Running my business in Singapore
Apart from being concerned with the sustainable and profitable corporate’s development, business operators should regularly check and balance the interest of the company, shareholders and stakeholders, especially employees in the long term. Therefore, Management should maintain and promote good corporate governance in the company.
The topics related to “Accounting & Reporting Standards”, “Business Taxes”, “Internet and E-commerce”, “Employee Rights in Singapore”, “Personal Data Protection”, “Intellectual Property Rights” and “ Commercial Issues – Small Claims” are also important for running the business in Singapore.
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Annual Filing Requirements in Singapore
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The Companies Act requires all companies to complete annual filing and other formalities.
Annual General Meeting (AGM)
A Singapore company must hold an Annual General Meeting (AGM) once every calendar year. The following general rules apply to AGMs:
- The first AGM must be held within 18 months of incorporation;
- No more than 15 months may elapse between subsequent AGM’s;
- Accounts presented at the AGM shall be made up to a date not more than 6 months before the AGM;
- Private companies can dispense with AGM’s if approved in general meeting by all members with voting rights.
Filing of Annual Return with ACRA
All Singapore companies must lodge an Annual Return (AR) with ACRA within 1 month of its AGM. Particulars of the company officers, registered address, and auditors (if applicable) must be included in the AR. The attachment of company’s accounts is governed by the applicable rules here.
Filing of Estimated Chargeable Income (ECI)
Singapore companies are required to declare the revenue amount and Estimated Chargeable Income (ECI) by filing the ECI form with Inland Revenue Authority of Singapore (IRAS) within 3 months of the company’s Financial Year End. Even if the estimated chargeable income is zero, a “Nil” ECI must be filed.
Filing of Annual Tax Return with IRAS
The annual tax return must be filed with IRAS by November 30. Singapore adopts the preceding year basis for taxation. It should be noted that the company’s directors are responsible for complying with the annual filing requirements and a failure to comply is an offence punishable by fine or prosecution.
Accounting requirements in Singapore
Legal requirements, accounting standards, penalties and sanctions
Preparation of Financial Accounts
Annual financial accounts must be prepared in accordance with the Financial Reporting Standards of Singapore. Bookkeeping can be monthly, quarterly or annual depending on the volume of transactions recorded by the company. The financial accounts should include a Statement of Comprehensive Income (i.e. Profit and Loss Account), Statement of Financial Position (i.e. Balance Sheet), Cash Flow Statement, and Statement of Changes in Equity.
Audit of Financial Accounts
A company shall appoint an auditor within 3 months from the date of its incorporation, unless it is exempted from audit requirements. To be exempted, a company must be a private company that fulfils at least two of the following three quantitative criteria:
- total annual revenue of not more than $10 million;
- total assets of not more than $10 million;
- number of employees of not more than 50.
For a company which is part of a group to be exempt from statutory audit, the company must qualify as a small company and the group must also meet at least two of the three quantitative criteria on a consolidated basis.
You can outsource your accounting to MBIA (price start @ USD 1800 per annum)
Business taxation in Singapore
Single-tier income tax system
Tax paid by a company on its chargeable income is the final tax and all dividends paid to shareholders are exempt from further taxation in Singapore. This prevents double taxation.
There is no tax on capital gains in Singapore, which includes gains realised on the disposal of fixed assets, foreign exchange, capital transactions, etc.
Headline Tax Rate
Singapore’s headline corporate tax rate is a flat 17%. The effective rate is generally lower after the application of tax exemptions and incentives, depreciation rules, etc.
General Tax Incentives
There are general tax exemptions and incentives currently available to Singapore resident to small-to-midsize companies which significantly reduces the effective tax rate.
Zero tax on S$100K taxable income
There will be no income tax on the first S$100,000 (approx. USD70,000) of taxable income for the first three tax filing years, for a newly incorporated company, subject to meeting all the following conditions:
- incorporated in Singapore;
- tax resident in Singapore; and
- no more than 20 shareholders of which at least one is an individual shareholder holding at least 10% of shares.
Furthermore, all Singapore resident companies are eligible for partial tax exemption, which effectively translates to significantly lower effective income tax rate on taxable income up to S$200,000 (approx. USD140,000) per annum. The taxable income in excess of S$200,000 will be charged at the normal headline corporate tax rate of 17%.
