Editorial Note:

In a global scenario prevailing, we should know tax laws of other states. As such we will be covering briefly tax laws prevailing in other countries.

Introduction to Singapore

Singapore has an area of 647.5 sq. km. With a population of 4.6 million, 2.4 million of which are Singaporeans and the rest Immigrants, Singapore has a growth rate of 1.15%. 76% of its population is Chinese, 15 Malay and 6% are Indians. The commonly spoken languages are English, Malay, Mandarin and Chinese. 31% of its population are Taoist, 28% Buddhist, 18% Muslims and 10% Christian and 4% Hindus. The Government follows a Parliamentary Democray. The major industries predominant in Singapore are shipping, banking, tourism, electrical and electronic and chemicals and oil refineries. The local currency is Singapore dollars and cents. The major trading partners are USA, Malaysia, Hong Kong and Japan.

1. Tax Laws

Singapore boasts of being a country which is a tax friendly state with the Maximum Marginal Rate of Personal Income Tax being one of the lowest in the world. Singapore offers attractive taxation rates to encourage influx of talented people from all around the world as they have low population levels which is on a steady decline.

1. Types of Taxes

Singapore has the following types of taxes:

• Corporate Income Tax

• Personal Income Tax

• Goods and Services Tax (GST)

• Stamp Duty

• Property Tax

• Customs Duty

• Estate Duty

• Withholding Tax

2. Income Tax Legislation

The tax law in Singapore is governed by the Income-tax Act, 1965 commencing on 1st January, 1965.

1. Year of assessment

As against the Indian assessment year running from 1st April – 31st March, Singapore has the calendar year as the Year of Assessment (YA).

2. Basis of assessment

Assessment is on preceding year basis; i.e., the previous year’s income is assessed and brought to tax in the current year. This method is similar to the assessment in India whereby income of a relevant year, known as “Previous Year” is taxed in the succeeding year called “Assessment Year”. For example income earned in the period 1-4-2004 – 31-3-2005 i.e., Financial Year 2004-05 is subject to tax in the succeeding year called the Assessment Year 2005–06. In Singapore, income of the calendar year is taxed in the subsequent year called of year of assessment (YA). Income and gains derived from trade, business, profession or vocation is assessable on the preceding accounting year basis. For example, Income of the year 2006 shall be assessable in the year, 2007.

3. Heads of income

In India, for the purpose of computation, income is classified under the following heads:

1. Salaries.

2. Income from house property.

3. Profits and gains of business or profession.

4. Capital gains.

5. Income from other sources

In Singapore, Income earned from the following sources is subject to tax:

• Gains or profits from any trade, business, profession or vocation

• Gains or profits from any employment

• Dividends, interest or discounts

• Any pension, charge or annuity

• Rents, royalties, premiums and any other profits arising from property

• Any gains or profits of an income nature not falling within any of the above heads

4. Taxable entities

In India, entities which are assessed to tax on their income are called assessees. Under the Income-tax Act, an Individual, a Hindu Undivided Family, a Company, a Firm, an Association of Persons, a Body of Individuals (incorporated or not), a Local Authority and every artificial juridicial person such as a Co-operative Society or a Condominium etc. are assessees. In Singapore, there is no concept termed as 'assessee'. However, taxable entities are, an Individual, a Company, Limited Liability Partnerships (w.e.f. April 2005), a Body of Persons, a Hindu Joint Family, and an Institution of a Public Character (IPC) also known as a Trust. Just as in India, a partnership firm is not accorded a separate legal entity status, in Singapore too, a partnership is not treated as a separate legal entity but partners are taxed in their hands on their share of profits earned from the business of the firm. However, in Singapore, Limited Liability Partnership Act, 2005 which has been brought in force w.e.f. 11 April 2005 has brought the LLP within its scope of taxable entities. These LLPs are regarded as bodies corporate in law and although they function as a partnership, they are accorded the status of a separate legal person. The income of a Hindu Joint Family is assessed on the manager or “karta” of such Hindu Joint Family who is liable for payment of the tax accordingly.

