TAXATION SERVICES IN SINGAPORE

A tax return is a document filed with the tax authorities that details income, expenses, deductions, and other pertinent tax information for a specific period. In Singapore, a tax return can either be for an individual (personal tax return) or for a business or organisation (corporate tax return), which must be filed annually with the Inland Revenue Authority of Singapore (IRAS).

This document serves several purposes for both the government and taxpayers, such as:

• Ensuring the accurate calculation and collection of taxes
• Promoting fairness and transparency in the tax system
• Providing taxpayers with access to tax benefits
• Maintaining compliance with legal requirements

The corporate tax returns in Singapore are calculated by determining the taxable income. The tax payable is computed using the current corporate tax rate at 17%. From the amount, subtract all tax rebates applicable to the company and any taxes deducted at source. The total amount will be the company’s net tax payable.

To calculate the taxable income in Singapore, a company may follow these steps:

• Deduct Non-Taxable Income: Subtract the non-taxable income from the company’s income, including capital gains, sale of fixed assets, gains on capital transactions, foreign exchange, foreign-sourced dividends, and other tax-exempt income under the Singapore Income Tax Act.
• Adjust Net Investment Income: Non-trade income or investment derived from interests, dividends, and rental are evaluated separately to ensure that each type of investment income is taxed properly without including expenses.
• Deduct Qualified Business Expenses: Certain expenses incurred wholly and exclusively in the production of trade or business profits are allowable deductions from a company's income. These include employee wages, office rental costs, and research and development (R&D) expenses.
• Deduct Capital Allowances: A company may be entitled to claim "capital allowance" to offset the wear and tear on fixed assets, such as office equipment and industrial machinery. Unused capital allowances on fixed assets from previous and current accounting periods are tax deductible.
• Deduct Unutilised Losses: A qualified loss must arise during a business operation and has not been used. The deduction can be made in the following year in which the loss was incurred. Unadjusted losses may be carried forward to the next assessment year indefinitely under certain conditions.
• Deduct Unutilised Donations: Tax deductions can only be claimed on donations made to approved public institutions.

Singapore offers the Start-Up Tax Exemption (SUTE) to support and encourage the growth of start-up companies. This tax exemption scheme allows qualifying companies to receive a 75% exemption on the first S$100,000 of chargeable income and a 50% exemption on the next S$100,000 in the first three consecutive years of assessment.

To qualify for this tax exemption, start-ups must meet the following requirements:

• A Singapore-registered company
• A tax resident for the assessment year
• A maximum of 20 shareholders within the company during the assessment year

The Singapore income tax system is based on a progressive framework, which imposes higher tax rates on higher incomes. Nevertheless, there are some strategies that can help minimise the personal income tax such as topping up the Central Provident Fund (CPF), Supplementary Retirement Schemes (SRS), and charity donations.

Here are several ways to reduce your personal income tax.

• Upgrade Your Skills: Under the Course Fees Relief scheme, individuals can claim tax relief up to S$5,500 per year on course fees they have incurred, provided that the course is relevant to their employment. The claim may still be made if the course enables the individual to change careers.
• Donate to Charity: Individuals may qualify for tax relief by donating to any charity registered with the Institute of a Public Character (IPC) in Singapore. They can receive tax deductions of 2.5 times the qualifying donation amount.
• Topping Up CPF: The Central Provident Fund (CPF) is a social security savings plan in Singapore designed to help individuals save for retirement, healthcare, and housing needs. The CPF top-up on the Special Account allows for equal deductions on chargeable income of up to a maximum of S$7,000 per year.
• Claim NSman Relief: The NSman Relief program provides tax benefits to NSmen of the Singapore Armed Forces who contribute their time and effort to fulfil their NS duties by reducing their taxable income, leading to a lower overall tax liability. They can claim between S$1,500 and S$5,000, while their spouses and parents may each receive S$750 in tax relief.
• Life Insurance Relief: A life insurance tax deduction may be available to individuals whose combined total of mandatory employee CPF contributions, self-employed Medisave or voluntary contributions, and voluntary contributions to their Medisave account for the previous year was less than S$5,000.
• Supplementary Retirement Scheme (SRS): Aside from supplementing CPF savings, contributions to SRS also provide a dollar-to-dollar tax relief for individuals. The contributions can be deducted to the final tax payable to maximise tax savings. The maximum annual SRS contribution from Singapore citizens and PRs is S$15,300 and S$35,700 for foreigners.

Being a GST-registered company in Singapore offers several benefits for companies, such as tax benefits, cost-effective business operations, and improved brand name. The primary benefit being able to claim the 8% (soon to be 9% in 2024) tax from their purchases.

When you hire a tax consultant to review your taxes and financials, you can be assured of an efficient and reliable process as they will ensure optimal, accurate and on-time tax filing.