A general rule for Singapore company tax is that all companies are taxed on the income earned in the preceding financial year. This means that income earned in the financial year 2018 will be taxed in 2019.
In tax terms, using the above example, 2018 is the Year of Assessment (YA). The YA is the year in which a company’s income is assessed to tax. To assess the amount of Corporate tax Singapore, Inland Revenue Authority of Singapore (IRAS) looks at the income, expenses, etc. during the financial year. This financial year is known as the “basis period”. The basis period is generally a 12-month period preceding the YA.
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Singapore’s corporate income tax rate is 17 %, and it is calculated on the basis of the company’s chargeable income i.e., taxable revenues less allowable expenses and other allowances. Though the rate itself is one of the lowest in the world, the effective tax payable works out to be even lower if a company takes advantage of all the government incentives, subsidies, and schemes.
Year of Assesment (YA) | Singapore Corporate Tax Rates |
---|---|
From 2010 | 17% |
2008 to 2009 | 18% |
2005 to 2007 | 20% |
New start-up companies are eligible for the Start-up Tax Exemption (SUTE) scheme:
To qualify for Start-up Tax Exemption (SUTE):
- The company must have no more than 20 individual shareholders
- For corporate shareholders, one individual must hold at least 10% of the issued shares
- Property and investment holding companies are not eligible
With the budget 2018, The main change is that the current tax exemptions (partial or full) are applicable on the first $300K profits of the company, but as per the new changes the exemptions are applicable only on the first $200K profits
Start-Up Tax Exemption-SUTE for companies (till YA 2019)
Chargeable income | % exempted from Tax | Amount exempted from Tax |
---|---|---|
First $100,000 | @100% | $100,000 |
Next $200,000 | @50% | $100,000 |
Total $300,000 | $200,000 |
Start Up Tax Exemption-SUTE for companies (from YA 2020 onwards )
Chargeable income | % exempted from Tax | Amount exempted from Tax |
---|---|---|
First $100,000 | @75% | $75,000 |
Next $100,000 | @50% | $50,000 |
Total $200,000 | $125,000 |
Partial tax exemption for companies (till YA 2019)
Chargeable income | % exempted from Tax | Amount exempted from Tax |
---|---|---|
First $10,000 | @75% | $7,500 |
Next $290,000 | @50% | $145,000 |
Total $300,000 | $152,500 |
Partial tax exemption for Singapore companies (from YA 2020 onwards)
Chargeable income | % exempted from Tax | Amount exempted from Tax |
---|---|---|
First $10,000 | @75% | $7,500 |
Next $190,000 | @50% | $95,000 |
Total $200,000 | $102,500 |
Effectively the new exemption applies only for the financial year ending 2019 and onwards.
Consider an example scenario:
New company set up in 2018 having its first financial year ending on 31st December 2018 (YA 2019) is still eligible for old exemption rates (either SUTE or Partial) for its first financial year. But from second financial year end onwards they fall under the new tax exemption rules.
So if a new company set up in 2018 is expecting reasonable profits, it is better to have their first financial year ending in the year 2018 (YA 2019) to avail the old tax exemption scheme for 1 year. But 2nd year onwards they fall under the new rules.
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