Corporate tax in Singapore

Summary

Corporate Income Tax Rate (%) 17 (a)
Capital Gains Tax Rate (%) 0
Branch Tax Rate (%) 17 (a)
Withholding Tax (%) (b)
Dividends 0 (b) (c)
Interest 15 (b)
Royalties from Patents, Know-how, etc. 10 (b)
Branch Remittance Tax 0
Net Operating Losses (Years)
Carryback 1 (d)
Carryforward Unlimited (d)

a) Various tax exemptions and reductions are available (see Section B).

b) See Section F.

c) See Section B.

d) See Section C.

Taxes on corporate income and gains

Corporate income tax. Income tax is imposed on all income deriv­ed from sources in Singapore, and on income from sources out­side Singapore if received in Singapore. However, a nonresident company that is not operating in or from Singapore is generally not taxed on foreign-source income received in Singapore. A com­pany is resident in Singapore if the control and management of its business is exercised in Singapore; the place of incorporation is not relevant.

Remittances of foreign income in the form of dividends, branch profits and services income (specified foreign income) into Sing­apore by companies resident in Singapore are exempt from tax if prescribed conditions are met. For remittances of specified for­eign income that does not meet the prescribed conditions, com­panies may be granted tax exemption under specific scenarios or circumstances on an approval basis.

Rates of corporate income tax. The standard corporate income tax rate is 17%. Seventy-five percent of the first SGD10,000 of nor­mal chargeable income is exempt from tax, and 50% of the next SGD290,000 is exempt from tax. The balance of chargeable in­come is fully taxable at the standard rate of 17%. Under a pro­posal in the 2015 budget, a 30% corporate income tax rebate will be granted for the 2016 and 2017 tax years, capped at SGD20,000 per tax year.

Tax incentives, exemptions and reductions. The following tax in­centives, exemptions and tax reductions are available in Singapore.

Pioneer companies and pioneer service companies. The incentive for pioneer companies and pioneer service companies is aimed at encouraging companies to undertake activities that have the effect of promoting economic or technological development in Singa­pore. A pioneer enterprise is exempt from income tax on its qual­ifying profits for a period of up to 15 years.

Development and Expansion Incentive. The Development and Expansion Incentive (DEI) is available to companies that engage in high value-added operations in Singapore but do not qualify for pioneer incentive status and to companies whose pioneer incen­tive status has expired. DEI companies enjoy a concessionary tax rate of not less than 5% on their incremental income derived from the performance of qualifying activities. The maximum initial relief period is 10 years, with possible extensions not exceeding 5 years at a time, subject to a maximum total incentive period of 20 years. However, if the DEI company engages in one or more qualifying activities, and oversees, manages or controls the con­duct of any activity on a regional or global basis, its total incen­tive period may on approval be extended beyond 20 years, with possible extensions not exceeding 10 years at a time, subject to a maximum incentive period of 40 years.

Investment allowances. On approval, investment allowances are available to companies that engage in qualifying projects. Such allowances are granted in addition to the normal tax depreciation allowances, and are based on a specified percentage (up to 100%) of expenditure incurred on productive equipment.

Approved royalties, technical assistance fees, and contributions to research and development costs. Approved royalties, technical assistance fees, and contributions to research and development (R&D) costs paid to nonresidents may be exempted from with­holding tax.

All the above incentives are also available under the International Headquarters (IHQ) Award (see Headquarters Programme).

Tax exemption scheme for new companies. Subject to certain con­ditions, a newly incorporated and tax-resident Singapore company or a Singapore company limited by guarantee may qualify for a full tax exemption on the first SGD100,000 of chargeable income and a 50% tax exemption on the next SGD200,000 of chargeable income. The exemption applies only to the qualifying company’s first three consecutive tax years. However, the scheme does not apply to new start-ups undertaking property development or in­vestment holding.

Productivity and Innovation Credit. Businesses that incur quali­fying expenditure on the following six activities qualify for an enhanc ed deduction or allowance, known as a Productivity and Innovation Credit (PIC), from the 2011 tax year to the 2018 tax year:

  • R&D
  • Eligible design activities
  • Acquisition and in-licensing of intellectual property rights
  • Registration of patents, trademarks, designs and plant varieties
  • Acquisition or leasing of PIC information technology (IT) and automation equipment
  • External training and qualifying in-house training

All businesses can claim a deduction or allowance of 400% of the first SGD400,000 of their expenditures per tax year on each of the above activities from their taxable income, subject to a com­bined cap of SGD1,200,000 of eligible expenditure for each activity for the 2016 to 2018 tax years.

