on the estimated tax amount.
  • Persistent non-compliance may lead to summons and court proceedings against individuals responsible for the business.

How One Tax CM Can Help Simplify Corporate Tax Compliance

How One Tax CM Can Help Simplify Corporate Tax Compliance

Managing income tax in Singapore can be overwhelming, with its complex regulations, detailed form, and strict deadlines. That’s where One Tax CM steps in to simplify the process and provide reliable guidance. Then, what are the advantages of One Tax CM?

1. Comprehensive Tax Services

From filing your Estimated Chargeable Income (ECI) to preparing and submitting Form C/C-S, we handle the intricate details so you can focus on growing your business. 

Additionally, we provide expert advisory services on tax exemptions and incentives, ensuring you unlock every opportunity to reduce your tax burden. Whether it’s navigating partial tax exemptions or applying for industry-specific incentives, our team is here to guide you.

2. Expert Financial Guidance

Our tailored solutions aim to minimize your tax liabilities while maximizing the benefits available to you under Singapore’s business-friendly tax framework. Staying compliant isn’t just about meeting deadlines—it’s about building a solid foundation for long-term business success. We ensure your compliance with all tax regulations, helping you avoid penalties and costly mistakes. 

Why handle corporate taxes alone when you can have a trusted partner by your side? Let One Tax CM simplify the process and give you peace of mind. Ready to make your tax compliance journey stress-free? Visit One Tax CM today and let us help you every step of the way!