Corporate income tax of 17% of chargeable income is applciable to both local and foreign companies. This refers to the taxable income after deducting tax-allowable expenses in the year of assessment. Sections under this title assist in calculating chargeable income.

Tax incentives may be granted under specific circumstances (not examinable).

Corporate income tax is assessed on a preceding year basis in Singapore, which means the income earned in the financial year 2025 will be taxed in 2026. The year of assessment would be 2026 here (i.e. actually when it is assessed).

Charging Provision

PART 3IMPOSITION OF INCOME TAX Charge of income tax 10.—(1)  Income tax is, subject to the provisions of this Act, payable at the rate or rates specified hereinafter for each year of assessment upon the income of any person accruing in or derived from Singapore or received in Singapore from outside Singapore in respect of —(a)gains or profits from any trade, business, profession or vocation, for whatever period of time such trade, business, profession or vocation may have been carried on or exercised;(b)gains or profits from any employment;(c)[Deleted by Act 29 of 1965](d)dividends, interest or discounts;(e)any pension, charge or annuity;(f)rents, royalties, premiums and any other profits arising from property; and(g)any gains or profits of an income nature not falling within any of the preceding paragraphs.

“Income”

• Generally, Singapore imposes income tax or gains in the nature of income, and not capital gains, as there is no capital gains tax regime in Singapore.
• Income or capital gain: fact-specific inquiry
• Factors considered include e.g.
  – intention or motivate of asset acquisition, frequency of similar transactions, and period of ownership.
  (freq buy and sell real estate = income ; one-off gain from selling a long-term investment property to fund biz expansation is likely non-taxable capital gain)
  
  – A gain which arises in the course of a taxpayer’s trade or business is in the nature of income, where the Singapore courts would typically examine various factors (referred to as the “badges of trade”) to determine whether a trading gain arises (NP and another v Comptroller of Income Tax [2007] 4 SLR(R) 599 — badges of trade:
  (a) the motive of the taxpayer; (b) the nature of the subject matter; (c) the method of financing; (d) whether there has been a multiplicity of similar transactions; (e) the duration of ownership; (f) the application of special skill/supplementary work; and (g) reasons for realisation.)
  

	Income (taxable)	Capital Gains (not taxable)
Nature of Receipt	Gains from ordinary course of business, trade, or regular investment returns	Proceeds from sale of a long-term asset held as an investment
Frequency	Recurring (e.g. monthly salary, quarterly dividends)	Generally infrequent/one-off transaction (e.g. sell property after many years)
e.g.	Salary/wages, interest from a bank account or bonds, dividends from stocks (may be classified differently according to tax regime)	Profit from selling real estate, selling stocks held as a long-term investment, or proceeds from sale of major business equipment

IRAS website says these dividends are not taxable?

• Generally, the following dividends are not taxable:
• Dividends paid to shareholders by a Singapore resident company under the one-tier corporate tax system (as the tax paid by a company is final), except co-operatives. Examples of co-operatives are MCCY Registry of Co-operative Societies, NTUC Fairprice Co-operative Ltd, NTUC Healthcare Co-operative Ltd and The Singapore Police Co-operative Society Ltd.
• Foreign dividends received in Singapore by resident individuals, except those received through a partnership in Singapore. Note: Foreign-sourced dividends received by individuals through a partnership in Singapore may qualify for tax exemption if certain conditions are met. Please refer to Tax Exemption for Foreign-Sourced Income for more information.
• Income distribution from Real Estate Investment Trusts (REITs), except those derived by individuals through a partnership in Singapore or from the carrying on of a trade, business, or profession in REITs.
• Dividends from:
  • Resident companies listed on the Singapore Stock Exchange, evidenced by the statement from Central Depository Pte Ltd (CDP)
  • Share buyback through Special Trading Counters (STC)
  • Private resident companies
  • NTUC FairPrice, except for those received through co-operatives
  • Approved CPF Investment Scheme agent banks, indicated in the Annual Dividend Statement (ADS)
  • Unit trusts in Singapore

“Accruing or derived from Singapore”

• Singapore-sourced income is charged to tax REGARDLESS of whether it is received in Singapore or otherwise
• Whether income is Singapore-sourced is a question of fact
• The broad guiding principle is to focus on what the taxpayer had done which earned him the gains or profits in question, and then to identify the location where those activities that he had engaged in or the work he had done took place.

