Guide to corporate tax in Singapore: Rates, exemptions, and filing

Corporate tax is a key factor for businesses in Singapore. Known for its business-friendly environment, Singapore boasts one of the lowest corporate tax rates globally, making it an attractive destination for both local and foreign enterprises. Despite its small size, Singapore’s open economy and business-friendly environment have made it a global business hub. The low tax rate boosts profitability, influences investment decisions, and enhances Singapore’s global competitiveness.

In Singapore, corporate income tax is charged at a flat rate of 17% on a preceding-year basis. 

The corporate tax rate in Singapore is significant to businesses for several reasons:

• Profitability and investment decisions: A lower corporate tax rate increases the net profit of businesses and influences critical business decisions such as expansion and resource allocation

• Global competitiveness: Singapore’s attractive tax rate strengthens its position as a global business hub, drawing in numerous multinational corporations and fostering international investments.

• Financial planning and budgeting: Understanding the corporate tax rate is essential for financial planning and budgeting

According to the Inland Revenue Authority of Singapore (IRAS), a company is defined as:

• 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 an overseas company

• A foreign company incorporated or registered outside Singapore

These companies are required to file corporate income tax returns. However, sole proprietorships and partnerships are not considered companies and follow different tax obligations.

Find out more on how to start a business in Singapore and how to register a company in Singapore.

Why is Singapore's corporate tax rate attractive for businesses?

Singapore's corporate tax rate is one of the lowest in the world, providing a competitive advantage over other major business hubs like Hong Kong, London and New York.

Singapore also operates a single-tier corporate tax system, meaning dividends are tax-exempt for both resident and non-resident shareholders, unlike the double-tier systems in other countries which imposes taxes on both the corporate and shareholder level. 

With a lower tax rate, local companies benefit from retained earnings that can be reinvested, while foreign firms enjoy a low-cost business environment. Additionally, Singapore’s extensive double taxation agreements (DTAs) and tax incentives, such as the Headquarters Tax Incentive Scheme, attract multinational corporations looking for a stable and efficient global base.

Comparison of corporate tax rates globally

Singapore's corporate tax system is one of the most competitive in the world. Here’s a comparative analysis of corporate tax rates¹ among major business hubs:

Both Singapore and Hong Kong have some of the lowest corporate tax rates globally, with Hong Kong slightly lower at 16.5%. These rates make both cities highly attractive for business investments, particularly in Asia. 

As for Germany, Japan and Australia, these countries have higher corporate tax rates. High tax rates can be a deterrent for businesses looking to maximise profitability.

What is Singapore's current corporate tax rate?

The current corporate tax rate in Singapore stands at 17%. This rate has remained consistent and unchanged over recent years, offering stability for businesses planning their financial strategies.

Comparison of Corporate Tax Rates Over the Years

What are the different types of business taxes in Singapore?

What tax exemptions and reliefs are available for companies in Singapore?

What are the corporate tax incentives available in Singapore?

Singapore offers various tax incentives to promote business activities in specific sectors:

• Research and Development (R&D)³: Under R&D scheme, also the Enterprise Innovation Scheme (EIS) aims to further incentivise businesses, especially the small and medium enterprises (SMEs) and the large local enterprises (LLEs) to invest in R&D. It lets eligible businesses to opt to convert up to $100,000 of total qualifying expenditure for each Year of Assessment (YA) into cash at a conversion rate of 20%.⁴

• Business Expansion: The Pioneer Certificate Incentive (PC) and the Development and Expansion Incentive (DEI) are designed to promote the development of capabilities and the undertaking of new or expanded economic activities in Singapore. Companies engaged in global or regional headquarters (HQ) activities within Singapore are also eligible to apply for the DEI to support these HQ operations.⁵ Eligible companies may enjoy a tax exemption or a concessionary tax rate of 5% or 10%.⁶ 

How to calculate corporate income tax for Singapore companies?

Calculating corporate income tax for Singapore companies involves several steps, from determining the estimated chargeable income to applying relevant tax rates and deductions. It is also important for companies to consider applicable reliefs and/or incentives as the few mentioned above. Here's a step-by-step guide:

1. Determine Estimated Chargeable Income (ECI), the income subject to tax after deducting allowable expenses and exemptions

• Revenue Recognition: Start by recognising all sources of income, including sales, services, interest, and any other revenue streams.

• Deductible Expenses: Subtract deductible expenses from the total income. These can include business operation costs, employee salaries, rent and utilities.

