Ravi Chandran
What are the general corporate income tax rules in Singapore?
Corporate Income Tax is assessed on a preceding year basis in Singapore. Singapore’s Corporate Income Tax rate is 17%.
For corporate income tax purposes, the following is considered a company:
- A business entity incorporated or registered under the Companies Act 1967 or any law in force in Singapore. It usually has the words ‘Pte Ltd’ or ‘Ltd’ as part of its name
- A foreign company registered in Singapore such as a branch of a foreign company
- A foreign company incorporated or registered outside Singapore
A sole-proprietorship or partnership business is not considered a company.
Basis Period and Year of Assessment for Corporate Income Tax
Table of Contents
Your company is taxed on the income earned in the preceding financial year.
This means that income earned in the financial year 2020 will be taxed in 2021. In tax terms, 2021 is the Year of Assessment (YA), as it is the year in which your company’s income is assessed to tax.
To assess the amount of tax, IRAS looks at the income, expenses, etc. during the financial year. This financial year is known as the ‘basis period‘.
The basis period is generally a 12-month period preceding the YA.
The financial year end is determined by your company based on what best suits its business operations. IRAS does not determine the financial year end for companies.
If you change your company’s financial year end, the change must be filed with the Accounting and Corporate Regulatory Authority (ACRA) via BizFile+. IRAS will then update its records based on the information filed with ACRA. If you need help with ACRA filing, you can get professional help by engaging corporate secretarial services provider.
Your company is taxed at a flat rate of 17% of its chargeable income. This applies to both local and foreign companies.
Chargeable Income
Chargeable income refers to your company’s taxable income (after deducting tax-allowable expenses) for a Year of Assessment (YA).
How to Determine Whether Your Income is Taxable
Generally, income accrued in or derived from Singapore or received from outside Singapore is taxable. Learn more through our e-Learning video on the taxability of income.
What Is Taxable
Your company has to pay tax in Singapore on taxable income that is:
- Accrued in or derived from Singapore; or
- Received in Singapore from outside Singapore.
For example, the income from a business carried on in Singapore is regarded as accrued in or derived from Singapore.
For Singapore tax purposes, taxable income refers to:
- Gains or profits from any trade or business
- Income from investment such as dividends, interest and rental
- Royalties, premiums and any other profits from property
- Other gains that are revenue in nature
Deductions such as business expenses, capital allowances and reliefs can be claimed to reduce taxable income. This leads to lower taxes.
Income Received in Singapore from Outside Singapore and Corporate Income Tax
Under Section 10(25) of the Income Tax Act 1947, income from outside Singapore is considered received in Singapore when it is:
- Remitted to, transmitted or brought into Singapore;
- Used to satisfy any debt incurred in respect of a trade or business carried on in Singapore; or
- Used to purchase any movable property (such as equipment, raw material, etc.) brought into Singapore.
Section 10(25) is applied to tax foreign income received in Singapore only if the income belongs to an individual who is resident in Singapore or an entity that is located in Singapore. All foreign-sourced income received in Singapore by resident individuals, except those received through a Singapore partnership, is exempt from tax where the Comptroller of Income Tax is satisfied that the exemption is beneficial to them.
Non-resident individuals and foreign businesses that are not operating in or from Singapore can remit their foreign income to Singapore without being taxed on the income.
As an administrative concession, foreign income that is reinvested overseas without being repatriated to Singapore is not considered received in Singapore at the point of reinvestment. This means that the taxation of the foreign income is deferred until the investment is sold and the proceeds are brought into Singapore.
If the foreign-sourced income is subject to tax in Singapore and overseas, tax reliefs may be available to alleviate the double taxation suffered. Learn more about tax reliefs on foreign income.
What is Non Taxable
Capital Gains
Capital gains are not taxable. These include:
- Gains on sale of fixed assets
- Gains on foreign exchange on capital transactions
Income Exempted from Tax
Certain types of income are specifically exempted from tax under the Income Tax Act 1947, subject to conditions. These include:
- Certain shipping income derived by a shipping company under Section 13A and Section 13E
- Foreign-sourced dividends, branch profits and service income received by a resident company under Section 13(8)
- Gains derived by a company on the disposal of equity investments under Section 13W
What is Deductible
Deductible business expenses reduce your company’s taxable income and the amount of tax you need to pay.
