TAXATION IN SINGAPORE Joanna Yap 16 September 2010

TAXES PAYABLE IN SINGAPORE 1. Income Tax 5. Casino Tax 2. Goods and Services Tax 3. Property Tax 6. Betting and Sweepstake Duties 7. Private Lottery Duties 9. Customs and Excise Duties 4. Stamp Duties 5. Estate Duties* * For deaths occurring before or on 15 February 2008.

INCOME TAX

TAX JURISDICTION § Singapore essentially adopts a “territorial” tax system. § Generally, income is taxable in Singapore if it is: a. accrued in or derived from Singapore; or b. received in Singapore from outside Singapore and falls in one of the heads of charge.

HEADS OF CHARGE § Gains or profits from any trade, business, profession or vocation § Employment income (including stock options, accommodation allowance and car) § Dividends, interests or discount; § Pension, charge or annuity § Rent royalties, premiums and any other profits arising from property § Any gain or profits of an income nature

YEAR OF ASSESSMENT § Singapore adopts a preceding year basis of assessment. § Tax for any given year of assessment is paid on the income earned: – for individuals: in the preceding calendar – for companies: in the financial year ending in the year preceding that year of assessment

TAXATION OF INDIVIDUALS

OVERVIEW § Different tax rates and tax treatment apply to tax resident and non-tax resident. § Who are tax residents ? – Singapore citizens – Permanent residents who established Singapore to be their permanent home – Foreigners who stayed or worked in Singapore for more than 183 days in the calendar year

TAX TREATMENT Tax Resident Non- Tax Resident 1. Expenses* Yes 2. Donations** Yes 3. Personal Reliefs Yes No 4. Tax treaty between Singapore and another country Yes No Expenses must be wholly and exclusive incurred in the production of income and not specifically prohibited. ** Donations must be a approved charity or a registered grant-making philanthropic organisation. *

TAX RATES § Tax residents – Taxed at a progressive tax rate – First $20, 000 at 0% and subsequent amounts at marginal tax rate ranging from 3. 5% to 20% with effect from YA 2010 § Non-Tax residents – Employees : 15% – Director’s fees, consultation fees and all other income: 20%

TAX FILING AND TAX PAYMENT § 2 modes of tax filing are available: – E-Filing (Deadline: 18 April of every year) – Paper Tax Return (Deadline: 15 April of every year) § Payment – Tax (estimate) must be paid within 30 days of the tax bill even if an objection is lodged. – If no objection is lodged within 30 days of the tax bill, the tax bill is deemed final and conclusive.

TAXATION OF CORPORATIONS

OPTIONS AVAILABLE FOREIGN COMPANIES Foreign companies can carry out business in Singapore in one of the following forms: - § § Representative Office; Permanent Establishment; Subsidiary company; or Branch.

REPRESENTATIVE OFFICE Representative office is: (a) not allowed to engage in commercial activities or provide any services for a fee; and (b) generally not regarded as a taxable entity for tax purposes.

PERMANENT ESTABLISHMENT § Singapore follows the OECD model tax convention - Generally, a foreign company would be liable to tax in Singapore if it has a permanent establishment in Singapore and the permanent establishment has income accrued or derived from Singapore or any foreign income received in Singapore. § In Singapore, permanent establishment is defined as a fixed place where a business is wholly or partially carried on.

PERMANENT ESTABLISHMENT § Permanent establishment includes: (a) (b) (c) (d) (e) (f) (g) (h) a place of management; a branch; an office; a factory; a warehouse; a workshop; a farm or plantation; a mine, oil well, quarry or other place of extraction of natural resources; and (i) a building or work site or a construction, installation or assembly project.

PERMANENT ESTABLISHMENT § A person is deemed to have a permanent establishment in Singapore if that person: - carries on supervisory activities in connection with a building or work site or a construction, installation or assembly project; or - has another person acting on his behalf in Singapore who-

PERMANENT ESTABLISHMENT (i) has and habitually exercises an authority to conclude contracts; (ii) maintains a stock of goods or merchandise for the purpose of delivery on his behalf; or (iii) habitually secures orders wholly or almost wholly for him or for such other enterprise as are controlled by him.