• Non-Deductible Expenses: Identify non-deductible expenses such as private car expenses, fines and penalties. These should not be included in the expense deductions.

2. Deductible Expenses and Allowances

The Inland Revenue Authority of Singapore (IRAS) allows several deductions and allowances to reduce the taxable income:

• CPF Contributions: Contributions to the Central Provident Fund (CPF) for employees are fully deductible.

• Donations: Qualifying donations to approved institutions can be deducted. Usually, this can be up to 2.5 times the amount donated.

• Capital Allowances: Capital allowances can be claimed on wear and tear of qualifying fixed assets bought and used in its trade or business

• IRAS Tax Reliefs: Various tax reliefs, such as the Productivity and Innovation Credit (PIC) and other industry-specific incentives, can further reduce taxable income.

3. Apply Corporate Tax Rates

• Tax Rate: The corporate tax rate in Singapore is a flat 17% on the chargeable income.

• Tax Exemptions and Rebates: Apply any applicable tax exemptions and rebates. Startups, for example, may enjoy tax exemptions on their first $100,000 of chargeable income for the first three years.

With Airwallex’s Expense Management and virtual cards, you can efficiently categorize and track deductible and non-deductible expenses. Our integration with Xero also aids in accurate tracking and recording of financial transactions, crucial for calculating profit and chargeable income.  

Steps to calculate taxes

If a company earns $500,000 in revenue with $102,500 in deductible expenses, its ECI would be calculated as follows: ​​500,000 - 102,500 = 397,500

Example: Partial tax exemption

Chargeable income: $500,000

Special tax rules for different industries

Different business industries in Singapore might be subject to specific tax rules. IRAS outlines specific GST rules for various business sectors, including:

What are the filing requirements for corporate taxes in Singapore?

Filing with the Inland Revenue Authority of Singapore (IRAS)

The filing requirements for corporate taxes in Singapore involve the following key steps:

1. Estimated Chargeable Income (ECI): Companies must file their ECI within three months after the end of their financial year, unless exempted.

2. Annual Tax Return (Form C-S/C): Companies must file their annual tax return by November 30 each year.

3. Tax Computation and Financial Statements including form C-S/C: These must be submitted with the annual tax return.

4. e-Filing: Mandatory for companies, using the IRAS myTax Portal.

When should companies seek professional corporate tax services in Singapore?

Companies in Singapore should consider seeking professional corporate tax services in the following scenarios:

• Complex Tax Situations: Businesses involved in cross-border transactions, mergers, acquisitions, or international expansions may face complex tax issues that require expert guidance.

• Compliance and Reporting: To ensure accurate and timely tax filings, especially for businesses with large volumes of transactions, professional services can help navigate the intricate reporting requirements and avoid penalties.

• Tax Planning: For businesses looking to optimise tax efficiency, professional tax advisors can provide strategies that align with Singapore’s tax incentives and reliefs.

• Startups and SMEs: These businesses may benefit from professional services to understand the various tax exemptions and schemes available, such as the Start-up Tax Exemption (SUTE) and Partial Tax Exemption (PTE).

• Changes in Tax Legislation: Keeping up with evolving tax laws and regulations can be challenging. Professional services ensure that businesses remain compliant and can adapt quickly to changes.

• Audit Preparedness: In the event of an audit by IRAS, having professional support can be crucial in ensuring all documentation is in order and that the process goes smoothly.

By engaging professional corporate tax services, companies can focus on their core operations while ensuring that their tax matters are handled efficiently and in compliance with Singapore’s regulatory requirements.

Using Airwallex for corporate tax management in Singapore

Airwallex is a leading global fintech platform that offers an end-to-end global payments solution to simplify international business operations. Our suite of services, including cross-border payments, multi-currency cards, and expense management application, ensures businesses can focus on growth while managing financial complexity with ease.

Airwallex simplifies corporate tax management in Singapore by automating expense tracking and bank reconciliation — including banking expenses — directly into accounting software like Xero. With real-time visibility into corporate card and banking expenses, businesses can easily track deductible costs, reduce taxable income, and ensure accurate tax computations.

Key features for simplifying tax management:

1. Multi-currency support: Airwallex’s multi-currency wallet holds over 23 currencies, enabling seamless transactions without conversion fees, ideal for global businesses managing international expenses.

2. Real-time expense tracking: All expenses are tracked and recorded as they happen, reducing errors and ensuring accurate monitoring of deductible and non-deductible expenses.