Example
| Computation | $ |
|---|---|
| Income | 80,000 |
| Business Expenses | 15,000 |
| – Deductible Business Expenses | 5,000 |
| – Non-Deductible Business Expenses | 10,000 |
| Income Subject to Tax (‘Taxable Income’) | 80,000 – 5,000 = 75,000 (Income minus deductible expenses) |
Generally, deductible business expenses are those ‘wholly and exclusively incurred in the production of income’. In other words, they must satisfy all these conditions:
- The expenses are solely incurred in the production of income.
- The expenses are not a contingent liability i.e. they do not depend on an event that may or may not occur in the future. In other words, the expenses must be incurred. An expense is ‘incurred’ when the legal liability to pay the expense arises, regardless of the date of actual payment of the money.
- The expenses are revenue, and not capital, in nature.
- The expenses are not prohibited from deduction under the Income Tax Act 1947.
What is Non-Deductible?
Non-deductible business expenses are activities you or your employees pay for that do not fulfil the conditions above. These include personal expenses (such as travel, or entertainment not related to the running of the business) and capital expenses (such as expenses incurred to incorporate a company and the purchase of fixed assets).
Examples of Deductible & Non-Deductible Business Expenses
| Deductible | Non-Deductible |
|---|---|
| Accounting fee Administrative expenses Advertisement Auditors’ remuneration | Amortisation |
| Bad debts (trade debtors) Bank charges Book-keeping services Borrowing costs as a substitute for interest expense or to reduce interest costs | Bad debts (non-trade debtors) |
| Carbon credits, CommissionCPF, skills development levy, foreign worker levy (FWL)CPF-related Statutory contributions to CPF Ad-hoc contributions to employees’ CPF MediSave Account via the Additional MediSave Contribution Scheme Topping-up Employees’ CPF Retirement Accounts/ Special Accounts on Their Behalf Voluntary cash contributions to self-employed persons’ MediSave Account | Certificate of entitlement (COE) for motor vehicles CPF-related Voluntary contributions to CPF (refers to CPF contributions exceeding the statutory rate)Topping-up Employees’ CPF MediSave Accounts on Their Behalf New!Interest incurred on late CPF contributions |
| Digital taxes imposed in the form of turnover taxes (not income taxes) Directors’ fees Directors’ remuneration | Depreciation (you may instead claim capital allowances) Digital taxes imposed as income taxes Dividend payments made on preference shares Donations |
| Employee Equity-Based Remuneration (EEBR) SchemeEmployment Assistance Payment (EAP) Entertainment Exchange loss (trade and revenue in nature) Exhibition expenses | Entrance fee (country club or other clubs) Exchange loss (non-trade or capital in nature) Expenses incurred before commencement of business |
| Fixed assets written off Fixed assets acquisition cost (you may instead claim capital allowances) Fines | |
| Goodwill payment | |
| Income tax of employee borne by employer (in accordance with employment contract) Insurance premium Insurance for underwriting bad trade debts Interest expenses Interest incurred on late payment of fees to a Management Corporation for a Strata Title Plan (MCST) Interest incurred on loans to re-finance prior loans or borrowings Intellectual property (IP) licensing expenditure | Impairment loss on non-trade debts Singapore income tax and any tax on income in country/ territory outside Singapore Installation of fixed assets Interest expenses on non-income producing assets (interest adjustment) |
| Legal and professional fees (trade and revenue transactions) | Legal and professional fees (non-trade or capital transactions) |
| Medical expenses (restricted to 1%/ 2% of total remuneration if company is under Portable Medical Benefits Scheme (PMBS) or Transferable Medical Insurance Scheme (TMIS)) Motor vehicle expenses (such as upkeep, maintenance, running and financing costs of goods/ commercial vehicles e.g. van, lorry and bus) | Medical expenses (amount exceeding 1%/ 2% of total remuneration if company is under PMBS or TMIS) Motor vehicle expenses (S-plated, Q-plated and RU-plated cars) |
| Office upkeep | |
| Periodicals and newspapers Postage Printing and stationery Property tax Provision for bad and doubtful debts (specific) (note: impairment loss on trade debts) Provision for obsolete stocks (specific) Additional Petrol Duty Rebate (Budget 2021) | Penalties Prepaid expenses (not relating to the relevant basis period) Private and domestic expenses (expenses not incurred for business purpose) Private hire car Provision for bad and doubtful debts (general) (note impairment loss on trade debts) Provision for obsolete stocks (general) |
| Reinstatement costs (expenses incurred to reinstate premises to its original condition prior to vacating it at the end of the tenancy agreement) Rental of business premises Registration of patents, trademarks, designs and plant varieties Repairs and maintenance Research and development Road tax rebate (Budget 2021) Retrenchment payments Contractual retrenchment payments Ex-gratia retrenchment payments and outplacement support costs, where there is no complete cessation of business | Renovation or refurbishment works (you may claim Section 14N deduction for qualifying expenditure) Retrenchment payments Ex-gratia retrenchment payments and outplacement support costs, where there is a complete cessation of business |
| Secretarial fees Staff remunerations (salary, bonus and allowances) Staff training Staff welfare/ benefits Statutory and Regulatory expenses Stock obsolescence Supplementary Retirement Scheme (SRS) | |
| Tax fees (service fees paid to tax agent) Telephone bills Transport (public transport and goods/ commercial vehicles) Travelling | Transport (S-plated, Q-plated and RU-plated cars) |
| Wages Water and electricity | Withholding tax on interest payments borne by companies on-behalf of non-residents |
Further/ Enhanced/ Double Deductions
There are various tax schemes that provide for further/ enhanced/ double deductions on qualifying business expenses.