A PIC+ scheme is also available to support small and medium enterprises that are making more substantial investments to trans­form their businesses. Under the scheme, which is effective for expenditure incurred in the 2015 to 2018 tax years, the expendi­ture cap is increased from SGD400,000 to SGD600,000 per qualifying activity per tax year, and the expenditure caps may also be combined. To qualify, the entity’s annual turnover must not exceed SGD100 million or it must not employ more than 200 workers; the criterion is applied at the group level if the entity is part of a group.

Qualifying persons with at least three local employees have the option to convert up to SGD100,000 of eligible expenditure for each tax year into a non-taxable cash grant. The conversion rate is 60% for the 2013 to 2018 tax years.

R&D incentives. Liberalized R&D deductions are available from the 2009 tax year through the 2025 tax year. A tax deduction can be claimed for undertaking R&D in any area (that is, the R&D is no longer re quired to be related to the trade or business carried on by the company), and an additional 50% tax deduction is allowed for certain qualifying R&D expenditure. If the companies out-source their R&D activities to an R&D organization in Singapore, the tax deduction available is at least 130% of the amount of R&D expenses incurred. Businesses that incur qualifying R&D expen­diture may qualify under the PIC scheme (see Productivity and Innovation Credit above).

Tax certainty on gains on disposal of equity investments. To pro­vide upfront tax certainty, and with certain exceptions, gains de­rived from the disposal of ordinary shares by companies during the period of 1 June 2012 through 31 May 2017 are not taxed if the qualifying divesting company had legally and beneficially owned at least 20% of the ordinary shares in the investee company for a continuous period of at least 24 months before the disposal of the shares.

Headquarters Programme. The Headquarters Programme con­sists of an International Headquarters (IHQ) Award and a Region­al Headquarters (RHQ) Award. The Headquarters Programme ap plies to entities incorporated or registered in Singapore that pro­vide headquarters services to their network companies on a re­gional or global basis. Under the IHQ and RHQ Awards, compa­nies may enjoy incentive rates of 0% to 15% for a specified period on qualifying income, depending on the amount of commitment to Singapore. This commitment is demonstrated by various fac­tors, including headcount, business spending and quality of peo­ple hired.

Finance and treasury center incentive. The finance and treasury center (FTC) incentive is aimed at encouraging companies to use Singa pore as a base for conducting treasury management activi­ties for related companies in the region. Income derived from the provision of qualifying services to approved network companies and from the carrying on of qualifying activities on own account (for its own purposes or benefit) is subject to tax at a rate of 10% or other concessionary rate for a period of up to 10 years, with possible extensions of up to 10 years at a time. Approved network companies are offices and associated companies of the company granted the FTC incentive that have been approved by the rele­vant authority for purposes of the incentive.

A sunset clause of 31 March 2016 applies to the FTC scheme.

Financial sector incentive. The financial sector incentive (FSI) is designed to encourage the development of high-growth and high value-added financial activities in Singapore. A 5% or 12% con­cessionary tax rate applies to income derived from carrying on qualifying activities by approved FSI companies in Singapore.

Maritime sector incentives. Ship operators, maritime lessors and providers of certain supporting shipping services may enjoy tax incentives under the Maritime Sector Incentive (MSI), which consists of the following three broad categories:

  • International shipping enterprise
  • Maritime (ship or container) leasing
  • Supporting shipping services

The tax benefits include tax exemptions or concessionary tax rates of 5% and 10%.

Shipping companies that either own or operate a fleet of foreign vessels can apply for the MSI-Approved International Shipp ing Enterprise (MSI-AIS) award. Successful applicants are grant ed either MSI-AIS status or the MSI-AIS (Entry Player) [MSI-AIS (Entry)] status, depending on the company’s scale of operations. Under this scheme, income derived from the operation of non-Singapore flagged vessels plying in international waters and other qualifying income are exempt from tax. An MSI-AIS award may be granted for a renewable period of 10 years (extendible up to 40 years), while MSI-AIS (Entry) status may be granted for a non-renewable period of 5 years, with the option of graduating to the MSI-AIS status if qualifying conditions are met. Applications for MSI-AIS (Entry) can be made from 1 June 2011 to 31 May 2016 (extended to 31 May 2021, as proposed in the 2015 budget).

Under the MSI-Maritime Leasing (Ship) award, approved ship­ping investment enterprises (Singapore-incorporated ship leasing companies, shipping funds, business trusts or partnerships) may enjoy tax exemption on their qualifying income, which includes income from the chartering or finance leasing of seagoing ships to qualifying persons for use outside the port limits of Singapore. Approved shipping investment managers may also enjoy a 10% concessionary tax rate on income derived from the management of an approved shipping investment enterprise, and prescribed services and activities. Applications can be made from 1 March 2011 to 31 May 2016 (extended to 31 May 2021, as proposed in the 2015 budget), and successful applicants are granted the status for a period of five years.