3. Simplified reconciliation: Automatically match expenses with receipts and invoices, and integrate them into Xero, reducing manual efforts and discrepancies in financial records.

4. Virtual and physical cards: Airwallex Borderless Cards help categorize expenses, set spending limits, and streamline reimbursements, ensuring better control and financial accuracy.

5. Seamless accounting integration: Airwallex integrates smoothly with accounting platforms like Xero, QuickBooks, and Netsuite. This ensures accurate financial data is recorded and categorized, reducing the administrative burden and simplifying tax filing.

By leveraging Airwallex’s integrated financial tools, businesses can improve tax compliance, reduce administrative burdens, and enhance overall financial operations.

Conclusion

Singapore's corporate tax system is a key factor in maintaining its global competitiveness. With a flat 17% tax rate — one of the world's lowest — Singapore creates a business-friendly environment that attracts both local and international companies. The absence of taxes on capital gains and dividends, as well as existing tax incentives and exemptions further encourages businesses to reinvest their earnings, driving innovation, expansion, and economic resilience.

Additionally, Singapore's strong legal framework, political stability, and extensive double taxation agreements make it an attractive hub for multinational corporations. Beyond the favourable tax rates, companies benefit from a supportive environment for regional headquarters and international trade.

For businesses navigating these tax complexities and aiming to optimise their tax strategies, tools like Airwallex offer essential support. By streamlining expense management, automating financial operations, and ensuring compliance with tax regulations, Airwallex empowers businesses to focus on growth while minimising administrative burdens. Leveraging such innovative financial tools can be the key to maximising the benefits of Singapore’s favourable tax environment.

FAQ

1. What penalties apply for late corporate tax payments in Singapore?

Late corporate tax payments in Singapore can result in penalties imposed by IRAS. A 5% late payment penalty is charged on the overdue tax, and if the tax remains unpaid 60 days after the due date, an additional 1% penalty may be levied for each month the tax remains unpaid, up to a maximum of 12% per year.

2. What steps should a company take if it is unable to pay its corporate taxes on time?

If a company is unable to pay its corporate taxes on time in Singapore, it should immediately contact IRAS to discuss a payment plan. Companies can apply for an installment plan to spread out the tax payment over several months. Timely communication with IRAS is crucial to avoid additional penalties and interest charges.

3. Are there any industry-specific tax incentives available in Singapore?

Yes, Singapore offers several industry-specific tax incentives to promote growth and innovation in key sectors. For example, the Research and Development (R&D) Tax Incentive encourages businesses to invest in R&D activities. Additionally, the Pioneer Certificate Incentive (PC) and the Development and Expansion Incentive (DEI) offer reduced tax rates for businesses in manufacturing, financial services, and other sectors that contribute significantly to Singapore’s economy.

4. Do I pay tax on dividends?

In Singapore, dividends paid by a Singapore-resident company to its shareholders are generally exempt from tax. Singapore operates a single-tier corporate tax system, meaning that tax paid by a company on its chargeable income is the final tax, and dividends are distributed to shareholders tax-free, regardless of whether the shareholders are residents or non-residents.

5. How are corporate tax audits conducted in Singapore?

Corporate tax audits in Singapore are conducted by IRAS to ensure compliance with tax laws. 

During an audit, IRAS reviews the company's tax returns, financial statements, and other relevant documents. The audit process may include interviews, site visits, and requests for additional information. The company is expected to cooperate fully and provide all requested documentation. If discrepancies are found, the company may face penalties, including fines and additional taxes.

Sources & references

1. https://taxfoundation.org/data/all/global/corporate-tax-rates-by-country-2023/ 

2. https://www.mof.gov.sg/policies/taxes/corporate-income-tax 

3. https://www.iras.gov.sg/taxes/corporate-income-tax/income-deductions-for-companies/business-expenses/research-development-(r-d)-tax-measures

4. https://www.iras.gov.sg/schemes/disbursement-schemes/enterprise-innovation-scheme-(eis)#:~:text=400%25%20tax%20deductions%20on%20up,ITE)%20or%20other%20qualified%20partners

5. https://www.edb.gov.sg/en/grants/incentives-and-schemes.html

6. https://www.corporateservices.com/singapore/pioneer-certificate-incentive-and-development-and-expansion-incentive/#key_facts

7. https://sleek.com/sg/tools/singapore-corporate-tax-calculator/