Singapore Corporate Income Tax: Rates, System, Reliefs

A corporate income tax (CIT) is a tax on profits the company makes. In Singapore, you pay this tax to IRAS  — Inland Revenue Authority of Singapore.

We look closer at what the corporate income tax is, ways to reduce it and deadlines for you to stick to.

This guide is enough for you to understand the concept and make informed decisions. However, we do not break down gathering the data and filling out forms as this work is normally done by Singapore bookkeeping and accounting services providers.

What is a corporate income tax?

A corporate income tax is the sum you pay on your profits after you deduct your expenses, but before you pay out dividends.

The sum of money the tax is applied to is called the chargeable income. In many cases, not all the revenue is taxed because there are tax incentives, reliefs and other allowances/deductions that reduce the chargeable income.

Singaporean corporate tax is single-trier, territorial-based and flat-rate. Let’s expand on what it all means and how it benefits you.

What is single-tier?

The single-tier system (in practice in Singapore for 17 years) means that your company’s profit is taxed one single time and all the dividends paid to the shareholders are exempt from further taxation.

In contrast, the two-tier system implies taxing both the company’s profits and dividends.

What is flat-rate?

“Flat-rate” means that the tax is the same for both local and foreign companies. From 2010, the corporate income tax rate stands at 17%.

To keep the tax rate effective, IRAS has been steadily reducing it since 2000.

What is territorial based?

Singapore follows a territorial basis of taxation, meaning that the territory where you get your income from is key for the tax you pay on it.

Income from the business carried out directly in Singapore: 17% tax

Foreign-sourced income: you pay tax only on what is viewed as “received and remitted” in Singapore. A Singapore-registered company that has its operations overseas will pay the corporate income tax only on what goes through its Singaporean bank account — as viewed received and remitted in Singapore. However, there is no universal rule for such cases, each of them is examined separately by IRAS.

Andy has an animation & design firm registered in Singapore. However, he lives and works in Italy and all his clients happen to be in Italy. They pay him to his company’s French bank account and the only money from his profit that reaches Singapore is the operating costs of the company there. Only this sum will be taxed by IRAS.

The Singaporean government also tries not to put double tax burden on those who have foreign-sourced income — having dozens of bilateral agreements known as DTAs (Avoidance of Double Taxation treaties). You can check the full list of countries Singapore collaborates with to see if your jurisdiction is among them.

What are the basic corporate tax exemptions schemes?

There are two of them: Start-up Tax Exemption (SUTE) and Partial Tax Exemption (PTE). It is your company’s age that defines what scheme can be applied to you. And, for example, for YA 2019 , you can enjoy 100% tax exemption.

For the first 3 years of assessment, a company falls under SUTE. This start-up tax exemption scheme was introduced in 2005, but got revised in 2018. The new figures will come into force from YA 2020.

Let’s have a look at future reductions, working since YA 2020 onwards:

For YA 2019 and before, the rates were the following:

Mind that investment holdings and real estate industry companies are not eligible for this scheme. Instead, they will be given partial tax exemptions.

For the 4th year of assessment onward, a company can enjoy PTE. The partial tax exemption has also been revised for YA 2020.

And here is what the reductions were for YA 2019 and before.

What are the requirements for tax exemptions?

1. A company must be incorporated in Singapore.
2. A company must be a tax resident in Singapore for a particular YA that you are under the scheme. That means that the control and management of the company should be carried out in Singapore. Even if the company’s day-to-day operations take place in Singapore, but the Board of Directors meets elsewhere, the company is not considered a Singaporean tax resident. The tax residency status may vary by each year of assessment.
3. The number of shareholders should not be over 20 for a particular YA. All the shareholders must be individuals, not companies OR at least 1 of the individuals must hold at least 10% of the company’s ordinary shares.

Emily's company calculates its tax for YA 2019. During the year, the business earned a net profit of S$280,000.

The company qualifies for SUTE, so it won't pay tax on some part of its chargeable income. The first S$100,000 is not taxed, the next S$180,000, are halved and become S$90,000. S$280,000 – S$100,000 – S$90,000 = S$90,000.

In short, the company is taxed as if it had made S$90,000 instead of S$280,000.

The 17% rate is applied to S$90,000. Thus, Emily will pay S$15,300. This sum is around 5% of the initial S$280,000.

Corporate Income Tax Rebate

Apart from the tax exemption schemes, there is one more thing that eases your tax burden — the tax rebate. A corporate income tax rebate is what all the companies are given. IRAS deducts the rebate automatically when you file the income tax documents (ECI and C-S/C forms).

While the tax exemption is about reducing your chargeable income, the tax rebate means a quantifier applied to the amount of tax you must pay.

The tax rebate rate is basically a percentage by which your tax is reduced. If you must pay S$10,000 and the rebate is 10%, you will pay one-tenth less: S$10,000 – S$1,000 = 9,000.

For 2019 year of assessment, the rebate is 20%. Mind that the total sum you can save due to the rebate is capped at S$10,000.

For 2020 YA, a CIT rebate is 25%, with the cap being set at S$15,000.

Now let us look at an example. Do you remember Emily?

Emily is to pay S$15,300 for YA 2019.

The company has an income tax rebate of 20% for YA 2019: S$15,300 - 20% = S$3,060

So the final corporate income tax to pay for Emily is S$15,300 - S$3,060 = S$12,240. And this sum is around 4% of the initial S$280,000 chargeable income.

What is the course of action when paying the corporate income tax?

1. You file your Estimated Chargeable Income (ECI) form with IRAS. Thus, IRAS will know your tax base and will be able to calculate your tax. SUTE and PTE deductions should not be in the ECI, meaning the form shows your income before any exemptions.
   The deadline for the ECI is within 3 months from the end of the financial year.
   You can get an ECI waiver, if this is about you: your annual revenue is not above S$5 million and your ECI estimation is nil.
2. You file Form C-S or Form C, depending on your annual revenue. It will be the main paper indicating how much you’ve earned in total. If you’ve earned nothing or there have been losses, it must also be reported in the form. You must file company income tax each year of assessment by December 15 if you are filing it online, and by November 30 — if you stick to the paper form. From YA 2020 onwards, IRAS makes e-filing compulsory.
3. IRAS calculates how much tax you owe and sends you the Notice of Assessment (NOA). After you receive it, you must pay the tax within 30 days. If you object to the estimation, you are still to pay the tax  first and then file an objection online/by mail to IRAS.

If the Form C-S/ C figure < ECI figure: the excess of the corporate income tax paid earlier will be automatically refunded.

If Form C-S/ C figure > ECI figure: the additional tax must be paid within 1 month from the date you get the NOA.

If IRAS do not get either the ECI or the Form C-S/ C by the due date, they may issue their NOA based on their own estimation of the company’s income. After that, you have 1 month to pay the bill.

Income Tax Papers Timeframe

Summing Up

1. The corporate income tax rate is 17%, applied to the profits before dividends deduction.
2. Avoidance of Double Taxation agreements may give you an exemption, with the conditions depending on the country Singapore signed it with.
3. Government programmes SUTE and PTE can give you tax exemption/reductions.
4. Corporate income tax rebate (20% for 2019 YA) also cuts your final tax sum.Filing of corporate income tax returns has 3 stages: you file your ECI, you file form C/C-S then IRAS sends you the final Notice of Assessment (NOA). After that, you must pay the tax within 30 days.