Under the MSI-Maritime Leasing (Container) award, approved container investment enterprises (Singapore-incorporated compa­nies, business trusts or partnerships) may enjoy a concessionary tax rate of 5% or 10% on their qualifying income, which in cludes income from the operating or finance leasing of sea containers that are used for the international transportation of goods. Ap­proved container investment managers may also enjoy a 10% con­cessionary tax rate on income derived from the management of an approved container investment enterprise and prescribed ser­vices and activities. Applications can be made from 1 March 2011 to 31 May 2016 (extended to 31 May 2021, as proposed in the 2015 budget), and successful applicants are granted the status for a period of five years.

The MSI-Supporting Shipping Services (MSI-SSS) award aims to promote the growth of ancillary shipping service providers and encourage shipping conglomerates to set up their corporate ser­vices functions in Singapore. An approved MSI-SSS company enjoys a 10% concessionary tax rate on incremental income de­rived from the provision of approved supporting shipping servic­es, such as ship broking, forward freight agreement trading, ship management, ship agency, freight forwarding and logistics ser­vices. Applications can be made from 1 June 2011 to 31 May 2016 (extended to 31 May 2021, as proposed in the 2015 budget), and successful applicants are granted the MSI-SSS award for a period of five years.

Global Trader Programme. The Global Trader Programme (GTP) is aimed at encouraging international companies to establish and manage regional or global trading activities with Singapore as their base. Under the GTP, approved companies enjoy a conces­sionary tax rate of 5% or 10% on qualifying transactions conduct­ed in qualifying commodities and products (including energy, agricultural, building, industrial, electrical and consumer prod­ucts, and carbon credits), qualifying transactions in derivative in­struments and qualifying structured commodity financing activi­ties. In addition, the 5% concessionary tax rate applies to income derived from qualifying transactions in liquefied natural gas, as specified by the relevant authority. A sunset clause of 31 March 2021 applies to the GTP scheme.

Venture capital funds incentive. The venture capital funds incen­tive aims to encourage a thriving venture capital industry in Sing­apore. Gains derived from the disposal of approved investments, interest from approved convertible loan stocks and dividends de – rived from approved investments are exempt from tax or taxed at a concessionary rate of not more than 10% for a period of up to 10 years. Extension periods of up to five years each may be avail­able, but the maximum total incentive period is 15 years. Under a 2015 budget proposal, a sunset clause of 31 March 2020 will be legislated.

International Growth Scheme. The 2015 budget contains a proposal for an International Growth Scheme to support high-potential companies in their growth overseas. Qualifying Singa­pore companies will enjoy a concessionary tax rate of 10% for a period not exceeding five years on their incremental income from qualifying activities. The approval window period (the period in which applications may be made) for the new scheme will be from 1 April 2015 to 31 March 2020.

Capital gains. Capital gains are not taxed in Singapore. However, in certain circumstances, the Singapore Revenue considers trans­actions involving the acquisition and disposal of real estate, stocks or shares to be the carrying on of a trade, and, as a result, gains arising from such transactions are taxable. The determination of whether such gains are taxable is based on a consideration of the facts and circumstances of each case.

Administration. The tax year, known as a year of assessment, runs from 1 January to 31 December. The period for which profits are identified for assessment is called the basis year. Therefore, in – come earned during the 2015 basis year is assessed to tax in the 2016 year of assessment. For companies engaged in business in Singapore that adopt an accounting period other than the calendar year, the assessable profits are those for the 12-month accounting period ending in the year preceding the year of assessment.

An estimate of the chargeable income (ECI) of a company must be filed within three months after the end of its accounting year. However, companies are not required to file an ECI if their an­nual revenue is not more than SGD1 million for the financial year and if their ECI is nil.

The statutory deadline for filing the income tax return is 30 Novem­ber for paper filing and 15 December for e-filing. No extension of time to file the return is allowed.

Income tax is due within one month after the date of issuance of the notice of assessment. In certain circumstances, companies may pay tax in monthly installments on the ECI, up to a maximum of 10, with the first installment payable one month after the end of the accounting period. No installments are allowed if the ECI is submitted more than three months after the end of the relevant accounting period.

A late payment penalty of 5% of the tax due is imposed if the tax is not paid by the due date. If the tax is not paid within 60 days of the imposition of the 5% penalty, an additional penalty of 1% of the tax is levied for each complete month that the tax remains outstanding, up to a maximum of 12%.