5. Rates of Income Tax

The rates of tax applicable to various entities are provided in Part XI of the Act containing sections 42 to 43U whereby the rates of tax in force, the various exemptions and concessions available to different entities are also provided such as concessionary rates of tax for trustee companies, oil trading companies etc.

1. Singapore Individual Income Tax Rates

The following tables show the rates of tax in force for YA 2006 and 2007

		Year of Assessment 2006		Year of Assessment 2007
	Chargeable Income ($)	Rate (%)	Gross tax payable ($)	Rate (%)	Gross tax payable ($)
On the first	20000	0	0.00		0.00
On the next	10000	3.75	375.00	3.5	350.00
On the first	30000		375.00		350.00
On the next	10000	5.75	575.00	5.5	550.00
On the first	40000		950.00		900.00
On the next	40000	8.75	3,500.00	8.5	3,400.00
On the first	80000		4,450.00		4,300.00
On the next	80000	14.5	11,600.00	14	11,200.00
On the first	160000		16,050.00		15,500.00
On the next	160000	18	28,800.00	17	27,200.00
On the first	320000		44,850.00		42,700.00
Above	320000	21		20

2. Indian Individual Income Tax Rates

In India, Income-tax rates applicable on an individual for Assessment Year 2006-07 are as under:

Taxable income slab (Rs.)	Rate (%)
1,00,000
1,35,000 (for ladies below 65 years of age and Indian citizens) (women)
1,85,000 (for senior citizens)	NIL
1,00,001 – 1,50,000	10%
1,50,001 – 2,50,000	20%
2,50,001 upwards #	30%
10,00,000 upwards *	30%*

#An Education Cess of 2% is levied on income tax payable.

*A surcharge of 10% on income tax is levied where taxable income exceeds Rs. 10 lakhs, which makes it effective 33% including surcharge

6. Concept of Tax Residence

There are two kinds of tests applicable to determine residence status of individuals. Qualitative and Quantitative tests.

Qualitative test is applied to Singaporeans, as per which, a Singaporean is considered a resident of Singapore if he normally resides in Singapore except for some temporary visits outside Singapore so long as they are consistent with the claim to be resident. A foreigner will be considered a resident in Singapore if he was physically present in Singapore or was in employment in Singapore for 183 days or more during the year preceding the YA. However, if a foreigner has worked in Singapore for less than sixty one days, his income is exempt from Singapore Tax Law.

In India, we only have the Quantitative test whereby, the tax resident status of an individual is determined on the basis of the number of days he is present in the country in a given financial year.

An individual is resident in India in any previous year, if he is present in India in that year for a total period amounting to one hundred and eighty-two days or more; or within the four years preceding the financial year, if he has been in India for a total period of three hundred and sixty-five days or more, and in the relevant year he is in India for a total period amounting to sixty days or more.

1. Tax treatment for Residents and Non Residents

All residents are taxed in respect of income accruing in Singapore and also all overseas income remitted up to 31st December 2003. All non-residents of Singapore are subject to tax on income accruing in Singapore except income that arises in Singapore by a non-resident who has worked in Singapore for less than 61 days in the preceding year as it is exempt from tax. In India, non-residents are provided certain tax exemptions on certain categories of income.

2. Tax treatment of Foreign Source Income

Any income arising from sources outside Singapore and received in Singapore on or after 1st of January, 2004 by an individual (other than partners of a partnership) is exempt from tax.

3. Tax treatment of Singapore Investment Income

Following income earned by any individual derived from Singapore on or after 1st January, 2004 is exempt from income tax:

• • Interest from debt securities;

• Discount from debt securities which mature within one year from the date of issue of those securities;

• Income from an annuity, except income from any annuity purchased by the employer of an individual in lieu of any pension or other benefit payable during his employment or upon his retirement; and any annuity purchased under SRS;

• Income from any life insurance policy, except any sum realised under any insurance against loss of profits;

• Distribution made by any collective investment scheme constituted as a unit trust (including real estate investment trust) authorised under section 286 of the Securities and Futures Act (Cap. 289), that is income or deemed to be income of the individual, except distributions made out of Singapore dividends from which tax is deducted or deductible under section 44; and

• Any fee or compensatory payment from securities lending or repurchase arrangements.

