As an important financial and business center in the Asia-Pacific region, Singapore’s tax system is known for its transparency, fairness and efficiency. The overall tax system adopts the taxation principle of combining territorialism and personalism, which mainly includes corporate income tax, personal income tax, consumption tax (GST), property tax, stamp duty and other taxes. Compared with neighboring countries, Singapore’s tax system is characterized by moderate tax rates, stable policies, and abundant preferential measures. This is also one of the important reasons why global companies choose Singapore as their regional headquarters.

In 2024, there are several significant changes in Singapore’s tax policy. First of all, the consumption tax rate has been increased from 7% to 8% in 2023. This is an important measure for the government to deal with the aging of the population and increase social welfare expenditures. Secondly, in order to support the digital transformation of enterprises, the government has expanded the scope of tax exemptions for digital service-related expenditures, and eligible enterprises can enjoy tax exemptions of up to 250%. Third, in response to the global minimum corporate tax rate initiative, Singapore plans to introduce a 15% supplementary minimum tax rate mechanism in 2025, while maintaining overall tax competitiveness through other preferential policies. It is worth noting that the tax incentives for innovative enterprises have been further strengthened, especially in terms of R&D expenditures and intellectual property income, providing more room for tax exemptions.

The competitive advantages of Singapore’s tax rate system are mainly reflected in three aspects: first, the advantage of low tax rate. The base corporate income tax rate of 17% is relatively low among developed economies. Coupled with various preferential policies, the actual tax burden may be even lower. Taking new companies as an example, they can enjoy partial tax exemptions of up to 75% in the first three tax years, which greatly reduces the tax burden in the early stages of starting a business. Second, policy completeness. Singapore has established a comprehensive double taxation agreement network and has signed tax treaties with more than 90 countries and regions, effectively preventing double taxation risks. Third, the convenience of collection and administration. The electronic tax service platform myTax Portal launched by the Inland Revenue Authority of Singapore (IRAS) has greatly simplified the filing process, and the artificial intelligence-assisted functions added in 2024 have improved the efficiency of tax processing. Enterprises usually only need to submit their estimated taxable income within three months after the end of the fiscal year, and can then pay it in installments. This flexible collection and management method greatly reduces the cash flow pressure of enterprises.

It is particularly worth mentioning that Singapore is actively arranging new opportunities for future development. In terms of green economy, a two-pronged approach of carbon tax and environmental protection preferential policies is used to guide enterprises to transform towards sustainable development. In the field of digital economy, we will create a future-oriented tax environment by improving the taxation system for digital services and providing tax support for digital innovation enterprises. These initiatives further solidify Singapore’s position as a business hub in the Asia-Pacific.

To better understand these advantages, let’s take a look at a specific case: a multinational technology company set up a regional headquarters in Singapore in 2024. By rationally using various preferential policies, the actual tax burden in the first year was only 12%, which was less than other alternative regions. Substantial tax costs. At the same time, thanks to Singapore’s comprehensive tax treaty network, the company’s cross-border operations have obtained sufficient tax protection and avoided double taxation.

For businesses considering entering the Singapore market, 2024 is an ideal time. It is recommended that enterprises pay close attention to the following aspects: first, study the latest digital economy tax policies and seize the opportunities of digital transformation; second, understand the tax benefits related to green development and plan environmental protection investments in advance; third, pay attention to the progress of the implementation of the global lowest tax policy, Make timely adjustments to tax strategies.

Corporate income tax rate system

1.1 Corporate income tax standard tax rate system

Singapore’s corporate income tax adopts a basic tax rate of 17%. This rate applies to companies registered in Singapore on their income derived from Singapore and income remitted to Singapore from abroad. It is worth noting that in fiscal year 2024, the Singapore government continues to implement a tax relief plan, and the first S$300,000 of taxable income can enjoy partial tax exemptions. Specifically, the first S$10,000 of taxable income is tax-free at 75%, and the subsequent S$190,000 is tax-free at 50%. This means that for a company with an annual profit of S$300,000, the actual tax burden can be reduced to about 8.36%.