Learn about the following tax schemes:
- Business and IPC Partnership scheme (BIPS)
- Double Tax Deduction for Internationalisation scheme
- Research and Development (R&D) tax measures
- Productivity and Innovation Credit (PIC) scheme (The PIC scheme has expired after the Year of Assessment (YA) 2018. Businesses are no longer allowed to claim PIC benefits on expenditure incurred after the basis period of YA 2018.)
Corporate Income Tax Filing Obligations
Your company has to file 2 Corporate Income Tax Returns with IRAS every year: Estimated Chargeable Income (ECI) and Form C-S/ Form C-S (Lite)/ Form C.
| Tax Return | Purpose | Due Date |
|---|---|---|
| ECI | To declare an estimate of the company’s taxable income for a Year of Assessment (YA) | Within 3 months from the end of the financial year, except for companies that qualify for the ECI filing waiver and those that are specifically not required to file an ECI |
| Form C-S/ Form C-S (Lite)/ Form C | To declare the company’s actual taxable income for a YA | 30 Nov each year |
Estimated Chargeable Income (ECI) Filing
You will receive an ECI filing notification before the end of your company’s financial year. This is a reminder to file your company’s ECI.
For New Companies
You will receive the ECI filing notification from IRAS before the end of your company’s financial year, starting from the year after the year of incorporation. You will not receive the notification in the year of incorporation, as most companies do not close their first set of accounts in the year of incorporation. For example, if your company is incorporated in 2021 and has a Dec financial year end, you will receive your first ECI filing notification for the Year of Assessment (YA) 2023 in Dec 2022.
However, if your company closes its first set of accounts in the year of incorporation, you are still required to file the ECI within 3 months from your company’s first financial year end, even though you have not received any ECI filing notification. This is so unless the company qualifies for the ECI filing waiver.
Using the same example above, if your company closes its first set of accounts on 31 Dec 2021 and does not qualify for the ECI filing waiver, you are required to file the ECI for YA 2022 by 31 Mar 2022 (within 3 months from 31 Dec 2021).
Form C-S/ Form C-S (Lite)/ Form C Filing
You will receive a Form C-S/ Form C-S (Lite)/ Form C filing notification by May of each year. This is a reminder to file your company’s Form C-S/ Form C-S (Lite)/ Form C.
or New Companies
You will receive the Form C-S/ Form C-S (Lite)/ Form C filing notification from IRAS by May of each year, starting from the second year after the year of incorporation. You will not receive the notification in the year of incorporation, as most companies do not close their first set of accounts in the year of incorporation. For example, if your company is incorporated in 2021, you will receive your first Form C-S/ Form C-S (Lite)/ Form C filing notification for the Year of Assessment (YA) 2023 by May 2023.
However, if in the year of incorporation, your company:
- Closes its first set of accounts; and
- Commences business or receives any income;
you are still required to file the Form C-S/ Form C-S (Lite)/ Form C for the YA immediately after the year of incorporation, even though you have not received any Form C-S/ Form C-S (Lite)/ Form C filing notification.