The tax law provides that it is an offense for a person charge­able to tax in Singapore not to file an income tax return with the tax authority. On conviction of such offense, a penalty of up to SGD1,000 is imposed for late filing of tax returns. In default of payment, the person may be liable to imprisonment for a term not exceeding six months. On conviction, a further penalty of SGD50 per day is im posed for each day that the tax return remains un-filed. If a person fails or neglects without reasonable excuse to file a tax return for a tax year for two years or more, a higher penalty of double the amount of tax assessed for the relevant tax year and a fine of not exceeding SGD1,000 is imposed on convic­tion. In de fault of payment, the person may be liable to imprison­ment for a term not exceeding six months. The Singapore Revenue may compound any of these offenses.

Dividends. Dividends paid by a Sing apore tax-resident company are exempt from income tax in the hands of shareholders, regard­less of whether the dividends are paid out of taxed income or tax-free gains.

Foreign tax relief. Singapore has entered into comprehensive dou­ble tax treaties with more than 70 countries, but notably not with the United States. Under Singapore rules, a foreign tax credit is limited to the lower of the foreign tax paid and the Singapore tax payable on that income. The foreign tax credit (FTC) is granted on a country-by-country, source-by-source basis unless the resident taxpayer elects to claim FTC under the pooling method, subject to meeting certain conditions.

A unilateral tax credit system, similar to FTC relief, is also avail­able for income derived from countries that have not entered into tax treaties with Singapore.

Determination of taxable income

General. In general, book profits reported in the financial state­ments prepared under generally accepted accounting principles are adjusted in accordance with the Singapore tax rules to arrive at taxable income.

If a company maintains its financial accounts in a functional cur­rency other than Singapore dollars, as required under the financial reporting standards in Singapore, it must furnish tax computations to the Singapore Revenue denominated in that functional currency in a manner as prescribed by the law.

For expenses to be deductible, they must meet all of the following conditions:

  • They must be incurred wholly and exclusively in the production of income.
  • They must be revenue in nature.
  • They must not be specifically prohibited under the Singapore tax law.

To facilitate business start-ups, it is specifically provided that businesses may deduct revenue expenses incurred on or after the first day of the accounting year (not exceeding a 12-month period) immediately preceding the accounting year in which they earn their first dollar of trade receipts.

Special rules govern the deductibility of expenses for investment holding companies.

Expenses attributable to foreign-source income are not deductible unless the foreign-source income is received in Singapore and subject to tax in Singapore. In general, offshore losses may not be offset against Singapore-source income.

No deduction is allowed for the book depreciation of fixed assets, but tax depreciation (capital allowances) is granted according to statutory rates (see Capital allowances [tax depreciation]).

Double deductions. Double deductions are available for certain expenses relating to approved trade fairs, exhibitions or trade mis­sions, maintenance of overseas trade offices, overseas investment development, logistics activities and R&D, as well as for approved salary expenditure for employees posted overseas (as proposed in the 2015 budget).

Renovation or refurbishment deduction. A tax deduction is allow­able on due claim, for qualifying renovation or refurbishment (R&R) expenditure incurred for the purposes of a trade, profession or business. The allowable R&R costs are capped at SGD300,000 for every three-year period, beginning with the basis period in which the deduction is first allowed. Any unused R&R deduction is allowed as a loss carryback or loss carryforward (see Relief for trading losses) or for group relief (see Groups of companies).

Inventories. Trading inventory is normally valued at the lower of cost or net realizable value. Cost must be determined on a first-in, first-out (FIFO) basis; the last-in, first-out (LIFO) basis is not accepted.

Provisions. Impairment losses for debts computed in accordance with Singapore financial reporting standards may be deducted, but only to the extent that the debts arose from the trade carried on by the taxpayer.

Capital allowances (tax depreciation)

Plant and machinery. Tax depreciation or capital allowances are given for capital expenditures incurred on the acquisition of plant and machinery used for the purposes of a trade or business. Qualifying plant and machinery are normally written off in equal amounts over three years when claimed. Alternatively, expendi­tures on such assets may be claimed in one year if each item costs no more than SGD5,000. However, the total claim for all such assets may not ex ceed SGD30,000 for a tax year.

The cost of the following may be written off in the year of acqui­sition:

  • Computers or other prescribed automation equipment
  • Generators
  • Robots
  • Certain efficient pollution-control equipment
  • Certified energy-efficient equipment or approved energy-saving equipment
  • Certain industrial noise- and chemical hazards-control equip­ment

Businesses that incur expenditure on the acquisition of qualify­ing IT and automation equipment may also qualify for the PIC scheme (see Section B).

Expenditures on automobiles (other than commercial vehicles and cars registered outside Singapore and used exclusively out­side Singapore) generally do not qualify for capital allowances.

