Singapore has long been considered to be the “Paradise of business incorporation.” Every year, thousands of global investors and entrepreneurs relocate to the city-state in a pursuit of achieving a successful career by opting for a company incorporation Singapore. Now, you might be wondering “What drives them to island nation?” One of the key driving factors is Singapore’s progressive tax regime. The presence of relatively low tax rates and a series of tax benefits sets the tax system of city-state apart from many other developed jurisdictions of the world. It is regarded as one of the lucrative tax regimes in the world.
How Tax System Woos Individuals to Incorporate a Company in Singapore?
Apparently, low tax rates mean more disposable income and vice versa. It makes sense that everyone wants to retain maximum disposable income. Singapore’s low tax rates and incentives enable the taxpayers to cut down on the tax liabilities when compared to many other jurisdictions. The individual or entity, who wishes to keep maximum revenue with them, tend to search for a productive economy to set up a business. In this regard, Singapore has been seen as a tax haven by the many investors and entrepreneurs.
The government of Singapore has designed the tax system in a bid to attracts maximum Foreign Direct Investment (FDI). The authority firmly believes that winning FDI gives a boost to the national economy while creating job opportunities, tax revenues and eventually, improving productivity. Thus, the Singapore government place a great emphasis on ensuring that they remain attractive to overseas investors by imposing low tax rates along with the implementation of a series of tax incentives.
The nation has been hugely successful in setting up a favorable tax and regulatory environment that encourages the individuals and entities to open a company in Singapore. Many international giants like Yahoo, Google, Apple, PayPal, and LinkedIn have their Asian bases in Singapore.
Singapore Tax System: Take a Glance
Any individual or entity earning money in Singapore is chargeable to tax. The headline rates of corporate tax and personal income tax are 17% and 22% respectively. The GST (Goods and Service Tax) rate is 7%.
Key facts of Singapore Income Tax system:
The Inland Revenue Authority of Singapore (IRAS) is the official tax authority who oversee the regulations.
The nation follows a territorial basis of taxation. In short, the individuals and companies are taxed mainly on their Singapore sourced income.
The corporate tax rate is capped at 17%. Singapore follows a single-tier corporate tax system, where dividends earned by the shareholders of the company are not taxed.
The personal income tax rates start at 0% and ends at 22% (for income above S$320,000).
There is no capital gains tax. The capital loss expenses are not considered as deductions for tax calculations.
Singapore has more than 70 bilateral comprehensive tax treaties, helping businesses minimize their tax burden.
There is full tax exemption scheme for start-up businesses and partial tax exemption scheme for existing companies. While new businesses can enjoy zero tax liabilities for first three years of operation, the effective tax rates become much lower for the existing companies.
When a foreign individual or entity incorporate a company in Singapore, the entity is considered to be a local tax resident of the nation if directors meeting held in nation. And, the business is entitled to enjoy all the benefits available for locals. Thereby, tax system of Singapore never fails to attract individuals and entities from all across the globe.
There are many other factors which make the business ecosystem of Singapore even more lucrative. World-class infrastructure, honest government, skilled workforce, transparent business policies are to name a few. These facts are enough to prove why company incorporation Singapore continues to get immense popularity among global aspirants. Undoubtedly, tax system remains one of the crucial parts of it.