In terms of calculation method, for example: a company’s taxable income in 2024 is S$500,000, and its tax is calculated as follows:

• First S$10,000: 17% × 25% × 10,000 = S$425
• Next S$190,000: 17% × 50% × 190,000 = S$16,150
• Remaining S$300,000: 17% × 300,000 = S$51,000
• Total tax payable: S$67,575, effective tax rate is approximately 13.52%

1.2 Corporate tax incentives

For new start-ups, Singapore has launched an extremely attractive Start-up Tax Exemption (SUTE). Eligible start-ups can enjoy a 75% tax exemption on the first S$100,000 of taxable income in the first three tax years, and a 50% tax exemption on the subsequent S$100,000. The latest regulations in 2024 require that companies must be incorporated in Singapore and have at least one individual shareholder holding no less than 10% of the shares.

In terms of the Regional Headquarters Award (RHQ), if the company commits to establishing substantial management and operational institutions in Singapore, the investment reaches a certain scale (usually not less than S$2 million), and it employs at least 10 people in Singapore within three years. Professionals can apply to reduce the tax rate to 15% or even lower. New requirements will be added in 2024, requiring applicant companies to demonstrate a clear digital transformation plan.

1.3 Tax rate guidelines and preferential policies by industry

Financial services industry: The Fintech Preferential Scheme launched by the Monetary Authority of Singapore (MAS) has been updated in 2024. For companies that obtain a payment services license, the first S$2 million in qualified income can enjoy a preferential tax rate of 5%. Data shows that more than 280 financial technology companies will benefit from this policy in 2023.

Manufacturing: To promote the development of high-end manufacturing, the Productivity Improvement Program (PIC) allows companies to enjoy 200% tax relief on investments in automation equipment. In 2024, the smart manufacturing equipment category has been specially added, including industrial IoT equipment and artificial intelligence systems.

Trading and Wholesale Industry: The Global Trader Program (GTP) provides a preferential tax rate of 5% or 10% to eligible large trading companies. The latest requirements include annual turnover of not less than S$100 million and the need to establish a substantial operations center in Singapore.

Digital economy industry: A new “Digital Innovation Incentive Plan” will be added in 2024. For enterprises that invest in digital technology research and development, relevant expenditures can enjoy a 250% super deduction. Cloud computing service providers can apply for a preferential tax rate of 8% on their qualified income.

Professional services industry: The Intellectual Property Development Initiative (IDI) provides special benefits to professional service companies. For income from intellectual property rights developed and commercialized in Singapore, they can enjoy a preferential tax rate of 5%-10%. If your income in areas such as legal services and accounting services comes from international customers, you can apply for the International Service Preferential Plan.

Practical suggestions : Enterprises should plan tax strategies as early as possible, and it is recommended to determine applicable preferential policies before the start of the fiscal year. It is crucial to maintain complete financial records, especially supporting documentation involving cross-border transactions. Consider hiring a local tax advisor to help optimize your tax structure and ensure compliance. Regularly check whether you continue to meet the preferential conditions to avoid losing the preferential qualifications due to changes in conditions. Pay attention to quarterly prepayment requirements and arrange cash flow reasonably.

Special reminder: In 2024, the Singapore Inland Revenue Authority will strengthen its review of substantive operations and recommends that companies ensure that they have sufficient support from local substantive operations when applying for various preferential treatment. At the same time, with the advancement of the global minimum tax policy, companies also need to take precautions and plan response strategies in advance.

Personal income tax rate structure

2.1 Progressive tax rate system for personal income tax

Singapore adopts the principle of global income taxation and adopts a progressive tax rate system for tax residents. The personal income tax rate for the 2024 tax year (applicable to 2023 income) ranges from 0% to 24%, with a total of 11 tax brackets. Residents with incomes below S$20,000 have a lower actual tax burden, which fully reflects the principle of tax fairness. Specifically, the tax rate is 0% on the first S$20,000 of taxable income, and the tax rate is 2% on the portion between S$20,001 and S$30,000. As income increases, the marginal tax rate gradually increases until the portion exceeding S$320,000 is implemented. Top tax rate of 24%.

