In Singapore, businesses that have their income derived from Singapore or income remitted to the country are obligated to pay corporate taxes on their chargeable income, regardless of whether it is a local or foreign company.

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Corporate Income Tax Rate

Singapore operates a single-tier corporate tax system, under which corporate income is taxed at a flat rate of 17% on the company’s chargeable income—that is, taxable income after deducting allowable expenses. Dividends paid to shareholders are exempt from further taxation.

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Taxable Income 

Singapore-source income is taxable when it arises but foreign-sourced income is taxable when it is received in Singapore.

Generally, taxable income refers to income that is revenue in nature, such as gains or profits from day-to-day business operations, royalties, premiums, and other income derived from property. In contrast, non-trade income that is capital in nature is not taxable income.

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Allowable Expense 

Generally, allowable expenses are those incurred in the production of income, such as salaries, rent, and utilities. However, expenses that are prohibited from deduction under the Income Tax Act 1947 are not deductible.

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Capital gain

Gains from the sale of fixed assets or shares that are not revenue in nature are generally not subject to tax. This means that profits derived from the sale of assets—such as shares or property—are typically tax-exempt. This tax treatment provides a strong incentive for investors and entrepreneurs.

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Foreign Source Income

Foreign-sourced income is taxable in Singapore only when received or deemed received in Singapore. 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
• applied to purchase any movable property which is brought into Singapore.

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Conclusion

Singapore has a single-tier corporate tax system with a low tax rate. Its capital gains exemption and favorable tax treatment for foreign-sourced income make Singapore an attractive destination for investment. Additionally, Singapore offers further corporate tax incentives, such as the start-up tax exemption, partial tax exemptions, etc. which further enhance its pro-business environment.

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