Many investors are now turning to Singapore for the establishment of their operations due to various reasons. The ease of operating and setting up a business is a key motivator.
Another vital determinant is Singapore’s popular tax regime-famously known for its eye-catching personal and corporate tax rates, lack of capital gains tax, tax relief measures, widespread double tax treaties and one-tier tax system.
Brief History of Singapore Taxation
The Singapore income tax was introduced in the year 1947, under the British colonial rule. The Income Tax was later imposed in 1948. This Act was founded on Model Colonial Territories Wages Ordinance that was devised for British colonies during the time. Thus, Singapore’s tax decrees share familiar historical roots with those from Australia, South Africa, Malaysia and New Zealand.
Singapore Tax Governing Power
Singapore’s Income Tax Act is the governing law for cases involving individual and corporate taxation issues. Previously known as the Inland Revenue Department, Inland Revenue Authority of Singapore (IRAS) was founded in the year 1960. It includes all key revenue collection organizations in one body that enables collection and administration processes have become better managed and streamlined. This department has made its mark as a service-friendly tax collector and efficient tax administrator also.
IRAS is the key department accountable for collecting the different taxes paid to the government. They include property tax, corporate income tax, goods and services tax, stamp duties and betting taxes. As the major tax manager, the department plays a major role in tax policy creation by giving policy inputs and technical implications in every policy. It also actively monitors major developments on external tax and economic environment to spot policy areas that require any changes.
Other non-revenue functions carried out by this department include standing for the government during tax treaty negotiations, drafting tax legislation and giving advice on asset valuations whenever required.
Types of Taxes in Singapore
- One of the main taxes in Singapore is Income tax. This type of tax is normally charged on individual and company’s incomes.
- Betting taxes are taxes laid on private lottery, sweepstake and betting in general.
- Stamp duty is a type of duty imposed on all commercial and legal records that relate to shares and stock and immovable property.
- Property tax is tax imposed on property owners based on the estimated rental values the properties stand for.
- Customs & Exercise duties are imposed mainly on tobacco, motor vehicles, liquors and petroleum products. Additionally, few products are subject to any import duties, because Singapore is a free port and has few import and excise duties.
- Motor vehicle taxes are imposed on motor vehicles. These duties are inflicted to curb road congestion and car ownership.
- Goods and services tax is a tax on consumption. This type of tax is normally paid after money is spent on goods and services, including all imports. It is a kind of indirect tax also referred to as VAT or Value Added Tax in many other states.
- Estate duty tax was abolished on February 15th in the year 2008.
- Other types of taxes include the foreign worker levy and airport traveler service charge. The foreign worker duty is charged to control foreign workers’ employment in Singapore.
Singapore Taxation System Key Facts
Singapore commercial tax rate is restricted at 17%. By keeping commercial rates competitive, Singapore has continued to draw a good portion of foreign investment. Singapore also follows a one-tier corporate tax method where a duty paid by a business on its gains is never imputed to the shareholders.
Singapore Follows a Territorial Taxation Basis
Singapore personal levy rates begin at 0% and are also capped at 20% for citizens and a flat rate of about 15% for non-residents.
Singapore Has No Capital Profits Tax
All personal taxes are paid according to the calendar year, which starts at January 1st and ends at December 31st.
Singapore has completed more than fifty bilateral tax treaties to assist resident companies reduce their tax burden.
Singapore’s tax rates have become one of the lowest among all developed countries. This is an attractive feature for outsiders working here. It has also attracted foreign ventures in the country, thereby creating more job opportunities and stabilizing the economy. When compared to other countries in Asia, taxation in Singapore remains relatively fair and favourable for businesses.