Land intensification allowance incentive. The land intensification allowance (LIA) incentive grants an initial allowance of 25% and an annual allowance of 5% on qualifying capital expenditure in­curred on or after 23 February 2010 by businesses on the con­struction or renovation of qualifying buildings or structures if certain conditions are met. The user of the building or structure must carry out one of the specified qualifying activities as its principal activity in the building or structure. The application window period for the LIA incentive is from 1 July 2010 through 30 June 2020.

Intellectual properties. Writing-down allowances (WDAs) are granted for capital expenditure incurred on the acquisition of specified categories of intellectual property (IP) on or before the last day of the basis period for the 2020 tax year if the legal and economic ownership of the IP lies with Singapore companies. The allowances are calculated on a straight-line basis over five years. On application, the legal ownership requirement may be waived for IP rights acquired on or after 17 February 2006 if the Singa­pore company has substantial economic rights over the IP, while the foreign parent holds the legal title.

On approval, an accelerated WDA over two years is granted to an approved media and digital entertainment (MDE) company with respect to the acquisition of approved IP rights for MDE content (pertaining to films, television programs, digital animations or games, or other MDE content) on or before the last day of the basis period for the 2018 tax year.

Businesses that incur qualifying expenditure on the acquisition or in-licensing of IP rights may also qualify for the PIC scheme (see Section B).

Disposal of plant and equipment and industrial buildings. Allow­ances are generally subject to recapture on the sale of qualifying plant and equipment and industrial buildings if the sales proceeds exceed the tax-depreciated value (to the extent of the excess but not more than the allowances claimed). If sales proceeds are less than the tax-depreciated value, an additional allowance is given.

Relief for trading losses. Trading losses may be offset against all other chargeable income of the same year. Unused losses may be carried forward indefinitely, subject to the shareholding test (see below). Excess capital allowances can also be offset against other chargeable income of the same year and carried forward indefi­nitely subject to the shareholding test and to the requirement that the trade giving rise to the capital allowances continues to be carried on (same trade test).

A one-year carryback of up to an aggregate amount of SGD100,000 of current year unused capital allowances and trade losses (col­lectively referred to as “qualifying deductions”) may be allowed, subject to the meeting of certain conditions and compliance with specified administrative procedures.

The carryforward and carryback of losses and capital allowances are subject to the shareholders remaining substantially (50% or more) the same at the relevant comparison dates (shareholding test). If the shareholder of the loss company is itself another com­pany, look-through provisions apply through the corporate chain to the final beneficial shareholder.

The carryback of capital allowances is subject to the same trade test that is applicable to the carryforward of unused capital allow­ances.

The Singapore Revenue has the authority to allow companies to de duct their unused tax losses and capital allowances, notwith­standing a substantial change in ownership at the relevant dates, if the change is not motivated by tax considerations (for example, if the change is caused by the nationalization or privatization of in – dustries or if the shareholding of the company or its parent chang­es substantially as a result of the shares being widely traded on recognized exchanges). If allowed, these losses and capital allow­ances may be offset only against profits from the same business.

Groups of companies. Under group relief measures, current-year un used losses, capital allowances and donations may be trans­ferred by one company to another within a group, subject to meet­ing certain qualifying conditions. A group generally consists of a Singapore-incorporated parent company and all of its Sing apore-incorporated subsidiaries. Two Singapore-incorporated compa­nies are members of the same group if one is 75% owned by the other, or both are 75% owned by a third Singapore-incorporated company.

Other significant taxes

The following table summarizes other significant taxes.

Nature of tax Rate (%)
Goods and Services Tax (GST) on any supply
of goods and services, except an exempt
supply, made in Singapore by a taxable
person (a business is taxable if its annual
supplies exceed SGD1 million) in the course
of or furtherance of business and on imports
of goods into Singapore unless the imports
qualify for import reliefs
0 / 7
Social security contributions (Central Provident
Fund [CPF]); foreigners holding work passes
are exempt
For employees up to age 55, on monthly
ordinary wages (lower rates apply if employee
is older than age 55); the monthly salary
ceiling for contributions is SGD6,000 (as
proposed in the 2015 budget) for ordinary
wages; contributions paid by
Employer (limited to SGD1,020 a month) 17
Employee (limited to SGD1,200 a month) 20
Contributions on additional wages, such as
bonuses and non-regular payments (limited
to SGD102,000 less the total ordinary wages
subject to CPF contributions in the year);
paid by
Employer 17
Employee 20
(For both contributions on ordinary wages and contributions on additional wages, the employer’s contribution rate for workers aged from above 55 to 60 is 13%; lower contribution rates apply to individuals older than age 60. The employee’s contribution rate for workers aged from above 55 to 60 is 13%; lower contribution rates apply to individuals older than age 60. For employees who earn total wages of less than SGD750 per month, different rates apply.)
Skills development levy; payable by employer for all employees; based on the first SGD4,500 of monthly gross remuneration; subject to a
minimum of SGD2
0.25

Miscellaneous matters

Foreign-exchange controls. Singapore does not impose any re – strictions on the remittance or repatriation of funds in or out of Singapore.