In order to understand this tax rate structure more clearly, we can illustrate it through a specific case. Assuming that a tax resident’s taxable income in 2023 is S$150,000, based on the progressive tax rate calculation, the first S$20,000 is completely tax-free, and the next S$10,000 is subject to a 2% tax rate and is subject to a tax rate of S$200, from 30,001 to 40,000. A tax rate of 3.5% applies to the Singapore dollar portion of S$350, the portion of S$40,001 to S$80,000 is subject to S$3,200, the portion of S$80,001 to S$120,000 is subject to S$4,800, and the final portion of S$120,001 to S$150,000 is subject to a tax rate of S$3,200. S$4,500. The taxpayer’s total tax payable is S$13,050, and the actual effective tax rate is approximately 8.7%. This calculation fully reflects the progressive nature of Singapore’s tax system.

2.2 Differences in status between residents and non-residents

Tax resident identification is a key point that taxpayers need to pay special attention to. In Singapore, you can be deemed a tax resident if you meet any of the following conditions: you have actually lived or worked in Singapore for 183 days (continuously or cumulatively), you have worked in Singapore all year round (except for short-term business trips), or you are a Singapore citizen or permanent resident who usually resides in Singapore. Singapore. In the latest regulations in 2024, foreigners who temporarily work remotely in Singapore due to the impact of COVID-19 can apply for special consideration as long as they can prove the temporary nature of their work arrangements.

There are significant differences in the way non-residents are taxed compared to residents. Employment income is taxed at a fixed tax rate of 15% or the resident tax rate, whichever is higher; professional income such as director fees and consultant fees are taxed at a uniform rate of 22%; at the same time, non-residents cannot enjoy personal exemptions and tax credits treatment. It is worth noting that certain income (such as rent) may be subject to a preferential withholding tax rate of 10%.

2.3 Preferential policies for special talents

In order to attract global talents, Singapore has launched a number of tax incentives for special talents. The Non-binding Tax Ruling (NOR) scheme is aimed at executives with an annual income of not less than S$200,000, allowing them to apply for tax exemption on their employment income corresponding to the number of days worked overseas, and is valid for 5 years. New regulations in 2024 require applicants to prove that they assume substantial management responsibilities in Singapore. The Regional Headquarters Talent Plan provides a preferential tax rate of up to 15% for senior managers of regional headquarters of multinational companies, requiring them to manage business in at least three Asia-Pacific countries in Singapore. Starting from 2024, the review of substantive management activities will be strengthened. In addition, the Innovation and Entrepreneurship Talent Program is aimed at technological innovation entrepreneurs, providing up to 50% taxable income reduction for the first three years, but requires a detailed business plan and proof of innovation.

2.4 Practical suggestions

At the practical level, taxpayers need to strictly abide by the filing schedule and submit paper tax returns before April 15 each year, or complete electronic tax returns before April 18. It is recommended to prepare relevant documents including IR8A form, income certificate and other documents in advance. In terms of personal exemption applications, taxpayers can consider preferential policies such as spousal relief, child support exemption, parental support exemption, provident fund voluntary contribution exemption, and charitable donations (250% exemption). At the same time, taxpayers also need to pay special attention to accurately recording the number of days of residence in Singapore, keeping complete proofs of overseas income, promptly updating personal information changes, and properly keeping tax vouchers for at least 5 years.

In 2024, the Singapore Inland Revenue Authority will strengthen tax inspections of high-income individuals, paying special attention to the completeness of overseas income declarations, accuracy of equity incentive income calculations, compliance with resident status determination, and the authenticity of various exemption and exemption applications. For high-net-worth individuals considering moving to Singapore, it is recommended to consult a professional tax advisor in advance to formulate a reasonable tax planning plan. At the same time, attention should also be paid to balancing tax incentives with actual business needs to ensure the rationality of business arrangements.

Consumption tax (GST)

As an important indirect tax, Singapore’s Goods and Services Tax (GST) has adjusted its standard tax rate to 9% from January 1, 2024. This is another rate adjustment after the increase from 7% to 8% in 2023. This change is an important step by the Singaporean government to deal with the aging of the population and increasing public expenditure. According to data from the Inland Revenue Authority of Singapore (IRAS), GST revenue reached S$14.5 billion in 2023, accounting for approximately 21% of the government’s total tax revenue. It is expected that tax contribution will further increase to S$17 billion in 2024.