7. Schemes of Singapore Government

1. Supplementary Retirement Scheme (SRS)

The SRS is part of the Singapore Government’s strategy to address the financial needs of a greying population. It is a voluntary scheme whereby participants can contribute a varying amount to SRS (subject to a cap) at their own discretion. The contributions may be used to purchase various investment instruments. With the SRS, the Singapore Government aims to encourage Singaporeans to save more for their old age, by means of voluntary contributions to their SRS accounts The SRS offers attractive tax benefits. Contributions to SRS are eligible for tax relief, investment returns are accumulated tax-free (with the exception of Singapore dividends from which tax is deducted or deductible by the payer company under section 44 of the Income-tax Act) and only 50% of the withdrawals from SRS are taxable at retirement.

2. The Central Provident Fund Scheme

Just like India has its PPF (Public Provident Fund) Scheme, Singapore has the Central Provident Fund (CPF) Scheme. CPF savings are meant to provide for housing and medical needs and for basic living needs after retirement.

8. Rates of Tax applicable to Residents and Non-residents

A resident is subject to tax on the rates provided in the table above. In case of a non-resident, income which is usually exempt from tax for a resident is taxed at a flat rate of 15%. Other income is taxed at the rate of 20%. Residents are also entitled to certain tax reliefs and treaty benefits which are not available to non-residents.

9. Concept of Area Representative

Under the Singapore tax law, an area representative is an individual who is based in Singapore in the course of his employment by a non-resident employer, who may be required to travel abroad in the course of his job duties and whose remuneration is paid by the foreign employer, which is not reflected whether directly or indirectly, in the accounts of the PE in Singapore.

Taxation of an area representative

The total remuneration drawn by an area representative which can be attributed to the duration of his stay in Singapore will be subject to Singapore tax. If however, the area representative is a Singapore tax resident, the income attributable to the duration of his stay in Singapore or the remittance of his employment income, whichever amount is higher, is taxed. However, employment income derived from a foreign source by a Singapore resident which is received by him on or after 1-1-2004 is exempt from tax. In India, there is no such concept of area representative.

10. Concept of Dual Employment

There is a concept of dual employment in Singapore, wherein an individual is employed by two different companies, a domestic company and a company based overseas. The following are the prerequisites for dual employment;

• The foreign income received from the overseas company must not be received or remitted into Singapore.

• Two separate contracts must be entered into with both, the domestic and the overseas company and the overseas employment under the separate contract must be exercised exclusively outside Singapore.

• Job duties performed outside Singapore are separate and distinct from the duties performed in Singapore.

• Salary expense must not be recharged to the Singapore entity.

• Income attributable to Singapore job must be commensurate with the responsibilities in Singapore.

An individual who is employed in Singapore is assessed to tax on his full income accruing in Singapore, regardless of the fact that his job may involve occasional travel overseas in the course of performing duties for the overseas company. However, where the nature of job is such which involves frequent overseas travel in performance of duties for the overseas company, it is advisable to enter into separate contracts with both the companies.

11. Not Ordinarily Resident (NOR)

The Not Ordinarily Resident (NOR) Tax-payer Scheme was introduced in the year 2002 with the aim to attract talents to relocate to Singapore. This scheme is targeted at attracting global talent who have spent a significant amount of time abroad in the past few years and encourage them to relocate to Singapore. The NOR Scheme extends favourable tax treatment to qualifying individuals for a period of five years of assessment. To avail of the NOR scheme, an individual must fulfil the following criteria:

• He has not been a Singapore tax resident in the three years of assessment preceding the year he first qualifies for the NOR scheme; and

• He must be a tax resident for the year of assessment in which he wishes to qualify for the NOR scheme.

If an individual qualifies for the status of NOR, the status shall be conferred on him for five years.

The individual claiming NOR status can either be a resident or non-resident during the 5-year period in which he is accorded the NOR status. However, he can only enjoy the tax concessions under the NOR scheme if he is a tax resident for that year of assessment.

