Taxes are integral for all individuals and businesses in any country around the world. Whether you run a foreign company or a local business, tax payment is necessary for you to follow the legislation of Singapore. After all, tax directly helps the government in providing better facilities to the public. Tax allows the government to improve infrastructure, offer necessary facilities, and enhance government systems. In this regard, it is essential to understand how the taxation systems work in Singapore, so you can play your integral role in society.
Income tax refers to the chargeable amount on both the income of individuals, as well as the companies. The taxed payment includes both the income earned either inside or outside of the company. When businesses are considered, companies need to have efficient tax management systems in order to ensure that they are complying with the taxation laws of the country.
The foreign company earned by a company in the country is subjected to double Taxation. The first Taxation occurs in a foreign country, and the double taxation occurs when the income from a foreign country is remitted into Singapore. Companies can opt for foreign tax credit (FTC), which allows claims on the foreign tax paid by the Singapore tax resident company when compared to the Singapore tax payable on the same income.
The personal tax rates in Singapore are known to be progressive. In other words, the rates of the tax increase as the income of the individual increases. The country charges ta on employment benefits like housing, bonuses, and salary. However, Singapore does not charge personal income tax on income from overseas employment or assets.
A foreigner getting employment income from a Singapore company has to pay tax at the rate of 15 percent or resident tax rates, whichever one is more. On the other hand, a foreigner getting income from other Singapore sources generally have to pay tax at 20 percent, unless specifically exempted or subjected to a reduced tax rate. Many people opt for tax services in Singapore to manage their taxes.
GST is basically a tax on consumption. This tax is paid when any money is spent on the goods and services, including all the imported material. Also known as Value-Add Tax (VAT) in many countries, the GST rate is levied on domestic consumption and not foreign consumption. This tax is collected by the GST-registered businesses when they supply goods and services to the consumers. A company in Singapore is supposed to register for GST if its annual turnover is more than S$1 million. For businesses that do not meet this income, it is optional for them to opt for this tax.
Certain goods and services are also exempted from this tax. For instance, the sale of residential properties, provision of financial services, and the local supply of investment-orientated metals are some of the examples of goods and services that do not come under this tax. Many accounting services in Singapore provide GST-related services to help companies better manage their taxes.
Singapore is known for being a duty-free port. In this way, no duties are imposed on exports from the country. However, import duty is imposed on certain items. These products include tobacco products, petroleum products, motor vehicles, and liquor.
The duty on these products is mostly imposed according to the rates specified by the type of import. But they are also levied on the basis of ad valorem, which is basically the tax charged in accordance with the price of the object.
Property tax is evaluated on real estate property. It is paid for by the owner. This tax is computed according to the percentage of all the annual value of the lands, buildings, houses, and tenements owned by the owner. The law in the country significantly makes a distinction between the tax on owner-occupied, rented out, residential, and commercial properties.
This tax is applicable to all the documents associated with the transfer of company shares and real estate property. However, the stamp duty that is levied on the transfer of company shares is minimal in amount.
When a real estate property is considered, three types of duties have to be paid. These duties include the sale, acquisition/disposal, and purchase of the properties in Singapore. These are usually referred to as Buyer’s Stamp Duty (BSD), Seller’s Stamp Duty (SSD), and Additional Buyer’s Stamp Duty (ABSD).
The withholding tax in Singapore is basically a tax charged to a non-resident company or individual accumulating its income from a Singapore source after providing certain services in the country. In other words, when a payment is provided by a company or individual in Singapore to a non-resident for particular services or products, a certain percentage of that payment has to be withheld.
There are numerous types of taxes that are levied in Singapore. For example, Singapore charges taxes on bets and all the revenue that is accumulated from gambling and lottery activities. On the other hand, the country also charges foreign workers. Similarly, airport passenger services regulate the employment of foreign workers through tax. But, in the majority of the cases, businesses and individuals working routinely in Singapore do not pay any additional hidden taxes.
The Certificate of Residence (COR) is useful to certify the tax residency in Singapore. By approving this, a company can enjoy various tax benefits in the country. The government in the country has formulated various Double Taxation Agreements (DTAs) with foreign companies and jurisdictions, which allows the companies in the country to get tax benefits when conducting cross-border transactions.
A company is considered to be a resident in Singapore when taxes are considered only if all the control and management related activities are conducted within the country. In this regard, if the directors and management of the country manages and directs all of its operations from Singapore, then it is considered to be a resident of Singapore.
It is essential to determine the status of your company because then it can help in identifying how much tax you have to pay for your operations. It can help in identifying your eligibility for foreign tax relief, double tax credit relief, liability to pay foreign-source income taxes, and other payments.
A person who is physically present in the country is considered a tax resident. On the other hand, any individual who is present in the company for employment purposes is also considered a tax resident. However, in such a case, the individual has to be present in the company for 183 days or more annually.
Singapore has a straightforward system for paying taxes. The system revolves around the needs of the taxpayers and not just the government. One reason why the taxation system is so easy in the country is that IRAS uses a lot of technology. A lot of tax filing and registration process can be done online, which makes it possible for people even in remote locations to efficiently fulfill their responsibilities.
There are also many services in the country offering taxation services. You may ask why do you need taxations services from a third party? The answer is simple. Taxation is not an easy topic. A lot of qualification is necessary in order to understand the taxation system. If you are just starting to pay taxes or registering a company, then you might need expert advice to know how things work.
There are various types of taxes that you would have to pay for your business. An expert service can help you to keep track of everything and remain within the jurisdiction of the company. On the other hand, if case you are a foreigner working in the country or running a business, then advice from the experts can help you to navigate through a new taxation system.
On the other hand, tax consultants can save a lot of time and effort by doing everything for you. They can update you with the most recent legislation, fill forms, prepare and submit tax returns, answer queries from the IRAS, and deal with all the necessary documentation that you might have to do on your own. This makes the taxation system in Singapore relatively easy.
Taxation is a necessary system for society. The taxation system in Singapore is an effective balance of incentives and checks that not only promotes commerce activity in the country but also ensures that the government has enough monetary revenue to meet its objectives. In this regard, the Singaporean taxation system is a mutually beneficial relationship for the government and its residents. Consider taxpaying your responsibility, as it will help you stay within the legal boundaries.