Business restructuring in Singapore

Tax landscape in Singapore

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The attractive tax system and numerous tax incentives have been contributing factors for MNCs in the choice of Singapore as a base for Asia.

Simplified administrative system

The corporate income tax system is territorial, with income tax being levied at a standard rate of 17% on all income derived from sources in Singapore.

A non-Singapore incorporated non-resident company is generally not taxed on foreign-sourced income received in Singapore if it is not operating in or from Singapore.

Remittances of foreign income in the form of dividends, branch profits and services income into Singapore by companies resident in Singapore are tax-exempt if certain conditions are met – and where they are not met, exemptions may be granted under specific scenarios or circumstances on an approval basis.

Lack of tax on capital gains

Capital gains are not taxed in Singapore, but care must be taken that gains are treated as capital and not revenue in nature.

Comprehensive treaties and free trade agreement (FTA) network

Singapore has entered into comprehensive double tax treaties with more than 60 countries (but notably not with the United States) and has a wide-ranging network FTAs that carry preferential duty rates, lowering the overall costs of trading where applicable to the various products traded through Singapore.

Numerous tax incentives

For MNCs looking to establish high value-added centralised operations in Singapore, depending on the nature and scale of the operations, the incentive for pioneer and pioneer service companies may be possible to obtain, with such enterprises being tax exempt on qualifying profits for a period of up to 15 years.

Where MNCs undertake high value-added activities but do not qualify for pioneer status, the Development and Expansion incentive under the Headquarters Program is available with qualifying income taxed at a concessionary tax rate of either 5% or 10%, for a period of up to 20 years, typically in tranches of five years.

The level of benefits and package of tax incentives will be dependent on factors such as the types of business activities conducted and additional capital expenditures invested into Singapore.

Further, there is potential for a withholding tax exemption or a reduction in the withholding tax rate, for approved licensing payments and technical assistance fees under the Approved Royalty Incentive.

For MNCs establishing a Singapore trading hub, the Global Trader Program offers concessionary tax rates of 5% or 10% on qualifying transactions in qualifying commodities and products.

There is also a Finance and Treasury centre incentive that is aimed at encouraging companies to use Singapore as a base for conducting regional treasury management activities in Singapore, as well as numerous research and development incentives designed to promote Singapore as a research hub.