In addition to the above, a NOR tax-payer will enjoy the benefit of time apportionment of employment income only if he meets certain additional conditions:

In India too, a NOR is accorded certain tax benefits. An Individual is said to be “Not Ordinarily Resident” in India in any previous year if he has been a non-resident in India in nine out of the ten previous years preceding that year, or has during the seven previous years preceding that year, been in India for a total period of seven hundred and twenty-nine days or less.

A Hindu Undivided Family is NOR whose manager has been a non-resident in India in nine out of the ten previous years preceding that year, or has during the seven previous years preceding that year been in India for a total period of seven hundred and twenty-nine days or less. Hence, in the case of a HUF, the resident status is determined on the number of days the Manager or Karta spends in India.

In India, the status of a person as Resident or Non-Resident is determined with reference to each previous year and the test is applied with reference to the number of days the individual is physically present in India during the relevant previous year to determine his tax resident status for the assessment year.

12. Time Apportionment of Singapore Employment Income Scheme

This incentive is targeted at making Singapore an attractive location for individuals to live and work, especially in terms of global talents who have international or regional business experience. With time apportionment, their employment income, which corresponds to the number of days they are outside of Singapore for business reasons, will not be subject to income tax. If an individual is exercising employment in Singapore, his total employment income in Singapore including the days he is outside of Singapore for business reasons would be liable to tax in Singapore. Under the Time Apportionment Incentive Scheme, an individual eligible to claim it will be taxed only on that portion of his Singapore employment income, which is attributable to the number of days he spends in Singapore. In other words, that part of his Singapore employment income, which corresponds to the number of days he spends outside of Singapore for business reasons, will not be subject to Singapore income tax. However, in the event that the tax on the Singapore employment income corresponding to the number of days in Singapore is less than 10% of the Singapore employment income before time apportionment, he will be subject to a tax of 10% of his total Singapore employment income which is called 10% floor rate.

Qualifying conditions for time apportionment

An individual claiming the above incentive scheme must satisfy the following 3 criteria;

Criteria 1:	He must first qualify for the NOR Scheme;
Criteria 2:	He must be exercising a Singapore employment and must spend at least 90 days outside of Singapore for business reasons; and
Criteria 3:	His income tax computed on his total Singapore employment income must be greater than 10%.

Under the Time Apportionment Incentive Scheme, a person pays income tax on only a portion of his employment income in Singapore. The taxable amount will be based on the number of days he spends in Singapore per calendar year.

In addition, an NOR tax-payer enjoys the following benefits:

1. Favourable tax treatment of pre-assignment income

Individuals who relocated to Singapore were taxed on their pre assignment income; i.e., income they remitted into Singapore before 1st January, 2004 even when that income was earned prior to their relocation to Singapore. The remittance of such pre-assignment income by an NOR tax-payer is exempt from tax. (With effect from A.Y. 2005, all overseas income remitted by individuals in Singapore is exempt from tax.)

2. Favourable tax treatment of contributions to overseas pension funds

Subject to the cap of the employer’s contributions to CPF for Singaporeans, the employer’s contributions to non-mandatory overseas pension funds or social security scheme on behalf of a non-citizen NOR tax-payer is exempt from income tax in the hands of the employee.

13. Taxable Income from Other Sources

Income derived from the following sources is also taxable;

• Dividend

• Interest

• Net Rent from property/ Net Annual Value

• Annuity

• Charge

• Pension

• Royalties

14. Computation of Chargeable Income

In India, Income is computed as per the provisions 14 to 59 laid down in Chapter IV of the Act, whereby taxable income is computed after allowing certain statutory reliefs and deductions and exemptions. In Singapore, chargeable income is defined under section 38 of the Income-tax Act, whereby the chargeable income of any person for any year of assess-ment is the remainder of his assessable income for that year after the reliefs and deductions allowable under the Act have been reduced

1. Personal Reliefs and Allowable Deductions

In India, deductions available to a person in computing his taxable income are provided in Chapter VI A of the Act. These deductions are provided in sections 80A to 80VV of the Act wherein a host of deductions, such as deduction in respect of expenses incurred on medical treatment, deduction on repayment of loan taken for higher education, deductions in respect of donations to charitable trusts, rents paid etc are available to a person.

