Singapore Tax & Business Guide - Deloitte

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Basic facts
Population 4.5m Inflation 0.1% (2006)
Main languages Chinese, Tamil, English, Malay GDP per head US$29,470*
Currency Singapore dollar (SGD) GDP growth 7.9% (2006)
Economic communities Asia Pacific Economic Co-operation, Association of South-East Asian Nations, WTO
GDP sources 0% agriculture, 33.8% industry, 66.2% services
*Economist Intelligence Unit estimate.
Political environment

Singapore is a parliamentary democracy led by the PeopleÌs Action Party (PAP).

Lee Hsien Loong (known as BG Lee) is the prime minister. The PAP won an outright victory in the general election held in May 2006. The president, S R Nathan, who was elected for a six-year term in September 2005, has the power to veto government budgets and appointments.
Foreign trade and investment
Exports US$289.4bn (2006)* Imports US$244.7bn (2006)*
*Economist Intelligence Unit estimates.

Leading export markets: Malaysia, the US, China and Japan.

Major exports: Machinery and equipment, chemicals and petroleum products.

All industries are open to foreign investment and multinational companies are welcomed. Investment incentives include tax holidays and concessions, accelerated depreciation schemes, favourable loan conditions, equity participation and high-quality industrial estates.
Business and financing
Business forms Branch, subsidiary, private limited company

Foreign corporations may operate through branches, but most foreign investors prefer to set up private limited companies: the tax status is simpler and they may qualify for any of several incentives, depending on industry, location and office type.

Subsidiaries of foreign corporations that do not wish to raise share capital or borrow funds from the public usually register as private companies and may commence business immediately after incorporation.
Labour environment
Unemployment rate 2.7% (2006) Minimum wage None

Most employees in large industrial plants and offices are unionised.

Singapore has no statutory minimum wage, but the National Wage Council issues recommended national guidelines for annual wage adjustments.

The Central Provident FundÛa compulsory savings programme for all employers and those employees earning over SGD 750 per monthÛprovides retirement and medical benefits. Employees aged below 55 years contribute 20%; employers contribute 13%. Employees aged 55 years and above contribute at lower rates.
Taxation
Corporate tax
Tax rate 20%

Resident and non-resident companies pay tax on all income accruing in or deriving from Singapore, and on all foreign income remitted or deemed to be remitted into Singapore. There is no tax differential between business carried on in Singapore by residents and by non-residents. All Singapore-source income earned by non-residents is taxable. A branchÌs profits are taxed at the same rate as a subsidiary. Only resident companies are entitled to the benefits under SingaporeÌs tax treaties; non-resident companies are not entitled to any treaty protection.

The corporate tax rate is 20%, but a partial tax exemption of 75% is available for up to SGD 10,000 and 50% on the next SGD 90,000 of chargeable income. Tax exemptions and various tax incentives are available to approved companies that promote or enhance the economic and technological development of Singapore. The financial sector is considered important to the economy so it receives special tax incentives.

SingaporeÌs imputation system was replaced with the one-tier corporate tax system in 2003. Under the one-tier system, corporate tax paid on the companyÌs profit is final. Any dividends distributed are tax-exempt in the hands of the recipient. The recipient may not claim any tax credit since the dividends are no longer taxable.
Individual tax
Progressive rates up to 20%

Resident individuals are taxed at progressive rates up to 20% on income accruing in or derived from Singapore. All foreign-source income received in Singapore by resident individuals is exempt, that is Singapore taxes individuals on a purely territorial basis, and only income derived in Singapore is subject to tax.
Capital gains
Capital gains are exempt

Singapore does not currently tax capital gains.
Indirect tax
Standard rate (GST) 7%; zero rate for international services and exports

The standard rate of goods and services tax (GST) is 7%, with a zero rate for international services and exports. Exempt items include the sale and lease of residential land and the provision of some financial services, interest charges and life insurance. The threshold for mandatory registration is SGD 1m annual turnover. Companies can apply for GST registration on a voluntary basis but must remain registered for at least two years.
Tax administration and compliance
Tax year Corporations: corporate year or calendar year; Individuals: calendar year

Companies are not required to make advance payments of tax. However, all businesses must provide an estimate of their chargeable income within three months after the end of the accounting period. An assessment will be raised based on the estimate and the tax payable must be settled within one month of the assessment unless instalment arrangements have been applied. The corporate tax return is due for submission by July 31st each year; the individual tax return and computation are due by April 15th, and an assessment is raised on the basis of this return. There is no system of deduction of tax at source from wages. Individuals must submit a tax return by April 15th following the end of the tax year and pay tax on assessment.
Additional tax information
Withholding taxes Dividends 0%, Interest 15%, Royalties 10%.
Tax treaties Singapore has more than 50 comprehensive tax treaties.
Dividends Exempt under the one-tier corporate tax system.
Revenue protection Singapore has transfer-pricing rules and anti-avoidance legislation.
Groups There is group relief for current-year unabsorbed losses, current-year unabsorbed capital allowances and current-year unabsorbed donations for Singaporean companies belonging to the same group.
Incentives Pioneer and expanding companies; headquarters activities; financial services; asset securitisation; start-up fund managers; business development/regionalisation; international trading; research and development; tourism.
Other taxes Entertainment tax, Skills development levy, Excise duty, Estate duty, Stamp duty, Import duties, Property tax.