Debt-to-equity ratios. Singapore does not impose any specific debt-to-equity restrictions.

Anti-avoidance legislation. The tax legislation allows the Singa­pore Rev enue to disregard or vary any arrangement that has the purpose or effect of altering the incidence of taxation or reducing or avoiding Singapore tax liability. The Singapore Revenue may also tax profits of a nonresident in the name of a resident as if the latter is an agent of the nonresident, if the profits of the resident from business dealings with the nonresident are viewed as lower than ex pected as a result of the close connection between the two parties.

Transfer pricing. Specific legislation governs the arm’s-length principle to be applied to related-party transactions. The Singapore Revenue may make adjustments to profits for income tax pur­poses in cases in which the terms of commercial relations or finan­cial relations between two related parties are not at arm’s length. The Singapore Revenue has revised its guidance on transfer pric­ing (TP) matters. The revised guidance is summarized below.

TP principles and fundamentals provide guidance on the arm’s-length principle and TP documentation requirements in Singapore. The guidelines on the application of the arm’s-length principle are broadly consistent with the Organisation for Economic Co­operation and Development (OECD) Transfer Pricing Guidelines for Multinational Enterprises and Tax Administrations, which endorse the arm’s-length principle. Specific guidance, including a recommendation to adopt a three-step approach (conduct a comparability analysis, identify the most appropriate TP method and tested party, and determine the arm’s-length results) to apply the arm’s-length principle, is provided together with specific requirements relating to external benchmarking searches and the application of results.

The Singapore Revenue expects companies to maintain contem­poraneous TP documentation to support their transactions with related parties. Specifically, the Singapore Revenue has included dollar-value thresholds for related-party transactions (subject to certain exceptions). TP documentation must be prepared if these thresholds are exceeded. The Singapore Revenue does not require TP documentation to be submitted together with the tax returns but taxpayers have 30 days to submit the documents on the Singa­pore Revenue’s request. Failure to prepare contemporaneous documentation or the inability of taxpayers to substantiate trans­fer prices may result in the imposition of penalties for not keeping proper records, upward adjustment, ineligibility to invoke compe­tent authority assistance, rejection of an Advance Pricing Arrange­ment (APA) application and disallowance of self-initiated adjust­ments. The TP documentation must be organized at the group level and entity level.

TP administration provides information and guidance on the TP consultation program and the avoidance and resolution of TP disputes. The TP consultation process involves the Singapore Revenue selecting taxpayers based on various risk indicators and reviewing and auditing their TP methods and documentation. The guidelines also provide details on the step-by-step processes for the Mutual Agreement Procedure (MAP) and APAs, including sample documents for the MAP and APAs. Double tax treaties provide for the MAP to resolve instances of double taxation. MAP is a dispute-resolution process used by the competent tax authorities to resolve disputes arising under the application of tax treaties.

Discussion and guidance is also provided with respect to TP ad­justments, related-party loans, services and attribution of profits to permanent establishments (PEs).

Reorganizations

Amalgamations of companies. For corporate amalgamations, a tax framework is available. This framework seeks to minimize the tax consequences arising from qualifying amalgamations and align it with the consequences provided in the Companies Act. On elec­tion, the tax treatment applies to two or more amalgamating com­panies and an amalgamated company in a qualifying amalgama­tion. Under the framework, the amalgamated company is treated as continuing the existing businesses of the amalgamating com­panies (and, accordingly, an acquisition of new businesses by the amalgamated company is not deemed to occur) for tax purposes.

Deduction for acquisitions of shares of companies. A Singapore company may claim a deduction if it and/or any one or more ac­quiring subsidiaries incur a capital expenditure during the period of 1 April 2010 to 31 March 2015 (both dates inclusive; will be extended until 31 March 2020, as proposed in the 2015 budget) in acquiring the ordinary shares in another company, subject to specified conditions. The amount of the deduction granted is 5% (increased to 25% for qualifying acquisitions made from 1 April 2015, as proposed in the 2015 budget) of the capital expenditure, to be written off over five years. For this purpose, the capital ex­penditure is capped at SGD100 million (reduced to SGD20 mil­lion for qualifying acquisitions made from 1 April 2015, as pro­posed in the 2015 budget) for all qualifying acquisitions that have acquisition dates within one basis period. A 200% tax deduction is granted for certain transaction costs incurred on the qualifying acquisition, subject to an expenditure cap of SGD100,000 per relevant tax year.