In order to reduce the burden on the people, the government has simultaneously launched the Assurance Package, which is expected to provide additional subsidies to low- and middle-income families in 2024-2025. A family of four with an annual income of less than S$55,000 can receive a cash subsidy totaling approximately S$1,000, effectively mitigating the impact of the tax rate increase.

In terms of zero-rate policy, it mainly applies to international services and basic export goods. Specifically, it includes international transportation services, qualified services to overseas customers, and export goods. It is worth noting that starting from 2024, the zero-tax determination criteria for digital service exports will be refined, requiring service providers to be able to prove that the service recipient is located outside Singapore when the service occurs.

Financial services and residential property leasing fall into the category of exempt supplies, which means that relevant companies do not need to charge GST on these transactions, but they cannot apply for input tax credits. This provision will remain unchanged in 2024, but the identification standards for financial technology services have been adjusted, and the exemption policy may no longer apply to some innovative financial services.

In the catering service industry, new regulations in 2024 require catering companies with an annual turnover of more than S$1 million to adopt an electronic invoice system to improve tax management efficiency. The delivery fees of food delivery platforms have also been clearly included in the scope of GST collection, which has affected the pricing strategies of major food delivery platforms including Grab and Foodpanda.

In the retail sector, a new Tourist Refund Scheme has been implemented to expand the scope of the electronic tax refund system to more retailers and simplify the tax refund process. At the same time, for retailers who sell both physical stores and online sales in parallel, the principles of GST treatment under the mixed sales model are clarified.

The healthcare industry continues to maintain special policies. Prescription drugs and necessary medical services remain exempt from GST, but non-essential medical services (such as cosmetic surgery) are subject to GST at the standard rate. New regulations in 2024 require medical institutions to clearly distinguish between necessary and non-essential medical services.

With the booming development of the digital economy, Singapore will further improve its overseas supplier registration system (OVR) in 2024. Overseas businesses with an annual turnover of more than S$100,000 and providing digital services to Singaporean consumers must register for GST. The new regulations particularly emphasize the following aspects:

Expansion of the scope of digital services: In addition to traditional electronic services, it also includes emerging digital services such as online education, telemedicine consultation, and cloud services. According to IRAS statistics, as of the end of 2023, more than 2,000 overseas digital service providers have registered for GST in Singapore, and this number is expected to grow by 30% in 2024.

Payment processing requirements: Electronic payment platforms must be able to identify and record the location where a transaction occurs, ensuring that GST is correctly calculated and collected. To this end, many payment platforms have updated their systems to include geolocation recognition capabilities.

Compliance reporting obligations: Businesses that provide electronic services are required to submit GST returns every quarter and keep detailed transaction records for at least 5 years. Penalties for non-compliance have also been increased, reaching up to three times the amount of tax payable.

At the specific operational level, companies need to pay special attention to the following points:

Regular review of the GST registration threshold: Enterprises should regularly monitor their turnover. Once the registration threshold is exceeded (annual turnover of S$1 million), they need to apply to IRAS for registration within 30 days.

Improve internal systems: Ensure accounting systems can accurately distinguish transactions with different tax rates, especially for businesses with a mix of standard-rate, zero-rate and exempt supplies.

Invoice management: From April 2024, GST-registered businesses with an annual turnover of more than S$1 million must use electronic invoices to ensure that the invoices contain all necessary information, including GST registration number, tax rate and tax amount.

Advance payment processing: For companies that receive advance payments, they need to pay attention to the transition period when the new tax rate is implemented to ensure that invoices are issued and taxes are paid at the correct tax rate.

The implementation of these new policies has significantly improved the efficiency of consumption tax collection and administration, but it has also increased the compliance costs of enterprises. It is recommended that enterprises update their internal processes in a timely manner and seek professional consultation when necessary to ensure tax compliance.