OR “Income received in Singapore from outside Singapore”

• Income from outside Singapore = foreign-sourced income. Foreign sourced income received in Singapore.
  • E.g. SG company with Msia subsidiary employs people in Malaysia for business. The income generated by the Msia subsidiary is foreign-sourced income that is not taxable until it is received in Singapore.
• Generally, foreign-sourced income is not taxable in Singapore unless iti is received or deemed received in Singapore
• Under section 10(25) of the ITA, foreign-sourced income would be received or deemed received in Singapore if it is:
  • (a) remited to, transmitted or borught into, Singapore (e.g. remitted into a Singapore bank account);
  • (b) applied in or towards satisfaction of any debt incurred in respect of a trade or business carried on in Singapore.
  • (c) applied to purchase any movable property which is brought into Singapore.

DEDUCTIONS

Section 14(1) ITA: “For the purpose of ascertaining the income of any person for any period from any source chargeable with tax under this Act (called in this Part the income), there are to be deducted all outgoings and expenses wholly and exclusively incurred during that period by that person in the production of the income, including –“

• Some examples:
  • (a) interest and loan-related expenses in lieu of interest or for the reduction of interest
  • (b) rent for premises occupied for the purposes of acquiring income
  • (c) expenses for repair and renewal of tools and equipment, provided that no capital allowance is claimed in respect of the expenditure and the expenses do not relate to the reconstruction or build of ‘premises, buildings, structures or works of a permanent nature”
  • (d) bad debts of a trade, business, profession or vocation
  • (e) obligatory contributions by an employer to a pension or provident fund, subject to the contribution rules and ceiling for contributions made to the CPF

Deductions not allowed

Section 15(1) of the ITA disallows deductions of certain tyes of expenses under the general deduction formula (it may not apply specific deductions — see “borrowing costs” under “Tax Issues in Corporate Restructuring”).

• These provisions generally deal with capital expenditure. The reason is because capital gains are not taxable, so it does not make sense to allow capital expenditure to be deducted.
• “Despite the provisions of this Act, for the purpose of ascertaining the income of any person, no deduction is allowed in respect of …”
  • any disbursements or expenses not being one wholly and exclusively laid out or expended for the purpose of acquiring the income
  • any capital withdrawn or any sum employed or intended to be employed as capital except as provided in section 14(1)(h)

Capital allowances

Capital allowances are a form of tax deduction that companies can claim for the wear and tear (depreciation for accounting purposes) of qualifying fixed assets used in their trade or business. They serve to reduce a company’s taxable profit, thereby lowering its corporate income tax liability.

• i.e. it is recognised that money is spent to buy capital which generates income. The expenditure needs to be taken into consideration. This is done by spreading the cost of the capital over its useful lifespan. E.g. you pay $10 for a plant that is supposed to last 10 years. So you spend $1 a year on the plant essentially, and that can be deducted.
• Part 6 of the ITA provides for capital allowances to be made to a taxpayer for depreciating assets.

The main class of tangible assets qualifying for capital allowances is plant or machinery.

• these are made under sections 19 and 19A where machinery or plant is acquired for the purpose of a trade, profession or business.
• Capital allowances can only be claimed on plant or machinery, not buildings (see ZF v Comptroller of Income Tax [2011] 1 SLR 1044, which differentiates ‘plant’ and ‘building’).

Section 19A provides for allowances for machinery or plant on an accelerated basis (over three years). Such allowances are made in lieu of the allowances under Section 19.

For section 19B writing-down allowances — see relevance of it in ‘Tax Issues in M&A’.