Domestic and treaty withholding tax rates

In general, withholding tax at a rate of 15% is imposed on interest and other payments with respect to loans or indebtedness paid to nonresidents. However, interest paid by approved banks in Sing­apore on deposits held by nonresidents is exempt from tax if the nonresidents do not have a PE in Singapore and do not carry on business in Singapore by themselves or in association with others, or do not use the funds from the operation of a PE in Singapore to make the deposit. In addition, interest paid on certain qualify­ing debt securities issued on or before 31 December 2018 to nonresidents who do not have a PE in Singapore is exempt from tax. This exemption also applies to nonresidents who have a PE in Singapore, but do not use the funds obtained from the operations of the PE to acquire the debt securities. Payments for arrange­ments, management or services relating to loans or indebtedness performed by nonresidents outside Singapore or guarantees with respect to loans or indebtedness provided by nonresident guaran­tors are not subject to withholding tax. Interest and qualifying pay ments made by banks, finance companies and certain approv­ed entities to nonresident persons are also exempt from withhold­ing tax during the period of 17 February 2012 through 31 March 2021 if the payments are made for the purpose of their trade or business and not with the intent of avoiding tax in Singapore.

A 10% withholding tax is imposed on the following types of pay­ments to nonresidents:

  • Royalties for the use of, or the right to use, intangible property
  • Payments for the use of, or the right to use, scientific, technical, industrial or commercial knowledge or information

However, payments made to a nonresident and borne by a person resident in Singapore or a Singapore PE for use of or the right to use software, information or digitized goods, but not involving the right to commercially exploit the copyright, are not subject to withholding tax. Examples are shrink-wrap software, software downloaded from the internet by end users and software bundled with computer hardware.

A 15% withholding tax is imposed on rent and other payments to nonresidents for the use of movable property. Effective from 17 February 2012, payments made to nonresidents (excluding PEs in Singapore) for the charter hire of ships are exempt from tax.

In general, a 17% withholding tax is imposed on payments to non­resident companies for assistance or services rendered in connec­tion with the application or use of scientific, technical, industrial or commercial knowledge or information, and for management or assistance in the management of any trade, business or profession. If services are performed outside Singapore, such services are not subject to withholding tax.

Payers no longer need to withhold tax on the above payments that are due on or after 21 February 2014 to PEs that are Singapore branches of nonresident companies. These branches in Singapore continue to be assessed for income tax on such payments received and must declare such payments in their annual income tax returns.

Payments made to nonresident professionals for services per­formed in Singapore are subject to a final withholding tax of 15% on gross income, unless the nonresident professionals elect to be taxed at 22% of net income.

Tax treaties may override the above withholding tax rules. How­ever, if the rate under the domestic tax law is lower than the treaty rate (see below), the domestic tax rate applies.

Singapore does not levy a withholding tax on dividends (see Section B).

The rates of withholding tax on interest and royalties may be reduced under the terms of a tax treaty, and details of the rates applicable to treaty jurisdictions are set out below.

 

Interest

%

Royalties (i)

%

Albania 5 (a) 5
Australia 10 10
Austria 5 (a) 5
Bahrain 5 (a) 5
Bangladesh 10 10
Barbados 12 (a) 8
Belarus 5 (a) 5 (w)
Belgium 5 (a) 3/5 (p)
Brunei Darussalam 5/10 (a)(m) 10
Bulgaria 5 (a) 5
Canada 15 (a) 15
China 7/10 (a)(b) 6/10 (p)
Cyprus 7/10 (a)(b) 10
Czech Republic 0 0/5/10 (x)
Denmark 10 (a) 10
Ecuador (y) 10 (a) 10
Egypt 15 (a) 15
Estonia 10 (a) 7.5
Fiji 10 (a) 10
Finland 5 (a) 5
France 10 (a) 0
Georgia 0 0
Germany 8 (a) 8
Guernsey 12 (a) 8
Hungary 5 (a) 5
India 10/15 (a)(c) 10
Indonesia 10 (a) 15
Ireland 5 (a) 5
Isle of Man 12 (a) 8
Israel 7 (a) 5 (q)
Italy 12.5 (a) 15/20 (t)
Japan 10 (a) 10
Jersey 12 (a) 8
Kazakhstan 10 (a) 10
Korea (South) 10 (a) 15
Kuwait 7 (a) 10
Latvia 10 (a) 7.5
Libya 5 (a) 5
Liechtenstein 12 (a) 8
Lithuania 10 (a) 7.5
Luxembourg (z) 0 7
Malaysia 10 (a) 8
Malta 7/10 (a)(b) 10
Mauritius 0 (u) 0 (u)
Mexico 5/15 (a)(d) 10
Mongolia 5/10 (a)(m) 5
Morocco 10 (a) 10
Myanmar 8/10 (a)(e) 10/15 (j)
Netherlands 10 (a) 0
New Zealand 10 (a) 5
Norway 7 (a) 7
Oman 7 (a) 8
Pakistan 12.5 (a) 10
Panama 5 (a) 5
Papua New Guinea 10 (a) 10 (a)

