Top 5 Myths of Singapore Corporate Income Tax
Despite of the fact that Singapore is globally known for offering a progressive tax regime with low Singapore tax rates and a slew of tax incentives, there are still myths about Singapore corporate income tax, which might have put off worldwide entrepreneurs and investors who do not have access to actual information. This article will shed light on the top five myths or misconceptions others might have with regard to Singapore company tax.
- Absence of Tax Exemption Schemes due to the low Singapore tax rates: One of the top myths is that there is no provision of tax exemption schemes in Singapore because rates of company tax Singapore are already low and competitive. However, the nation offers three types of tax exemption schemes – full tax exemption for newly startup companies, partial tax exemption scheme for all companies and exemption for foreign sourced income. Indeed, it is hard to find such exemption schemes in any other jurisdictions.
- Filing of audited accounts is compulsory for all Companies: Many entrepreneurs live with a misconception that all businesses must file their audited accounts with ACRA. Whereas, it is not necessarily mandatory for all Singapore businesses to undergo audit procedure before they file their annual account. Importantly, dormant companies and Private Exempt Companies (PECs) are free from filing audited account.
- Fear of Double Taxation while incorporating a company in Singapore: Fear of double taxation always arises at the time of starting a business in a different country. But, Singapore is an exception in that case. With a wide spanning network of Double Tax Agreements (DTAs) with about 74 countries worldwide, Singapore provides a thriving platform for starting business, without the threat of double taxation.
- Presence of Capital gain Tax: One of the common myths that many business professionals assumed is the presence of capital gain tax in Singapore. Since capital gains are taxable in most of the jurisdictions in the world, they tend to believe that capital gain tax is also applicable in Singapore. Whereas, the truth is that there is no tax on capital and inheritance available under Singapore taxation.
- Paying tax in advance is necessary: This is the myth that causes confusion. The truth is that tax is corporate tax in Singapore is always assessed and paid on a preceding year basis. Precisely, taxes are paid only after the financial year end. The first tax bill is based on the ECI declaration with IRAS within 3 months from the fiscal year end and the IRAS will issue the final tax bill after the company files the annual corporate tax return.
In conclusion, Singapore taxation provides a progressive regime corporate income tax, which never failed to lure entrepreneurs from far and wide to incorporate a company in Singapore. The headline Singapore corporate tax rates are capped at 17% and the tax system comes with a series of attractive and pro-business benefits/incentives.
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