All incorporated businesses in Singapore are required to pay tax to the government. The taxation process and requirements vary from other developed and developing countries, and so it is important for new companies in the country first to seek information about it to avoid fines and other penalties.
Today, we will look at Singapore Corporate Tax residency.
What is Singapore Corporate Tax Residency?
In most parts of the world, the location or state that a particular company is incorporated is used to determine its corporate tax residency. However, in Singapore, this form of tax is not dependent on the location but rather the type of management of the business.
For example, if a company exercises all the full management and control requirements inside of the city-state, then it is considered as a tax resident. On the other hand, .
However, the primary basis for taxation do not vary between resident and non-resident, but there are some benefits that a resident company qualifies for that cannot be availed to a non-resident company. Let us look at some of these benefits briefly.
Number 1: Tax Exemption on Foreign Brand Profits
In a bid to attract more foreign investors into the country, the government has introduced a tax exemption on all income that is earned outside the country. This means that income earned as a result of products being sold outside the country will not be taxed.
Number 2: Avoidance of DTA
DTA stands for Double Taxation agreement. According to IRAS, this is a form of agreement between the government and other countries protect company registered in Singapore from double taxation of revenue generated in one jurisdiction by a resident of the other jurisdiction. At the moment, resident corporate taxpayers benefit from double taxation in more than fifty treaty partners of Singapore.
What is Estimated Chargeable Income?
According to IRAS, Estimated Chargeable Income (ECI) is the total taxable income of a company in one YA. The figure is achieved after deducting all the corporate expenses that are categorized as tax allowance. Here is a list of all allowable tax expenses that are recognized by IRAS.
- All profits earned from any business activities
- Revenue from premiums, royalties, and properties
- Income from investments such as rental, interest, and dividends
- Additional corporate gains that are considered as revenue
Finally, all companies that are registered and recognized as city-state are required to file estimated chargeable income three months after the end of the financial year. IRAS usually sends a reminder, but you still need to file the ECI even if you do not receive the notification/reminder.