Corporate Income Tax (CIT) Rebate for YA 2020
Every Singapore Company is eligible for a one-off corporate income tax rebate of 25% on corporate income tax payable for YA 2020 which is subjected to a cap of S$15,000 (approx. USD10,000).
Corporate Income tax filing due date
Corporate income tax filing due date for Singapore companies from 2009 is November 30.
Companies must file a complete set of returns including Form C, audited/unaudited accounts, and tax computation.
Corporate income tax assessment period
Corporate income tax is assessed on a preceding year basis. Thus the basis period for any Year of Assessment (YA) refers to the financial year ending (FYE) in the year preceding the YA. For example, in 2020, a company will file a corporate tax return for the financial year ending between 1 January 2019 and 31 December 2019.
Withholding tax in Singapore
Singapore has implemented a withholding tax law to Singapore source income to ensure the collection of tax due from non-residents companies and individuals.
A person must withhold tax when certain types of payments (e.g. interest, royalty, services etc) are made to non-resident persons. The rate of withholding tax depends on the nature of payment.
Nature of Income
- Interest, commission, fee or other payment in connection with any loan or indebtedness : 15%
- Royalty or other lump sum payments for the use of moveable properties : 10%
- Payment for the use of or the right to use scientific, technical, industrial or commercial knowledge or information : 10%
- Rent or other payments for the use of moveable properties : 15%
- Technical assistance and service fees : 17% (prevailing corporate income tax rate)
- Management fees : 17% (prevailing corporate income tax rate)
- Proceeds from sale of any real property by a non-resident property trader: 15%
- Distribution of taxable income made by REIT to unitholder who is a non-resident (other than an individual) : 10%
However, please be informed that most withholding tax rates are lowered or cancelled by the Double Tax Agreements signed between Singapore and other jurisdictions.
Tax residence of company in Singapore
A company is considered as resident in Singapore if the control and management of the business is exercised in Singapore, if board meetings take place outside Singapore and management and control is exercised outside Singapore it will be considered non-resident. A company’s tax residence may change from one year of assessment to the next depending on the circumstances. The basis of taxation for a resident company and non-resident company is generally the same, with the exception of certain benefits that are only available to resident companies, including:
- income tax exemption scheme for start-ups;
- income tax exemption on foreign-source dividends, foreign branch profits, and foreign-source service income under section 13(8) of the Income Tax Act; and
- benefits under the Double Taxation Agreements (DTA) concluded between Singapore and the treaty countries.
Singapore Double Tax Treaty Network
Singapore has an extensive network of Double Tax Treaties (“DTA”), the aim of which is to eliminate double taxation issues and provide reduced rates of withholding tax on dividends, interest and royalties. Most of Singapore’s DTAs are based on the OECD model, which determines the rights to tax different categories of income, allocated to each signatory country. In addition, most Singapore’s DTAs contain exchange of information provisions, inspired from the OECD model.
To enjoy the benefit of Singapore’s DTAs, a tax residence certificate issued by the tax authorities of the country where the recipient is a resident, shall be submitted to the Singapore tax authorities.
As of December 2015, Singapore has entered into 82 DTAs, with the following countries:
Albania – Australia – Austria – Bahrain – Bangladesh – Barbados – Belarus – Belgium – Brunei – Bulgaria – Canada – China – Cyprus – Czech Republic – Denmark – Ecuador – Egypt – Estonia – Fiji – Finland – France – Georgia – Germany – Guernsey – Hungary – India – Indonesia – Ireland – Isle of Man – Israel – Italy – Japan – Jersey – Kazakhstan – Kuwait – Laos (P) – Latvia – Libya – Liechtenstein – Lithuania – Luxembourg – Malaysia – Malta – Mauritius – Mexico – Mongolia – Morocco – Myanmar – Netherlands – New Zealand – Norway – Oman – Pakistan – Panama – Papua New Guinea – Philippines – Poland – Portugal – Qatar – Romania – Russia – Rwanda (P) – San Marino – Saudi Arabia – Seychelles – Slovakia – Slovenia – South Africa – South Korea – Spain – Sri Lanka – Sweden – Switzerland – Taiwan – Thailand – Turkey – Ukraine – United Arab Emirates – United Kingdom – Uruguay (P) – Uzbekistan – Vietnam
(P): DTAs with Laos, Rwanda and Uruguay are still pending, awaiting ratification.