SINGAPORE CORPORATE TAX RATES FOR YA

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Andrew Brown
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1 SINGAPORE CORPORATE TAX RATES FOR YA

2 SINGAPORE (EFFECTIVE) CORPORATE TAX RATES Singapore s maximum corporate tax rate is 17%. However, it has the lowest effective corporate tax rate in the world when partial tax exemption, incentives and rebates are included. Singapore s tax regime recognizes the importance of easing cashflow for startup companies in their initial years of operation. Therefore, Singapore extends support in the form of sizeable exemptions for the first 3 years for new startups. New Startup Companies* for First 3 Years of Assessment Companies that do not meet the qualifying conditions would still be eligible for partial tax exemption. For All Other Companies - Partial Tax Exemption * Qualifying conditions: Must have no more than 20 individual shareholders For corporate shareholders, one individual must hold at least 10% of the issued shares Property and investment holding companies are not eligible TAX-FREE DIVIDEND Tax paid by a company on its chargeable income is the final tax. All dividends paid to its shareholders are exempt from further taxation. 0%

3 EFFECTIVE CORPORATE TAX RATE TABLE: YA 2013 TO YA 2015 Due to tax exemption schemes, the effective tax rates in Singapore are one of the lowest worldwide and unlike any other jurisdictions, Singapore is widely respected and well-recognizeable for its rule of law, transparency and world-class standards. FULL EXEMPTION FOR NEW STARTUP COMPANIES - FOR FIRST 3 YEARS OF ASSESSMENT Chargeable Income ($) Estimated Tax (S$) Effective tax rate 100, % 200,000 5, % 300,000 11, % 400,000 23, % 500,000 35, % 600,000 47, % 700,000 59, % 800,000 72, % 900,000 89, % 1,000, , % 5,000, , % 10,000,000 1,636, % PARTIAL TAX EXEMPTION FOR ALL OTHER COMPANIES Chargeable Income ($) Estimated Tax (S$) Effective tax rate 100,000 5, % 200,000 11, % 300,000 17, % 400,000 29, % 500,000 41, % 600,000 53, % 700,000 65, % 800,000 80, % 900,000 97, % 1,000, , % 5,000, , % 10,000,000 1,644, %

4 CAPITAL GAINS TAX Gains that are of a capital nature are not taxed in Singapore. However, where there is a series of transactions or where the holding period of an asset is relatively short, IRAS may take the view that a business is being carried on and attempt to assess the gains as trading profits of the company. SINGAPORE WITHHOLDING TAX Withholding Tax is part of the overall tax collection mechanism and is applicable to payments made to non-residents (including employees, business partners and overseas agents). In accordance with IRAS tax rules, a person has a legal obligation to withhold a percentage of the payment when he makes payments of a specified nature under the Singapore Income Tax Act to a non-resident and pay the withheld amount to IRAS. Such amount withheld amount is called Withholding Tax. Nature of Income Tax rate Interest, commission, fee or other payment in connection with any loan or indebtedness 15% Royalty or other lump sum payments for the use of movable properties 10% Payment for the use of or the right to use scientific, technical, industrial or commercial knowledge or information 10% Rent or other payments for the use of movable properties 15% Technical assistance and service fees 17%* Management fees 17%* Time, voyage and bareboat charter fees for the charter of ships 0-2% Remuneration payable to Non-resident Director 20% Proceeds from sale of any real property by a non-resident property trader 15% Distribution of taxable income (except distribution out of Singapore dividends from which tax is deducted or deductible under section 44) made by REIT to unit 10% holder who is a non-resident (other than an individual) The withholding tax rates apply when the income is not derived by the non-resident person through its operations carried out in Singapore. They are to be applied on the gross payment and the resultant tax payable is a final tax. For operations carried out in Singapore, the tax rates applicable on the gross payment are as follows: Non-resident person (other than individuals) : Prevailing corporate tax rate (17% ) Non-resident individuals : 20% * Prevailing Corporate Tax Rate

PRODUCTIVITY & INNOVATION CREDIT (PIC) OPTION 1: CASH PAYOUT OF UP TO S$60,000 To support small and growing businesses which may be cash-constrained, to innovate and improve productivity, businesses

5 PRODUCTIVITY & INNOVATION CREDIT (PIC) OPTION 1: CASH PAYOUT OF UP TO S$60,000 To support small and growing businesses which may be cash-constrained, to innovate and improve productivity, businesses can exercise an option to convert their expenditure into a non-taxable cash payout. They can convert up to S$100,000 (subject to a minimum of S$400) of their total expenditure in all the six qualifying activities into cash payouts. ELIGIBILITY CRITERIA Businesses that can opt for the cash payout are sole-proprietorships, partnerships, companies (including registered business trusts) that have: employees CPF contributions Active business operations in Singapore Expenditure in any of the six qualifying areas Qualifying Expenditures Prescribed Automation Equipment Training Expenditures R & D Expenditures Acquisition of Intellectual Property Registration of Intellectual Property Design Expenditures ENHANCED PIC BONUS SCHEME: BUDGET To encourage businesses to undertake improvement in productivity and innovation, eligible businesses that spend a minimum of $5,000 in qualifying PIC investments in a YA will receive a dollar-for-dollar matching cash bonus. The PIC Bonus is capped at $15,000 for the 3-year period (YA 2013 to YA 2015), and is given in addition to existing PIC benefits of: 400% PIC tax deductions up to $400,000 in expenditure for each PIC qualifying activity; or Cash payout at 60% on up to $100,000 of the qualifying expenditure.