Other important tax rates

4.1 Withholding income tax

Singapore’s withholding tax regime focuses on certain types of income paid to non-residents. The latest policy in 2024 shows that the withholding tax rate on technical service fees, management fees and director fees remains at 22%, while interest and royalties are 15%. It is worth noting that starting from January 2024, new withholding tax regulations will apply to technology service fees paid to digital service providers. In particular, payments involving software licenses and cloud services require more careful judgment of their nature. According to statistics from the Inland Revenue Authority of Singapore, taxes collected through withholding tax will reach S$2.8 billion in 2023, an increase of 15% from the previous year.

In practice, the payer must pay the withholding tax and submit the relevant returns to the tax bureau within 14 days after the payment date or the payment date (whichever is earlier). It is worth noting that the tax avoidance agreements signed by Singapore with more than 80 countries may provide more favorable withholding tax rates, and companies should make full use of this advantage for tax planning.

4.2 Stamp duty

Regulation of the real estate market continues to deepen, and the stamp duty policy in 2024 has undergone important adjustments. The stamp duty on the purchase of the first home remains at the basic rate calculated based on price segments, but the Additional Buyer’s Stamp Duty (ABSD) rate on the purchase of the second and subsequent homes has been adjusted to range from 20% to 35%. According to data from the Urban Redevelopment Authority of Singapore, the effect of this policy is significant, with private residential transaction volume falling by approximately 25% year-on-year in the fourth quarter of 2023.

In terms of commercial real estate, the buyer’s stamp duty remains at the base rate of 3%, but the stamp duty calculation method for lease agreements has been simplified. From 2024, for leases with a term of more than four years, stamp duty will be calculated based on actual rent rather than nominal rent, which provides companies with a clearer basis for cost forecasting.

4.3 Property tax

From 2024, Singapore will adopt a more progressive tax rate structure for property tax on residential properties. Tax rates range from 4% to 16% for owner-occupied properties and 11% to 27% for rental properties. This adjustment mainly targets high-value properties and reflects the policy orientation of wealth redistribution. It is estimated that for an owner-occupied property worth S$3 million, property taxes in 2024 will increase by approximately S$2,000 compared to 2023.

The property tax rate for commercial properties remains unchanged at 10%, but the annual property value assessment method has been updated to better reflect market rental levels. The valuation cycle of industrial real estate has also been changed from once every year to once every two years, reducing the administrative burden on enterprises.

4. 4 Carbon tax

To achieve its 2050 net-zero emissions target, Singapore will increase its carbon tax rate to S$25/ton of carbon dioxide equivalent in 2024, and is expected to further increase to S$45/ton in 2026. This policy affects about 50 large industrial emitters, covering about 80% of Singapore’s greenhouse gas emissions. The government also launched a carbon credit trading mechanism that allows companies to offset part of their carbon tax obligations by purchasing high-quality international carbon credits.

Companies can reduce carbon emissions by investing in energy-saving technologies and optimizing production processes. The industrial transformation support plan provided by the government can cover up to 70% of related investment costs. According to data from the Energy Market Administration, more than 30% of affected companies have launched emission reduction projects in 2023.

4.5 Luxury goods tax

Singapore implements differentiated taxation policies for specific luxury goods categories. The additional registration fee (ARF) for private yachts and high-end cars adopts progressive tax rates, up to a maximum of 320%. Starting from 2024, the ARF calculation method for new energy vehicles worth more than S$200,000 will be adjusted to balance the policy goals of environmental protection and luxury taxation.

Luxury goods such as luxury jewelry and watches are mainly levied through GST, but additional tariffs on certain luxury goods categories will be added in 2024. It is worth noting that Singapore still allows GST rebates when purchasing these goods at Changi Airport duty-free shops. This policy helps maintain Singapore’s status as a regional luxury retail center.

At the specific operational level, taxpayers need to pay attention to the following points: track changes in tax rates in a timely manner, especially in real estate transactions and carbon emissions; make full use of various tax preferential policies, such as tax avoidance agreements and industrial transformation support plans; improve internal control systems, Ensure accurate calculation and timely payment of various taxes; regularly assess tax risks and seek professional consulting services when necessary.

