Complete Guide To Singapore Corporate Taxes: Tax Rates, Tax Rebates And Tax Exemptions

In some ways, companies are resigned to the same fate as most people – they die (typically within 20 years) and, of course, they have to pay taxes.

In 2019, companies contributed $16.7 billion in corporate taxes to the Inland Revenue Authority of Singapore (IRAS). This is more than 31.2% of Singapore’s tax revenue, and also 4.3% higher than in 2018. Going forward, however, it is an entirely different story – with analysts expecting COVID-19 to hit corporates hard.

Read Also: COVID-19 Impact: 5 Reasons Many  More Companies Will Shut In The Coming Months

Companies are taxed based on the income they earned the previous year. What this means is that for the Year of Assessment (YA) 2021, companies will be paying taxes on the income they earned in the financial year 2020.

How Much Is The Corporate Tax In Singapore?

The corporate tax rate for both local and foreign companies in Singapore is a flat 17%. This is chargeable on a company’s income (or profits).

As Singapore operates on a one-tier corporate tax system, this is the only corporate tax levied on companies. Capital gains earned by companies and dividends paid by Singapore tax resident companies are tax-exempt. This also means dividends that Singapore tax resident companies pay are tax-free to both corporates and people.

Singapore also has agreements to aid companies in avoiding double taxation on foreign-sourced income. With the Avoidance of Double Taxation Agreements (DTAs), Exchange of Information (EOI) and Limited Treaties, foreign income earned by Singapore companies may not attract any tax or may be taxed at a reduced rate in the foreign jurisdiction. This applies to close to 100 DTAs, EOIs and Limited Treaty partners.

You can use IRAS’ Basic Corporate Tax Calculator as a guide to prepare your tax computations.

Corporate Tax Relief – Partial Tax Exemption (PTE) – For All Companies In Singapore

All companies in Singapore enjoy a Partial Tax Exemption (PTE). From YA2020, all companies enjoy a 75% exemption on the first $10,000 of normal chargeable income; and a further 50% exemption on the next $190,000 of normal chargeable income. This means all companies can enjoy up to $102,500 exemption for each YA. Note that this has been reduced from previous years.

Chargeable Income% Exempted From TaxAmount Exempted From Tax
First $10,000@75%$7,500
Next $190,000@50%$95,000
YA2019 and before
First $10,000@75%$7,500
Next $290,000@50%$145,000

Source: IRAS

For example, if your company declares a chargeable income of $300,000 for YA2020, you will only have to pay a corporate tax on $197,500 of your chargeable income.

Finally, while only revenue expenses incurred after your business commences are tax-deductible, IRAS allows “revenue expenses incurred one year before the first day of the financial year in which you earn your first dollar of business receipt” to be tax-deductible.

Tax Exemption Scheme For New Start-Up Companies

To support entrepreneurship and aid new start-ups grow in their initial years, IRAS provides a tax-exemption scheme for such companies. This too has been reduced in YA2020.

Read Also: How To Choose The Right Legal Entity To Start A Business In Singapore

In YA2020, new start-ups will be eligible for 75% tax exemption on the first $100,000 of normal chargeable income and 50% tax exemption for the next $100,000 of normal chargeable income, for the first 3 consecutive YAs, where the YA falls in or after YA2020. Thereafter, companies will be eligible for the Partial Tax Exemption available to all companies. Note that this has been reduced from previous years.

Chargeable Income% Exempted From TaxAmount Exempted From Tax
First $100,000@75%$75,000
Next $100,000@50%$50,000
YA2019 and before
First $100,000@100%$100,000
Next $200,000@50%$100,000

Source: IRAS

For example, if your company declares a chargeable income of $300,000 in YA2020, you only have to pay corporate tax on $175,000 of your chargeable income. This is lower than if your company was a in its 4th YA as it would have to pay corporate tax on $197,500 of your chargeable income.

This scheme does not apply to companies 1) whose principal activity is that of investment holding; and 2) which undertake property development for sale, investment or both investment and sale. Start-ups must also be incorporated in Singapore, be a tax resident in Singapore for that YA and must be held by no more than 20 shareholders in the YA, where all shareholder are individuals or at least one shareholder is an individual who owns at least 10%.