Using the same example above, if your company closes its first set of accounts on 31 Dec 2021, and commences business or receives income in 2021, you are required to file the Form C-S/ Form C-S (Lite)/ Form C for YA 2022 by 30 Nov 2022.
Determining your company’s First Year of Assessment (YA) for Corporate Income Tax
The first YA of your company is the YA that relates to the basis period during which your company is incorporated.
It depends on the financial year end chosen and the closing date of the first set of accounts. Hence, the first YA of your company may differ from another company that is incorporated on the same day.
Example 1: First Set of Accounts is 12 months
| Date of Incorporation | Financial Year End | First Set of Accounts Closed On | Period Covered in First Set of Accounts |
|---|---|---|---|
| 1 Jul 2020 | 30 Jun every year | 30 Jun 2021 | 1 Jul 2020 to 30 Jun 2021 (12 months) |
| YA | Basis Period |
|---|---|
| First YA: 2022 | 1 Jul 2020 to 30 Jun 2021 (12 months) |
| Second YA: 2023 | 1 Jul 2021 to 30 Jun 2022 |
| Third YA: 2024 | 1 Jul 2022 to 30 Jun 2023 |
Example 2: First Set of Accounts is less than 12 months
| Date of Incorporation | Financial Year End | First Set of Accounts Closed On | Period Covered in First Set of Accounts |
|---|---|---|---|
| 1 Jul 2020 | 31 Dec every year | 31 Dec 2020 | 1 Jul 2020 to 31 Dec 2020 (Less than 12 months) |
| YA | Basis Period |
|---|---|
| First YA: 2021 | 1 Jul 2020 to 31 Dec 2020 (Less than 12 months) |
| Second YA: 2022 | 1 Jan 2021 to 31 Dec 2021 |
| Third YA: 2023 | 1 Jan 2022 to 31 Dec 2022 |
Example 3: First Set of Accounts is more than 12 months
| Date of Incorporation | Financial Year End | First Set of Accounts Closed On | Period Covered in First Set of Accounts |
|---|---|---|---|
| 1 Jul 2020 | 31 Dec every year | 31 Dec 2021 | 1 Jul 2020 to 31 Dec 2021 (More than 12 months) |
| YA | Basis Period |
|---|---|
| First YA: 2021 | 1 Jul 2020 to 31 Dec 2020 (Less than 12 months) |
| Second YA: 2022 | 1 Jan 2021 to 31 Dec 2021 |
| Third YA: 2023 | 1 Jan 2022 to 31 Dec 2022 |
Note:
The company’s profit/ losses must be attributed and declared under 2 YAs (i.e. YAs 2021 and 2022) as the basis period for each YA should not exceed 12 months. Therefore, the first YA is YA 2021, and not YA 2022.
Time apportionment may be used if the company is not able to directly identify its income and expenses to the 2 periods.
Foreign-Owned Investment Holding Companies and Corporate Income Tax
Foreign-owned investment holding companies, with purely passive sources of income or receiving only foreign-sourced income, are generally not considered tax residents of Singapore because these companies usually act on the instructions of its foreign companies/ shareholders.
However, they may still be treated as Singapore tax residents if they can satisfy certain conditions.
Non-Singapore Incorporated Companies and Singapore Branches of Foreign Companies
Non-Singapore incorporated companies and Singapore branches of foreign companies are controlled and managed by their foreign parent. They are not considered tax residents of Singapore.
However, they may still be treated as Singapore tax residents if they can satisfy certain conditions.
How Tax Residency Affects Corporate Income Tax
While tax resident and non-resident companies are generally taxed in the same manner, tax resident companies enjoy certain benefits, such as:
- Exemption or reduction in tax imposed on specified foreign income that is derived in a jurisdiction that has an Avoidance of Double Taxation Agreement (DTA) with Singapore
- Tax exemption on specified foreign income such as foreign-sourced dividends, foreign branch profits, and foreign-sourced service income under Section 13(8) of the Income Tax Act 1947
- Foreign tax credit for the taxes paid in the foreign jurisdiction against the Singapore tax payable on the same income
- Tax exemption for new start-up companies
Certificate of Residence
The Certificate of Residence (COR) is a letter issued by IRAS to certify that the company is a tax resident of Singapore for the purpose of claiming tax benefits under the DTAs that Singapore has concluded with other jurisdictions. It is generally required by the foreign tax authority to prove that the company is a Singapore tax resident.