Tax rate optimization plan

5.1 Industry typical case analysis

Manufacturing tax optimization case: Taking a precision manufacturing company with an annual turnover of S$200 million as an example, the company successfully reduced its effective tax rate in 2023 through the rational use of the Productivity and Innovation Concession Scheme (PIC) and the Enterprise Development Plan (EDB) to 12%. Specific measures include: concentrating R&D activities in Singapore to obtain a 250% super deduction of expenses; using automation equipment investment credits to deduct approximately S$5 million from taxable income; and obtaining a 17% discount through intellectual property management. tax rate. The combined tax saving effect of these measures is approximately S$1.5 million.

Digital service industry case: The Singapore branch of a multinational technology company established a regional headquarters to integrate Southeast Asia’s digital service business, and a preferential tax rate of 5% was applied. The company will achieve tax savings of approximately S$2.8 million in 2023 by locating core functions such as technology research and development, data centers and customer services in Singapore, while rationally arranging cross-border service pricing. It is worth noting that the company strictly adheres to the economic substance requirements and maintains a sufficient scale of business activities and employees in Singapore.

Financial services industry case: An asset management company enjoys a 10% preferential tax rate on income from offshore funds it manages through the Financial and Treasury Center (FTC) scheme. At the same time, by setting up an investment holding company in Singapore and taking advantage of the shareholding tax exemption and foreign tax credit benefits, the overall tax burden can be effectively reduced. In 2023, the company will save approximately S$2 million in taxes through tax planning.

5.2 Tax rate planning suggestions

Group structure optimization: It is recommended that enterprises choose the optimal company structure based on the nature of their business. For example, functional companies such as intellectual property holdings and regional procurement centers should be located in Singapore to make full use of the tax treaty network and various preferential policies. The new regulations in 2024 require holding companies to have substantive business activities, and it is recommended to maintain at least three full-time employees with relevant professional backgrounds.

Financing structure design: Reasonably arrange the proportion of equity and debt financing, and make full use of interest expense deductions. Starting from 2024, Singapore will implement revised interest deduction restriction rules. It is recommended that companies control the debt-to-equity ratio within 3:1 and pay attention to the reasonable pricing of related party borrowings.

Transfer pricing management: Develop related party transaction pricing policies that comply with the arm’s length principle. It is recommended that enterprises prepare contemporaneous documents and adopt advance pricing arrangements (APA) to reduce tax risks. The new regulations in 2024 have strengthened transfer pricing documentation requirements, and it is recommended that companies with annual related-party transactions exceeding S$15 million proactively prepare transfer pricing documentation.

R&D activity planning: Make full use of the super deduction policy for R&D expenses. It is recommended to keep core R&D activities in Singapore and pay attention to distinguishing between qualified R&D expenditure and general development expenses. Starting from 2024, the government will increase its support for local R&D activities, and eligible R&D expenditures can receive tax exemptions of up to 300%.

5.3 Common misunderstandings reminder

Excessive pursuit of tax benefits: Some companies enter into arrangements that have no commercial substance in order to obtain tax benefits, which may lead to questions from the tax authorities. It is recommended that enterprises ensure that business arrangements have reasonable economic purposes while pursuing tax benefits. For example, in 2023, many companies were punished for artificially dividing their businesses to avoid the GST registration threshold.

Overlooking compliance costs: Underestimating the supporting costs of tax planning. Complete tax planning requires the investment of corresponding manpower and material resources, including establishing physical institutions, maintaining necessary personnel, and preparing compliance documents. It is recommended that enterprises conduct a comprehensive cost-benefit analysis to avoid focusing on one thing and losing another.

Cross-border tax risks: International tax development trends are not fully considered. With the implementation of BEPS 2.0, the global minimum tax rate of 15% will affect large multinational enterprise groups. It is recommended that companies assess the impact early and adjust their international business layout if necessary.

5.4 Practical suggestions

Establish a tax risk management system: Set up dedicated tax management positions, regularly assess tax risks, and establish a tax decision-making approval process. Starting from 2024, the Singapore Inland Revenue Authority will strengthen tax audits and recommend that companies maintain complete transaction records and supporting documents.

Make good use of professional service resources: It is recommended to consult professional agencies for complex tax planning, especially when it involves cross-border transactions, corporate restructuring and other major matters. According to statistics, companies that hire professional tax consultants in 2023 can reduce their tax risks by an average of 20%.

