Income Tax in Singapore is payable on following categories of income:

• Income from a trade, business, profession or vocation carried on in Singapore.
• Income from employment in Singapore
• Income from dividends paid by a company resident in Singapore. This income subject to tax deduction at source and is not subject to further taxation in the hands of the recipient.
• Interest and discounts. Interest is deemed to be sourced in Singapore if borne by a Singapore resident person or establishment or is deductible against Singapore taxable income, or where the funds on which interest is charged are brought into or used in Singapore and interest derived from an approved bank by a non-resident person or corporation.
• Income from pensions, charges or annuities.
• Income from rents, royalties, premiums and others arising from property.

Tax Treaties

Singapore has entered into tax treaties with most of the Asian countries, several European countries, and Canada. Most of the tax treaties reduce the rate of withholding tax in respect of interest and royalties, the most usual reduced rate being 10%. To date, no tax treaty has been negotiated with the United States other than a limited treaty covering income derived from international air and shipping transport.

Tax on Companies and Branches

Companies, whether locally incorporated or registered as a branch, are taxed at a flat rate of 26% on income received after allowable deductions. Allowable deductions generally include expenses wholly and exclusively incurred in the production of taxable income but exclude capital expenditure.

Resident companies are not taxed on profits derived outside Singapore and which is not remitted to Singapore. However, where the company declares dividends, which reflects that income, a complex mechanism involving a quasi-withholding tax on dividends subjects such offshore income to tax at 26%.

In order to encourage Singapore investors to repatriate their foreign earnings to Singapore, dividends paid out of foreign sourced income is tax exempted if the foreign income has already suffered tax at the rate of 26% or more at source. Thus, the foreign income received in Singapore is no longer subject to any further Singapore tax when dividends are paid. However, if the foreign tax paid is on a lower rate than Singapore's corporate tax rate of 26%, tax-exempt dividend is also available but at a figure obtained by a more complex way of calculation.

A branch may be nonresident for tax purposes. However, Singapore sourced income or offshore income received in Singapore is subject to income tax at 26%. The income of a branch will be deemed to be derived from Singapore unless it is directly attributable to operations carried on outside Singapore.

Tax on Representative Offices

Generally, representative offices are not subject to tax since they do not engage in trade or carry on business in Singapore. However, the revenue authorities may, at their discretion, impose a tax at the rate of 5% on the costs of the representative office.

Tax on Individuals

The personal income of individuals resident in Singapore is subject to income tax calculated on a sliding scale ranging from 2% on the first $5,000 to 28% on income greater than $400,000.

The income tax imposed on nonresidents employed in Singapore is as follows: -

• Where the nonresident remains in Singapore for not more than 60 days in a year, his/her income is tax exempted;
• Where the nonresident remains in Singapore for more than 60 days but less than 183 days in a year, his/her income derived from or received in Singapore is subject to tax at the rate applicable to Singapore residents or 15%, whichever is higher;
• Where the nonresident remains in Singapore for more than 183 days in a year, he/she is considered a Singapore resident and is taxed accordingly.

Property Tax

Property Tax is based on the annual gross rental of buildings and land. Owner-occupiers are taxed at 4% and other property owners at 12%.

Goods and Services Tax (GST)

In Singapore, GST is applied at the rate of 3% of value of almost all goods and services consumed in Singapore. Sales and rentals of residential properties and the provision of financial services are exempted.

Tax Incentives

Various tax incentives have been introduced by the Singapore government to encourage economic development and expansion in Singapore. Broadly, there are three types of tax incentives. These are:

• Incentives to attract specific investments.
• Incentives to make Singapore a gateway into the region
• Incentives to assist the regionalization of Singapore enterprises