Global connectivity is the catalyst for Singapore’s climb to economic prowess in the modern era, with thousands of ports, airways, and shipping lines dotting its logistic landscape. This makes it a prime location for east-west trades and furthermore, a gateway towards an ever-expanding market known as Mainland China.
But for all these promising boons, there’s an underlying set of taxes and regulations by which businesses have to abide in return. Knowing how each tax regiments — as well as trading incentives — apply to your case is therefore crucial in paramount in getting your trading business off the right start.
1. Common taxes apply to Singapore trading companies
There are a number of different types of taxes that may be applicable to Singapore trading companies, including income tax, goods, services tax (GST), and stamp duty.
1.1. Corporate Income Tax
Corporate Income tax is a tax on the income of a company. Singaporean resident companies are subject to Singaporean income tax on their worldwide income. Although a fixed corporate tax rate of 17% is imposed on tax resident and non-resident companies, the prior have more incentives down the line due to being locally established.
For companies established in Singapore but derive their income from outside its borders, the income is then classified as “foreign income” and becomes taxable upon accrual. Note that this taxation happens regardless of whether the income is received in Singapore or not. As a result, Singapore tax residents are provided with extensive tax reliefs under certain conditions to remediate double taxation.
Taxable income includes profits, gains, and remittances from business activities, as well as rental income, interest, dividends, and other forms of passive income. Expenses that are deductible for income tax purposes include business expenses, capital allowances, and reliefs.
1.2. Goods and Services Tax (GST)
Goods and services tax (GST) is a tax on the sale of goods and services as well as the importation of goods in Singapore. Goods and services are categorized into two groups – taxable and non-taxable – which will therefore have their own rate on GST.
Stamp duty is a tax on the transfer of property, such as land or shares. The rate of stamp duty varies depending on the value of the property being transferred. Singaporean trading companies must pay stamp duty when they purchase or sell property in Singapore.
2. How to comply with tax obligations in Singapore
As with any other form of business venture, operating in the trading space requires you to have proper awareness of tax obligations. To comply fully, it is recommended that you enlist service from a professional accountant or tax advisor for more accuracy.
In order to comply with Singaporean tax law, trading companies must register for tax purposes with the Inland Revenue Authority of Singapore (IRAS). This can be done online at www.iras.gov.sg.
It is important to seek professional advice from an accountant or tax advisor to ensure that tax obligations are met correctly and on time. In order to comply with Singaporean tax law, trading companies must register for tax purposes with the Inland Revenue Authority of Singapore (IRAS). This can be done online at www.iras.gov.sg.
Singaporean trading companies must register for GST if their annual turnover exceeds S$1 million, and file regular GST returns. You must also pay income tax on your profits, and may be required to pay stamp duty on property transactions.
All Singaporean companies, including trading companies, are required to file regular tax returns. The deadline for filing tax returns is usually 31 May of the following year. It is also important to keep accurate financial records so that you can accurately report your company’s income and expenses to the tax authorities.
Singapore has a highly developed and efficient tax system, and by complying with your tax obligations you can be sure that you are operating within the law.
Singaporean trading companies must comply with a number of tax obligations in order to remain in compliance with the law. Another equally important tax obligation is the Estimated Chargeable Income (ECI).
3. Supporting measures for the Singapore government to trading businesses
Singapore also has a number of tax incentives in place to support trading companies. These measures include:
- Fast and easy company incorporation procedures
- Tax exemptions for start-up companies, and partial tax exemption for all companies
- Deduction on expenses incurred prior to business formation
A tax exemption scheme for startup companies was introduced in 2005 as an initiative from Singapore to further cultivate its entrepreneurial economy. In 2018, the scheme was further amended with the change being in effect from YA 2020 onward. In order to qualify for this exemption, trading companies must meet certain conditions laid down by the Inland Revenue Authority of Singapore (IRAS).
In addition, Singapore offers a variety of other tax incentives to help trading companies that meet certain conditions grow their businesses. These include the Pioneer Service Tax Incentive and the Productivity and Innovation Credit (PIC) scheme. The latter is larger in scope, available to all qualifying businesses whereas the prior only applies to companies that are registered for Singapore income tax. Singapore has also introduced the Singapore International Commercial Court (SIACC), which provides a fast and efficient way to resolve cross-border disputes.
All of these measures make Singapore an attractive place to do business and help to ensure that trading companies in Singapore are able to grow and compete in the global marketplace.
If you are looking to set up a company in Singapore for your trading endeavor, Singapore is the perfect place to do so. Not only are you exempt from Singapore corporate income tax, but you also have a number of measures in place to support your business, including a range of tax concessions and exemptions.