BRANCH AND SUBSIDIARY § Companies (whether foreign or local) are taxed at a flat rate of 17% on their chargeable income with effect from 2009. § Who are tax residents ? – Companies whose control and management is exercised in Singapore. § Like individuals, different tax treatment apply to tax resident companies and nontax resident companies.

TAX TREATMENT Tax Resident Non- Tax Resident 1. Expenses* Yes 2. Donations** Yes 3. Capital allowance Yes 4. Tax treaty between Singapore and another country Yes No Expenses must be wholly and exclusive incurred in the production of income and not specifically prohibited. ** Donations must be a approved charity or a registered grant-making philanthropic organisation. *

CAPITAL ALLOWANCES § Capital allowance is granted in place of depreciation. § To claim for capital allowance: - capital expenditure was incurred on the provision of plant and machinery; and - the plant and machinery is used for the claimant’s trade, business or profession.

WITHOLDING TAX § Generally, the payer is obliged to withhold tax where he is liable to pay the following types of income to another person not known to him to be resident in Singapore: - interest; - royalties and know-how payments; - fees for technical assistance or services; and - management fees.

WITHHOLDING TAX RATE § Depending on the nature of the payment, the withholding tax rate applicable to a payment made to a non-resident could be 10%, 15%, 17% or the rate specified under a tax treaty.

GOODS AND SERVICES TAX

OVERVIEW § Goods and Services Tax (“GST”): - was first introduced on 1 April 1994 - is similar to value added tax in other countries -is essentially a consumption tax that is levied on the supply of goods and services in Singapore and the import of goods

SCOPE OF GST § GST is chargeable on any supply of goods or services made in Singapore if: - it is a taxable supply; the taxable supply was made by a taxable person; and the taxable supply was made in the course or furtherance of a business carried on by the taxable person.

IMPORT OF SERVICES § Generally, the importation of services in Singapore is subject to GST. § A person who belongs in Singapore has to account for GST if a person who belongs outside Singapore supplies a service to him.

EXPORT OF SERVICES • Where a person supplies an international service to a person who belong outside Singapore, such service is zero-rated. • International services broadly includes, inter alia, : - services connected to international transportation; services connected with offshore goods; services supplied to persons and business abroad; and international telecommunication services.

PROPERTY TAX

OVERVIEW § A tax on immovable properties including all houses, land, buildings and tenements but excluding inter alia, chattels and industrial plant and machinery used for the manufacture of goods.

PROPERTY TAX RATES § Current Tax Rate: - 4% per annum of one owner-occupied residential property’s annual value - 10% per annum of a property’s annual value

ANNUAL VALUE § Annual value: - For wharf, pier, jetty or landing-stage: the gross amount at which the property can reasonably be expected to be let from year to year, the tenant paying the expenses of repair, insurance, maintenance or upkeep. - For all other cases: the annual value is the gross amount at which the property can reasonably be expected to be let from year to year, the landlord paying the expenses of repair, insurance, maintenance or upkeep and all taxes (other than GST)

STAMP DUTIES

OVERVIEW § A tax imposed on certain legal and commercial instruments. § The main categories of instruments currently liable to tax are sale or any disposal (including gifts) of immoveable property and shares, and in the case of immoveable property only, lease or tenancy and mortgage.

OVERVIEW § All instruments executed in Singapore should be stamped before execution under section 42, but for administrative convenience, all instruments are allowed to be stamped within 14 days of execution if executed in Singapore, and within 30 days of receipt in Singapore if executed outside Singapore.

STAMP DUTIES RATE § The rates of duties on the various types of instruments range from a fixed amount of $10 on an instrument of partition to ad valorem rates depending on the amount or value of the consideration paid in a sale and purchase agreement.

CUSTOMS AND EXCISE DUTIES

OVERVIEW § Goods imported into or manufactured in Singapore are subjected to custom and/or excise duties. § Four broad categories of dutiable goods in Singapore: (a) intoxicating liquors; (b) tobacco products; (c) motor vehicles; and (d) petroleum products.

MORE INFORMATION Custom Duties § http: //www. customs. gov. sg All Other Taxes § http: //www. iras. gov. sg § http: //www. singaporelaw. sg/content/Taxation. ht ml