GOODS AND SERVICES TAX (9%)

Charging Provision

• Section 8(1) of Goods and Services Tax Act 1993: “Tax is charged on any supply of goods or services made in Singapore where it is a taxable supply made by a taxable person in the course or furtherance of any business carried on by the taxable person”
  • “supply of goods and services”
    • a supply of goods or services must be made (section 10(2) and Second Schedule, GSTA)
  • “made in Singapore”
    • the supply must be made in Singapore (sections 13 and 15, GSTA)
  • “Taxable supply”
    • the supply must be a taxable supply i.e. must not be an exempt supply (Section 8(2A), GSTA)
  • “Taxable person”
    • The supply must be made by a taxable person — i.e. must be registered or required to register under GSTA (section 8(2), GSTA).
  • “In the course of furtherance of any business”
    • The supply must be made in the course of furtherance of a business

REGISTRATION – TAXABLE PERSON

2.1 COMPULSORY REGISTRATION

A taxable person is a person who is registered or is ‘required to be registered’ under the GSTA (section 8(2), GSTA)

A business is required to be GST-registered in Singapore if:

• (a) its total amount of taxable supplies of goods or services made in Singapore has exceeded SGD 1 million in a calender year; or
• (b) its total amount of taxable supplies of goods or services made in Singapore is reasonably expected to exceed SGD 1 million in the next 12 months (i.e. prospective basis).

2.2. VOLUNTARY REGISTRATION

A person who is not liable to be registered may apply for voluntary registration if he makes taxable supplies, or certain exempt supplies in the course or furtherance of a business, or if he is an overseas vendor or a recipient of reverse charge supplies (paragraph 8(1), First Schedule, GSTA).

The registration would be for a period of not less than two eyars (unless the Comptroller allows for a shorter period) (paragraph 8(2), First Schedule, GSTA).

OVERSEAS SUPPLIER

Briefly, there are two regimes that are relevant to imported services, remote services and distantly taxable goods supplied by an overseas supplier to a customer belogning in Singapore:

• Overseas Vendor Registration (“OVR”) regime
• Reverse Charge regime

Overseas vendor registration regime

Under the OVR regime, GST is chargeable on a supply of distantly taxable goods and remote services made by a taxable person (which may include an overseas supplier, among others), in the course of furtherance of business carried on by him to a customer who belongs in Singapore (section 8(1A) and Seventh Schedule, GSTA).

• Definition of “remote services”: Remote services includes services where, at the time of performance of services, there is no necessary connection between the place where the services are physically performed, and the location of the customer of the services (paragraph 2A, Seventh Schedule, GSTA).
• This includes supplies of downloadable digital content, subscription-based media, software programs, professional services, education and examination services, personal services and consultancy and advisory services.

OVR registration threshold

• The ovrseas supplier must register for GST if:
  • in a calender year, its global turnover has exceeded SGD 1 million and the value of remote services and distantly taxable goods made to non-GST registered customers belonging in Singapore has exceeded SGD 100,000 (i.e. retrospective basis) and the registration has to be submitted within 30 days after the end of the quarter in which this threshold is reached (paragraphs 1A(1)(a) and (5), First Schedule, GSTA); or
  • In the next 12 months, it reasonably expects that its global turnover will exceed SGD 1 million and the value of remote serices and distantly taxable goods made to non-GST registered customers belonging in Singapore will exceed SGD 100,000 (i.e. prospective basis) and the registration has to be submitted within 30 days from the date of the forecast (paragraphs 1A(1)(b) and (5), First Schedule, GSTA).

Reverse charge regime

This applies where, among others, a supplier who belongs outside Singapore supplies imported services and distantly taxable goods to a person (i.e. a recipient) who (section 14(1), GSTA):

(i) belongs in Singapore;

(ii) is GST-registered or liable to be GST-registered;

(iii) is not receiving goods or services as an individual in his private or personal capacity; and

(iv) is not entitled to full input tax credit.

To the extent that the imported services and distantly taxable goods fall within the scope of reverse charge, the receipient will be required to account for GST on the value of its imported services and distantly taxable goods as if it were the supplier (section 14(2), GSTA).

• However, in the case of a supply of distantly taxable goods, the recipient of the supply need not account for GST on the supply if he has paid GST to the supplier for the supply (section 14(3A), GSTA).