Singapore offers many personal expenses as allowable deductions and rebates under Part X of its Income-tax Act, wherein the reliefs and deductions are provided in sections 39, 40 of the Act.

Tax reliefs and rebates are given as a means to offer recognition for individuals’ efforts. Instead of offering tax-payers with compensation of certain expenses fully, several reliefs and rebates are given for meeting certain social objectives. Hence there are reliefs available to encourage family formation to encourage growth of population, upgrading of skills and reliefs given in support of individuals saving for retirement and serving the National Service. Certain personal reliefs and rebates available are, Earned Income Relief of 1000 $ for an Individual or a Joint Hindu Family, Earned Income Relief of 2000 $ for an individual who was totally blind or suffering from any physical or mental disability which permanently and severely restricted his capacity for work, Old Age Income Relief, Handicapped Child Relief and Aged Parent Relief etc.

Some other reliefs available are on contributions towards approved provident fund and life insurance premium etc. Certain additional personal reliefs and allowable deductions are towards donations, subscriptions to professional bodies, travelling expenses, entertainment expenses, capital allowances (only for businesses) and unabsorbed tax, losses, capital allowances and donations (only for businesses).

15. Assessments

In India, the person making assessment of a return of income is called 'Income Tax Officer' and in Singapore, the person making the assessment of a return of income filed is called the 'Comptroller'. Under the Income-tax Act of India, the provisions relating to assessments are laid down in Chapter XIV and in the Singapore Act, Chapter XVII lays down provisions 72 to 77 relating to assessments. The procedure for assessment in India is provided in sections 139 to 158. The Indian Act lays down detailed procedure for assessment from filing of return of income, to best judgment assessment and time limit for issue of notice by ITO and time limit of completion of assessment and reassessments etc.

In Singapore, where a person has delivered a return, the Comptroller may —

1. accept the return and make an assessment accordingly; or

2. refuse to accept the return and, to the best of his judgment, determine the amount of the chargeable income of the person and make an assessment accordingly.

Where a person has not delivered a return and the Comptroller is of the opinion that such person is liable to pay tax, the Comptroller may, according to the best of his judgment, determine the amount of the chargeable income of such person and make an assessment accordingly, but such assessment shall not affect any liability otherwise incurred by such person by reason of his failure or neglect to deliver a return.

Additional Assessment

There is a concept of 'Additional Assessment' in Singapore tax law, wherein if it appears to the Comptroller that any person liable to tax has not been assessed or has been assessed at a less amount than that which ought to have been charged, the Comptroller may, within the year of assessment or within 6 years after the expiration thereof, assess that person at such amount or additional amount as according to his judgment ought to have been charged.

16. Appeals

In India, Appeal and Revision provisions are laid down in Chapter XX of the Act containing sections 246 to 269. Singapore Income-tax Act provides Part XVIII containing provisions 78 to 84 laying down the law in respect of appeals. For the purpose of hearing appeals against the assessment made by the Comptroller by which an assessee is aggrieved, a Board of Review is constituted consisting of not more than 30 members appointed from time to time by the Minister. The onus of proving that an assessment is excessive lies on the appellant.

1. Appeals to the Board of Review

Powers of the board

The Board shall have the following powers:

• to summon to attend at the hearing of an appeal, any person whom it may consider able to give evidence in respect of the appeal, to examine such person as a witness either on oath or otherwise and to require such person to produce such books, papers or documents as the Board may think necessary for the purposes of the appeal;

• to allow any person so attending, any reasonable expenses necessarily incurred by him in so attending. Such expenses shall form part of the costs of the appeal and shall be paid by the Appellant or the Comptroller, as the Board may direct;

• all the powers of a District Court with regard to the enforcement of attendance of witnesses, hearing evidence on oath and punishment for contempt;

• to admit or reject any evidence adduced, whether oral or documentary and whether admissible or inadmissible, under the provisions of any written law for the time being in force relating to the admissibility of evidence.