6 PRODUCTIVITY & INNOVATION CREDIT (PIC) OPTION 2: GET TAX CREDIT FOR EACH OF THE QUALIFYING ACTIVITIES S$1 Expenditure BEFORE PIC Tax Deductible Expenditure AFTER PIC S$1 S$4 Tax Deductible Expenditure Qualifying activities Acquisition or Leasing of Prescribed Automation Equipment Training Expenditure Acquisition of Intellectual Property Rights ( IPRs ) Registration of Intellectual Property Rights ( IPRs ) Design Expenditure Research & Development ( R&D ) Brief description of qualifying expenditures under the PIC Costs incurred to acquire/lease prescribed automation equipment Costs incurred on: In-house training (i.e. Singapore Workforce Development Agency ( WDA ) certified, Institute of Technical Education ( ITE ) certified; or All external training. Costs incurred to acquire IPRs for use in a trade or business (exclude EDB approved IPRs and IPRs relating to media and digital entertainment contents) Costs incurred to register patents, trademarks, designs and plant variety Costs incurred to create new products and industrial designs where the activities are primarily done in Singapore Costs incurred on staff, costs and consumables for qualifying R&D activities carried out in Singapore or overseas, if the R&D done overseas is related to the taxpayer s Singapore trade or business Total deductions/allowances under the PIC (as a % of qualifying expenditure) 400% allowance or deduction for qualifying expenditure subject to the expenditure cap, 100% allowance or deduction for the balance expenditure exceeding the cap 400% tax deduction for qualifying expenditure subject to the expenditure cap*. For qualifying expenditure exceeding the cap for R&D done in Singapore, deduction will be 150%. For balance of all other expenses, including expenses for R&D done overseas, deduction will be 100% Notes: Total expenditure cap for YA 2011 and YA $800,000 for each of the six qualifying activities. Total expenditure cap for YA 2013 to YA $1,200,000 for each of the six qualifying activities. Total expenditure cap for YA 2016 to YA $1,800,000 for each of the six qualifying activities.

7 PIC EFFECTIVE TAX RATES (YA ) Estimated Taxable Income Estimated Tax Payable Effective Tax Rate Total Qualifying Expenditure * Total PIC Claim (400%) Effective Tax Payable 100,000 8, % 25, , ,000 16, % 50, , ,000 25, % 75, , ,000 42, % 100, , ,000 59, % 125, , ,000 76, % 150, , ,000 93, % 175, , , , % 200, , , , % 225, , ,000, , % 250,000 1,000, ,000, , % 500,000 2,000, ,000, , % 750,000 3,000, ,000, , % 1,000,000 4,000, ,000, , % 1,250,000 5,000, ,000, , % 1,500,000 6,000, ,000,000 1,164, % 1,750,000 7,000, ,000,000 1,334, % 2,000,000 8,000, ,000,000 1,504, % 2,250,000 9,000, ,600,000 1,606, % 2,400,000 9,600, ,000,000 1,844, % 2,750,000 11,000, ,000,000 2,014, % 3,000,000 12,000, ,000,000 2,184, % 3,250,000 13,000, ,000,000 2,354, % 3,500,000 14,000, ,000,000 2,524, % 3,750,000 15,000, ,000,000 2,694, % 4,000,000 16,000, ,000,000 2,864, % 4,250,000 17,000, ,000,000 3,034, % 4,500,000 18,000, ,000,000 3,204, % 4,750,000 19,000, ,000,000 3,374, % 5,000,000 20,000, ,000,000 3,544, % 5,250,000 21,000, ,000,000 3,714, % 5,500,000 22,000, ,000,000 3,884, % 5,750,000 23,000, ,000,000 4,054, % 6,000,000 24,000, ,000,000 4,224, % 6,250,000 25,000, ,000,000 4,394, % 6,500,000 26,000, ,000,000 4,564, % 6,750,000 27,000, ,000,000 4,734, % 7,000,000 28,000, ,800,000 4,870, % 7,200,000 28,800,000 0

8 RIKVIN PTE LTD 20 Cecil Street, #14-01, Equity Plaza, Singapore Main Line : (+65) Fax : (+65) info@rikvin.com Website : Reg No K EA License No 11C3030 The information contained herein is intended for general information purposes only and shall not be regarded as professional advice. Readers are therefore advised that before acting on any matter arising from these notes, they should discuss their particular situation with the Firm. No liability can be accepted for any action taken as result of reading the notes without prior consultation with regard to all relevant factors. DOWNLOAD THE RIKVIN MOBILE APP FOLLOW US ON:

ANNEX B-2: Research and Development (R&D) Tax Measures

ANNEX B-2: Research and Development (R&D) Tax Measures 1) Liberalisation of R&D Tax Deduction a) Enhanced deduction for R&D expenses Existing Tax Treatment Currently, taxpayers carrying on a manufacturing