 

Philippines 10/15 (a)(r) 15/25 (k)(s)
Poland 5 (a) 2/5 (p)
Portugal 10 (a) 10
Qatar 5 (a) 10
Romania 5 (a) 5
Russian Federation 7.5 (a) 7.5
San Marino (y) 12 (a) 8
Saudi Arabia 5 (a) 8
Seychelles (y) 12 (a) 8
Slovak Republic 0 10
Slovenia 5 (a) 5
South Africa 0 5
Spain 5 (a) 5
Sri Lanka 10 (a) 15
Sweden 10/15 (a)(f) 0
Switzerland 5 (a) 5 (g)
Taiwan — (n) 15
Thailand 10/25 (a)(v) 15
Turkey 7.5/10 (a)(h) 10
Ukraine 10 (a) 7.5
United Arab Emirates 7 (a) 5 (l)
United Kingdom 5 (a) 8
Uzbekistan 5 8
Vietnam 10 (a) 5/10 (o)
Non-treaty countries 15 10

a) Exempt under certain specified circumstances.

b) The rate is 7% for interest paid to banks or financial institutions.

c) The 10% rate applies to interest paid to financial institutions. The 15% rate applies to other interest.

d) The rate is 5% for interest paid to banks.

e) The rate is 8% for interest paid to banks or financial institutions.

f) The rate is 10% for interest paid by industrial undertakings to financial insti­tutions in Sweden.

g) Payments received as consideration for the use of, or the right to use, indus­trial, commercial or scientific equipment constitute business profits (that is, not royalties).

h) The rate is 7.5% for interest paid to financial institutions.

i) In certain circumstances, the reduced rates do not apply to royalties for copy­rights of literary or artistic works, including cinematographic films and films or tapes for radio or television broadcasting. Reference should be made to the applicable tax treaty.

j) The 10% rate applies to payments relating to patents, designs or models, plans, secret formulas or processes, or industrial, commercial or scientific equip­ment or information concerning industrial, commercial or scientific experi­ence. The 15% rate applies in all other cases.

k) Royalties approved under the Economic Expansion Incentives (Relief from Income Tax) Act are exempt.

l) This rate does not apply to royalties with respect to the operation of mines or quarries or the exploitation of natural resources. A contracting state may ex empt or reduce the tax on industrial royalties in accordance with its domes­tic laws.

m) The 5% rate applies if the interest is received by a bank or financial institution.

n) The treaty between Singapore and Taiwan does not contain an interest article.

o) The lower rate applies to payments relating to patents, designs or models, plans, secret formulas or processes, or industrial, commercial or scientific equipment or information concerning industrial, commercial or scientific experience.

p) The lower rate applies to royalties paid for the use of, or the right to use, industrial, commercial or scientific equipment.

q) The tax rate on royalties in the recipient’s country is limited to 20%.

r) The 10% rate applies to interest arising in the Philippines with respect to the public issuance of bonds, debentures or similar obligations.

s) In the case of the Philippines, the 15% rate applies to royalties paid by enter­prises registered with the Philippine Board of Investments (BOI) and engaged in preferred activities. It also applies to royalties paid with respect to cinemat­ographic films or tapes for television or broadcasting. The 25% rate applies in all other cases, except for those covered by footnote (k).

t) The 15% rate applies to payments relating to copyrights of scientific works, patents, trademarks, designs or models, plans, secret formulas or processes, industrial, commercial or scientific equipment or experience or information concerning industrial or scientific experience. The 20% rate applies to literary or artistic works, including cinematographic films or tapes for television or broadcasting.

u) The 0% withholding tax rate does not apply to persons incorporated under the International Companies Act if their income or profits are not taxed at the normal rate of corporate income tax in Mauritius or any income tax compa­rable thereto.

v) The 10% rate applies to interest paid to financial institutions. The 25% rate applies to other interest.

w) The rate also applies to payments for the use of industrial, commercial or sci­entific equipment, which includes transport vehicles for cargo transportation.

x) The rates are three-tiered, which vary according to the nature of the payment.

y) The treaty entered into force on 18 December 2015 and is effective from 1 January 2016.

z) The revised treaty entered into force on 28 December 2015 and is effective from 1 January 2016.