• the Board may, on the application of the Comptroller made at any time after notice of appeal has been given, require the Appellant to furnish security, in such sum and within such time as may be specified, for payment of tax, and if such security is not furnished in the sum and within the time specified, the tax assessed by the Comptroller shall become payable and recoverable;

• The Board may, after hearing an appeal, confirm, reduce, increase or annul the assessment or make such order thereon as it thinks fit.

2. Appeals to High Court

In any case in which the amount of tax payable, as determined by the Board (excluding the amount of any costs awarded) exceeds $ 200, the Appellant or the Comptroller may appeal to the High Court from the decision of the Board upon any question of law or of mixed law and fact. The procedure governing such appeals to the High Court is the same as for appeals to the High Court from decisions of District Courts in civil matters. The High Court has the power to hear and determine any such appeal and it may confirm, reduce, increase or annul the assessment determined by the Board and make such further or other order on such appeal.

3. Appeals to the Supreme Court

There lies a further right of appeal from decisions of the High Court to the Supreme Court and the decision of the Supreme Court is final.

17. Taxation of Partnerships

Under Singapore law, partnership can be constituted between resident individuals, non-resident individuals as well as companies. A partnership can also be formed between two companies and between a company and an individual. A partnership is not treated as a separate legal entity. Therefore, tax is not levied on partnerships but on the individual partners in respect of their share of profits or loss. Income of a partnership is computed in the same way as that of a person engaged in any business or profession. Adjustments are made for partners’ salaries, interest on capital contributions and also some personal expenses. After providing for the allowable deductions, the residual profits are divided among the partners in their profit sharing ratios.

1. Limited Liability Partnerships

The Limited Liability Partnership (LLP) Act 2005 came into effect on 11th April, 2005. This Act makes it possible the formation of partnerships with limited liability like a limited company. Therefore, partnerships formed under this Act essentially offer the best of both, the flexibility of a partnership firm and the limited liability option of a company.

2. Essential features of a LLP

• A LLP is a partnership with limited liability.

• Minimum two partners are required for the formation of a LLP

• A LLP is treated as a separate legal entity or body corporate in law.

• The functioning of a LLP is like that of a partnership firm combined with the status of a distinct legal entity.

• The status of a LLP is not affected by any changes in the constitution of its partners.

3. Liability of LLPs

• Any claims made against an LLP can be made against its assets to the full extent.

• If a partner is negligent in his business transactions, the person affected by it can make a claim against the LLP and also the personal assets of the negligent partner.

• The liability of innocent partners however, is limited to the extent of their contributions made to the LLP.

4. Income tax treatment of LLP

A LLP is treated as a partnership and each partner is taxed on his profits on the rate applicable to him as per his share accruing to him. Individual partners will be taxed at individual rates and company will be taxed at corporate tax rate of 20%.

18. Taxation of Companies

Singapore recognizes the following types of companies:

Private Company: A company which has a maximum of 50 shareholders.
Private Exempt Company: A company which has a maximum of 20 individual shareholders.
Public Company: A company which has more than 50 shareholders and its shares are offered to the public.
Branch of a Foreign Company: A branch of a company headquartered in a foreign country.

1. Formation of a Company

At least one Director must be an ordinarily resident in Singapore; i.e., at least one of the Directors is a Singapore citizen or permanent resident or a person holding an employment permit or a dependant.

A company must have at least one shareholder who may be an individual of any nationality or a company.

A company must have at least one Company Secretary who must be an individual with a natural place of residence in Singapore.

2. Highlights of Corporate Tax System

Certain essential features of a Corporate Tax System are as under;

• Flat corporate tax rate of 20%

• No capital gains tax

• Territorial basis of taxation

• Taxation of income of preceding year in Year of Assessment

• Certain foreign income exempt from tax

• Foreign tax credit system

• Comprehensive Tax Treaty Network

• Tax losses can be carried forward indefinitely and carried back for one year.

