If you set up a Singapore company, your company will be liable for corporate taxes and the individuals who are employed in the company will have to pay personal income taxes on the salaries that are paid to them.

 

In Singapore, corporate tax rates are a flat 17%. However, there are common tax reliefs that will help to reduce the tax bill for new start-up companies.

 

For Year of Assessment 2020 (YA 2020)

This is for financial years which closed in 2019.

  • 75% exemption on the first $100,000 of normal chargeable income; and
  • A further 50% exemption on the next $100,000 of normal chargeable income.

New start-up companies will also be eligible for Corporate Income Tax Rebates

All companies will receive a corporate income tax rebate of the following:

  • 20% corporate income tax rebate, capped at $10,000 for YA 2019

 

(Normal chargeable income refers to income to be taxed at the prevailing corporate tax rate.)

 

This is the Resident Tax Rates in Singapore (From Year of Assesment 2017)

Chargable IncomeIncome Tax Rate (%)Gross Tax Payable (SGD$)
First $20,000
Next $10,000
0
2
0
200
First $30,000
Next $10,000
-
3.50
200
350
First $40,000
Next $40,000
-
7
550
2,800
First $80,000
Next $40,000
-
11.5
3,350
4,600
First $120,000
Next $40,000
-
15
7,950
6,000
First $160,000
Next $40,000
-
18
13,950
7,200
First $200,000
Next $40,000
-
19
21,150
7,600
First $240,000
Next $40,000
-
19.5
28,750
7,800
First $280,000
Next $40,000
-
20
36,550
8,000
First $320,000
In excess of $320,000
-
22
44,550

 

Here is an example of the tax bill which start-up companies will need to pay.

 

Profit: SGD$100,000

75% exemption means that taxes only need to be paid on SGD$25,000

17% of $25,000 = $4,250

20% corporate tax rebate means that the actual tax paid is 80% of $4,250 = SGD$3,400

In this instance, the corporate tax bill is SGD$3,400 for the first SGD$100,000 of profit.

 

If a director earns SGD$96,000 per annum, his personal income tax will be SGD$5,190

First $80,000: $3,350
11.5% of $16,000 = $1,840

 

Please note that dividends that are received by shareholders are not taxable. Dividends are paid out on the profit after tax. Therefore, in the first instance, the SGD$100,000 profit will incur a corporate tax bill of $3,400. The remaining profit can be declared and paid out as dividends to the shareholders of the company. These dividends that are received by the shareholders do not have to be declared as income by the shareholders nor will they incur any further tax.

 

When in doubt, seek legal advice or consult an experienced ACRA Filing Agent.

 

Yours Sincerely,
The editorial team at Singapore Secretary Services

 

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Common Tax Reliefs that will help to reduce the tax bill for New Start-Up Companies