Simplicity of Singapore’s Taxation Regime

There are several reasons why foreign companies prefer setting up a business in Singapore. Some do it for the incredible business infrastructure while others do so for the number of growth opportunities available in the country. Few foreign entrepreneurs prefer the ease of doing business in Singapore and there are some who register a company in the country as it makes it simpler to target the entire Asia-Pacific region from Singapore. Whatever may be the reason for a foreign entrepreneur to setup a presence in Singapore, the country’s liberal and simplistic taxation regime is always one of the key factors that make foreign company owners take the final plunge into doing business in Singapore.  

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Singapore believes in having a taxation system that is simple, easy to comprehend and at the same time is a win-win situation for both businesses in the country and the economy of Singapore. During the global economic recession when most countries were trying to introduce new taxes or increases the existing tax rates to meet their public funding requirements, Singapore actually lowered its overall corporate tax rate to only 17 per cent. This was done to ensure that businesses in the country had funds to manage their business and not have to worry about paying high taxes. By lowering taxes, Singapore attracted several thousand companies to its shore and thereby increasing the overall tax collection by the concerned authorities.

Singapore’s taxation regime also believes in a single tax and not having multiple tax burdens of businesses. Therefore apart from the standard corporate tax of 17 per cent, there are no other taxes in Singapore. Companies do not even have to pay taxes on capital gains or dividends distributed to shareholders. Singapore also has bilateral taxation treaties with several countries from around the world to avoid double taxation situation for companies based in the country. Singapore does not even tax foreign sourced income if that income is not deemed to be remitted to Singapore.

Apart from an already low corporate tax rate, Singapore also offers a number of tax incentives to lower the taxation burden of a company. For example, for new startups there are no taxes for income up to SGD $100,000 for each of the first three years they are in operation. Also for income up to SGD $300,000, companies have to pay a concessional tax rate of only 8.5 per cent. Each year, Singapore also introduced special tax schemes for specific industries or tax breaks for expenses related to things like research and development etc.