• Advanced Ruling System introduced from 2006

• No thin capitalization rules

• Group relief system for utilization of losses

3. Corporate Income Tax Rates

From YA 2005 onwards, a company is taxed at a flat rate of 20% on its chargeable income. One Tier Corporate Tax System has been introduced in Singapore w.e.f. 1st January, 2003 as per which Corporate Tax paid by companies is a final tax and the dividend income received by shareholders is exempt from tax.

With effect from YA 2002, the concept of partial tax exemption is introduced under the new corporate tax regime as per which a 75% discount is available for first 10000 $ taxable income (TI) and a 50% discount is available for the next 90000 $ TI. Therefore, this interpreted translates into the rate of tax as under:

Tax rate on first TI of 10000 $	5%
Tax rate for next TI of 90000 $	10%
Tax rate on TI in excess of 100000 $	20%

4. Capital Gains Tax

Singapore does not levy any tax on capital gains arising out of sale or transfer of capital assets to an individual or company.

5. One-Tier System

Prior to 1st January, 2003, Singapore had something called a full imputation system for all companies, wherein the corporate income was only subject to tax once at the shareholders’ level at their respective marginal income tax rates. This system discouraged companies with insufficient dividend credits from distributing dividends. The one-tier corporate taxation system was introduced in 2002 to replace the imputation system. Under this system, corporate income is taxed at the corporate level and this is a final tax. Singapore dividends are tax exempt. This system also removes current restrictions on the distribution of dividends from capital gains and this could result in higher dividend payouts for all shareholders. In addition, the one-tier corporate taxation system has the desirable consequence of allowing the unlimited flow-through of exempt dividends to all tiers of shareholders, regardless of shareholding level.

6. Tax Exemption of Foreign Income

Any of the following income arising from sources outside Singapore and received in Singapore on or after 1st June, 2003 by any resident persons will be exempted from tax (subject to conditions below);

• any dividend derived from any territory outside Singapore;

• any profit derived from any trade or business carried on by a branch in any territory outside Singapore of a company resident in Singapore; and

• any income derived from any professional, consultancy and other services rendered in any territory outside Singapore.
  The income will be exempted from tax if the following conditions are met;

• the specified foreign income has been subjected to tax in the foreign jurisdiction from which the income is received; and

• the headline tax rate of the foreign jurisdiction from which the specified foreign income is received is at least 15%.

7. Partial Tax Exemption

Under the partial tax exemption scheme for companies,

• 75% of up to the first $ 10,000 of a company’s chargeable income (CI) is exempt; and

• 50% of up to the next $90,000 of the company’s CI is exempt.

8. Full Tax Exemption for new companies

Full tax exemption is granted on normal chargeable income of a qualifying company up to $100,000, for any of its first three consecutive YAs that falls within YA 2005 to YA 2009. The first YA refers to the YA relating to the basis period during which the company is incorporated.

To qualify for the tax exemption for a relevant YA under the new scheme, a company must:

• be a company incorporated in Singapore

• be a Tax Resident in Singapore for that YA

• have no more than 20 shareholders throughout the basis period relating to that YA;
  and

Any company that does not meet the qualifying conditions for any of its first three consecutive YAs falling within YA 2005 to YA 2009 would still be eligible for partial tax exemption.

9. Group relief

Corporations often organise themselves into Multiple Holding Companies, Subsidiaries and Associate Companies to reflect the structure of their business and to limit liabilities. In an effort to encourage risk taking and enterprise, the Government introduced the Loss Transfer System of Group Relief with effect from YA 2003. A group consists of a Singapore incorporated parent company and all its Singapore incorporated subsidiaries. Two Singapore incorporated companies could be members of the same group if one is 75% owned by the other or both are 75% owned by another Singapore incorporated company. The Singapore incorporated companies must also have the same accounting period to qualify for group relief.

Foreign losses may not be transferred for purpose of group relief. As the scope of the corporate tax system is territorial, foreign income is not taxed in Singapore, unless remitted to Singapore.