Corporate Income Tax Rebate of 25% (Capped At $15,000) For All Companies in YA2020

In YA2020, all companies are also eligible for a further 25% corporate income tax (CIT) rebate on its chargeable income, capped at $15,000. This is up from YA2019 – when it was 20% CIT rebate, capped at $10,000.

For example, your company has a chargeable income of $300,000. After the PTE, you would have a remaining chargeable income of $197,500. This translates to a tax payable of $33,575. On this amount, your company receives a corporate income tax rebate of 25% (capped at $15,000). This means your company only pays $25,181.25 in corporate income tax for YA2020.

Chargeable Income$300,000
Chargeable Income (After Partial Tax Exemption)$197,500
Corporate Income Tax$197,500 x 17% = $33,575
LESS: Corporate Income Tax Rebate$33,575 x 25% = $8,393.75 (which is within $15,000)
Net Tax Payable$25,181.25

Are You Allowed To Deduct Revenue Expenses Incurred Before The Commencement Of A Company?

Short answer – yes. Long answer – also yes, but this only applies to revenue expenses incurred “one year before the first day of the financial year in which you earn your first dollar of business receipt”.  

Are You Allowed To Deduct Losses From Previous Years?

Singapore companies may carry forward losses to offset future income tax.

Under the Loss Carry-Back Relief, companies may carry-back unutilised capital allowances (CAs) and trade losses to reduce the amount of taxes payable in an immediately preceding YA. What this means is that it can offset losses in the current year to claim back taxes paid in the immediate preceding year.

To help companies in 2020, the Loss Carry-back Relief for YA2020 was enhanced during Budget 2020, allowing companies to carry-back unutilised CAs and trade losses from YA2020 up to three YAs immediately preceding YA2020 (i.e. YA2017, YA2018 and YA2019).

What Is The Deadline To File Corporate Income Tax In Singapore?

Most companies are required to submit two Corporate Income Tax Returns to IRAS every year.

The first is the Estimated Chargeable Income (ECI) – to be filled within 3 months from the end of the financial year, if the company is required to submit ECI. Your company does not need to file the ECI if its annual revenue is not more than $5 million for the financial year AND the ECI is NIL for the YA.

The second is the YA2020 Corporate Income Tax Returns (From C-S/ C) – which is due on 15 Dec 2020 for YA2020. From YA 2021 onwards, this will be due on 30 Nov. All companies, including those that did not carry on business or have incurred a loss, must e-File their YA2020 Form C-S/ C forms as paper submissions will not be accepted.

e-Filing Made Easier For Small Companies

For companies that qualify to fine Form C-S and have an annual revenue of $200,000 or below, you can opt to submit e-File Form C-S (Lite) – a simplified version of Form C-S – comprising only six essential fields to be completed for companies with straightforward tax matters.

If your small company has straightforward tax matters, you can also leverage on the new digital solution co-created by IRAS and Accounting and Corporate Regulatory Authority (ACRA), in partnership with accounting software providers. This digital solution allows companies to automate the preparation and filing of Form C-S and Annual Return to IRAS and ACRA respectively via the accounting software.

There are government grants for companies to purchase the software solutions with the Start Digital Pack, the Digital Resilience Bonus (DRB), as well as the Productivity Solutions Grants (PSG).

Paying Your Corporate Tax

For companies with straightforward tax affairs, IRAS will typically send a Notice of Assessment (NOA) by 31 May the following year. 

For companies with more complex tax affairs, more in-depth reviews of your corporate tax returns will be undertaken. The Notice of Estimated Assessment, pending review, will be sent by 28 February the following year. After review, the NOA will be sent by 30 Nov of the second year.

Companies have one month from the date of the Notice of Assessment (NOA) to pay the corporate tax. Even if your company has filed an objection and is awaiting the outcome, you must pay the tax assessed as shown on your NOA within one month from the date of the NOA.

If payment is not received by the due date, a 5% late payment penalty will be imposed. Additional penalties of 1% per month, up to 12 months, may be imposed if the tax remains unpaid 60 days after the imposition of the 5% penalty.

IRAS may appoint agents such as the company’s bank, tenant or lawyer to pay the moneys to IRAS; and/or take legal action against the company.

Need Financing Support During This Period?

From now till 31 March 2021, SMEs can enjoy extra financing support of up to $5 million through the Temporary Bridging Loan Programme.

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