How to navigate Singapore’s tax system

Singapore’s tax system is favourable, but making it work for foreign businesses and employees takes specialist local knowledge

One foundation of Singapore’s economic success is its welcoming attitude to foreign talent and international business. This policy clearly works – nearly half the Asian headquarters of multinational corporations are based in Singapore.

For foreign businesses, Singapore is a gateway to wider Asia Pacific markets. The city state’s Changi Airport is regularly cited as the most connected in Asia.

Singapore’s welcoming attitude is enshrined in tax policies that are among the most business-friendly in the world, with a basic corporate tax rate of 17%. In reality, many businesses pay less thanks to exemptions.

Meanwhile, individuals are taxed progressively at a rate of between 0% and 22% (24% from 2023) and on income accrued in or derived from Singapore.

For companies and individuals, Singapore’s tax system is attractive and relatively straightforward. However, there is some degree of complexity, especially for foreign-owned entities and their employees who are new to Singapore’s tax system.

Those new to and unfamiliar with Singapore’s tax system are advised to enlist local expertise to ensure their tax returns are filed accurately and on time, making the most of any benefits, administrative concessions and exemptions that apply.

Singapore tax filing for corporations

The Singapore government makes no secret of its desire to attract multinational businesses, promoting the island state as a stable, law-abiding and well-connected gateway to the Asian continent.

As part of that, corporate tax laws are continually reviewed. The tax regime is fair, transparent and treats large and small businesses much the same.

A basic corporate tax rate of 17% applies across the board and can often be reduced to as low as 0% if businesses take advantage of a range of potential benefits, tax incentives and exemptions.

Predictably, the tax system favours resident businesses over those registered as local branches of international organisations, but the regime is attractive for any firm that wants a solid foundation for growth in Asia.

One particular benefit for businesses in Singapore, and those that invest there, is the proactive approach to tax treaties. The city state has signed Avoidance of Double Taxation Agreements (DTAs), limited DTAs that apply only to certain types of income and Exchange of Information Arrangements with about 100 jurisdictions. These include regional neighbours such as Malaysia, Indonesia, the Philippines and Vietnam.

Singapore income tax for individuals

Residents of Singapore pay a progressive tax rate of between 0% and 22%, based on income accruing in or derived from Singapore.

Top rates are about to increase, however. A recent budget raised tax on the portion of chargeable income between SGD 500,000 and SGD 1m to 23%, while the portion exceeding SGD 1m went up to 24%. These changes come into effect from 2023.

Income tax in Singapore only applies on income above SGD 20,000.

The Singapore tax system is a little more complicated for non-residents, who pay a base rate of at least 15%, or the relevant progressive tax rate if that is higher. But tax is only due on income accruing in or derived from Singapore.

To be considered resident for tax purposes, individuals must live or work in the state for a minimum of 183 days in any single year or continuously for three consecutive years. An individual who works in Singapore for a continuous period over two calendar years aggregating at least 183 days also qualifies.

An obvious benefit for residents and non-residents alike is the absence of capital gains tax – individuals do not pay tax when selling property, shares, antiques or other assets if these are isolated occurrences and carried out infrequently. That sets Singapore’s tax system apart from many major economies.

Like their corporate counterparts, individual taxes are constantly reviewed for transparency, simplicity and their effect on the wider economy.

One recent development has made Singapore’s tax system a little less generous for foreign employees. The Government unexpectedly announced the scrapping of the Not Ordinarily Resident (NOR) status in 2019, a tax exemption scheme that had operated since 2002.

NOR aimed to attract foreign nationals with regional roles. It simplified the process of avoiding double taxation for employees of international companies who spent significant amounts of time travelling and working outside Singapore.

Even with the scrapping of NOR, Singapore’s tax system for individuals remains among the most attractive in the Asia Pacific region.

Singapore tax return filing: how Intertrust Group can help

• The scrapping of NOR has emphasised the importance of local knowledge in navigating the intricacies of the Singapore tax system. Intertrust Group has the experience and expertise to help international corporations and their employees in Singapore make the most of the benefits, administrative concessions and exemptions available.
• Singapore is ahead of much of the world in digitising its tax regime but accessing the system and being approved by it can be complex and time-consuming, especially for foreign nationals and businesses. Intertrust Group can take that headache away.
• For individuals, the Singapore tax filing deadline is mid-April. Corporate tax returns can be filed from June. In both cases, Intertrust Group can help make the process as smooth, painless and cost-effective as possible.
• Businesses that take bookkeeping and accounting, corporate secretarial or other services from Intertrust Group find it convenient to have the same trusted supplier file corporate and individual tax returns as well.