Once the required conditions are met, a loss making company can elect to transfer its current year losses and current year unabsorbed capital allowances to another group company. However, current year unutilised investment allowances are not eligible to be transferred. Since Investment allowance is given as an incentive to companies to engage in certain projects they can only be offset against profits arising from that project.

19. Double Tax Avoidance Agreements (DTAA)

Singapore has 52 tax treaties or DTAAs in force at the moment. Singapore also has in force 7 tax treaties for reciprocal tax exemption on income derived from international shipping and/or air services

All the Avoidance of Double Taxation Agreements concluded by Singapore since 1965 to date are categorized as follows:

• Comprehensive Avoidance of Double Taxation Agreements, which generally cover all types of income. 

• Limited Treaties, which cover only income from shipping and/or air transport. 

• Treaties, which are signed but not ratified which are either comprehensive agreements or limited treaties which are not ratified and therefore do not have the force of law.
  With India, Singapore has entered into a comprehensive DTAA, effective from April 1, 1994 in India

2. Other taxes

1. Goods and Services Tax (GST)

1. Concept of GST

Goods and services tax (GST) is a tax on domestic consumption. The tax is paid when money is spent on goods or services, including imports. It is a multi-stage tax which is collected at every stage of the production and distribution chain. “Output tax” is the GST a registered trader charges on his local supplies of goods and services. The tax is collected by him on behalf of the Comptroller of GST. “Input tax” is the GST that the trader has paid on purchases of goods and services for the purpose of his business. The input tax is deductible from output tax to arrive at the GST payable by the trader, or amount to be refunded to him.

2. Overview of Singapore GST

GST was first introduced in Singapore on 1st April, 1994. The GST rate was increased from 3% to 4% in 2003 and from 4% to 5% in 2004. GST is levied on goods and services supplied in Singapore by any taxable person in the course or furtherance of a business; and goods imported into Singapore by any person. In general, a supply is either taxable or exempt. A taxable supply is one that is standard-rated or zero-rated. Only a standard-rated supply is liable to GST at 5%.

Zero-rating a supply means applying GST at 0% for the transaction. A GST registered trader need not charge GST on his zero-rated supplies, but he is nevertheless allowed a refund of the tax he has paid on his inputs. In Singapore, only “exports” of goods and “international” services are zero-rated. If a supply is exempt from GST, no tax is chargeable on it. A GST registered trader does not charge his customer any GST on his exempt supplies. At the same time, he is not entitled to claim input tax credits for any GST paid on goods and services supplied to him for the purpose of his business. The “sale and lease of residential properties” and “financial services” are exempt from GST in Singapore.

2. Property Tax Information

Property tax is imposed under the Property Tax Act on immovable properties and is payable in advance each year. The tax payable in respect of a property is computed by applying the applicable tax rate to the annual value of the property.

1. Annual value

Annual value is the estimated annual rent a property can fetch if it were rented out. In determining the Annual Value of a property, IRAS will consider the rentals of similar properties in the vicinity, size and condition of the property, and other relevant factors. The annual value is determined in the same manner regardless of whether the property is let-out, owner-occupied or vacant. The annual value of the land is determined at 5% of the market price of the land. When a building is demolished, the land would have to be assessed by this method. The prevailing property tax rate for industrial, commercial and let-out residential properties is 10%. Owner-occupied residential properties are taxed at a concessionary rate of 4% of the annual value.

2. Property tax exemption

Section 6(6) of the Property Tax Act provides that all buildings or parts of buildings used exclusively

• as places for public religious worship

• for public schools which are in receipt of grants-in-aid from the Government

• for charitable purposes

• for purposes conducive to social development in Singapore
  shall be exempted from property tax.

3. Estate Duty

Estate duty is a duty levied on the total estate of an individual on his death
Rates of Duty on Estate of a deceased

In the case of a person dying on or after 28 February 1996 the rates are:

• For every dollar of the first $ 12M 5%

• For every dollar exceeding $ 12M 10%

Exemptions

ASSETS	EXEMPTION
Dwelling houses	up to the value of $ 9 M
All other assets	up to the value of $ 600,000
If the CPF balance exceeds $ 600,000	the excess of $ 600,000