Regularly review optimization plans: With dynamic changes in tax policies, it is recommended to evaluate the effectiveness of existing tax planning at least every six months. Pay special attention to the transition period arrangements for new policies to avoid delays in measures.

Practical Operation Guide

6.1 Use of tax rate calculation tools

The Inland Revenue Authority of Singapore (IRAS) will comprehensively update its online tax calculation system in 2024 to provide taxpayers with more intelligent calculation support. myTax Portal has been upgraded to a new version and integrates artificial intelligence assistance functions, which can automatically recommend applicable tax preferential policies based on the industry to which the company belongs. Corporate users can log in to the system through the Singapore Unified Corporate Account (CorpPass) to achieve one-stop tax management.

In actual operation, the system provides multiple professional calculation modules: the corporate income tax calculator can automatically identify the tax rates of different income sources and automatically calculate various deduction items according to the latest policies; the GST calculator integrates output items under different tax rates Tax and input tax processing, especially providing accurate calculation support for cross-border e-commerce and mixed supply situations. According to IRAS usage data, companies that use online calculation tools can reduce calculation errors by an average of 60% and significantly improve filing efficiency.

In order to facilitate the use of small and medium-sized enterprises, IRAS has also launched a simplified version of Excel calculation template, covering common tax calculation scenarios. These templates are preset with the latest tax rate parameters and calculation formulas, and companies only need to enter basic data to obtain accurate tax payables. It is recommended that enterprises regularly download the latest version to ensure that calculation parameters are consistent with current policies.

6.2 Important tips for declaration

In terms of corporate income tax declaration, the “smart declaration” system will be implemented from 2024, requiring enterprises with annual income of more than S$10 million to use electronic declaration. The system has added a real-time verification function that can automatically identify potential reporting errors and abnormal data. Particular attention needs to be paid to the fact that multinational companies have stricter information disclosure requirements for related-party transactions, and transfer pricing policies and specific calculation basis must be explained in detail.

GST declaration has been fully electronic, and the quarterly declaration deadline has been adjusted to 21 days from the first working day of the following month. The system supports automatic import of electronic invoice data, greatly reducing manual entry steps. For mixed supply businesses, the basis for income classification needs to be detailed in the notes to the return. Special reminder: Starting from 2024, the penalty for late filing will increase, up to three times the tax payable.

A new electronic form (S45) has been introduced for withholding income tax returns, requiring details of the nature of payment and the basis for determining the applicable tax rate. If the preferential tax rate under a tax treaty applies, supporting documents such as the beneficial owner certificate must be uploaded to the system. Starting from 2024, the withholding income tax declaration for technical service fees will increase the service substance identification requirements, and a more detailed service description will be required.

6.3 Application process for preferential policies

The application process for super deduction of R&D expenses has been optimized, and companies can confirm R&D project qualifications in advance through the online platform. The new system supports the submission of application materials in stages, and you can start to enjoy the discounts after the R&D plan is initially approved. It is recommended that enterprises submit applications 3 months before the start of the project and keep complete documentation of the research and development process.

The application threshold for the Industrial Transformation Support Scheme (ITS) has been lowered, and small and medium-sized enterprises only need to prove that the investment project can increase production efficiency by 20% to receive support. The application process is simplified into two stages: the initial review mainly evaluates the feasibility of the project, and the final review focuses on reviewing the specific implementation plan. Businesses can submit applications through Enterprise Singapore’s online portal, with the average approval time shortened to 15 working days.

The Regional Headquarters Preferential Program (RHQ) applies for a new “fast track”, and qualified companies can obtain preliminary recognition within 30 days. Starting from 2024, the application conditions will be adjusted to: Commitment to invest no less than S$2 million in Singapore within three years and hire at least 10 professionally qualified local employees. Application materials need to include detailed business development plans and staffing plans.

Special reminder

7.1 Important changes in 2024

The taxation system for the digital economy has been comprehensively upgraded, and Singapore has expanded the scope of taxation on cross-border digital services. Electronic service providers whose annual turnover exceeds S$1 million are required to compulsorily register for GST, and guidelines for the processing of GST on cryptocurrency transactions have been added. Digital payment service providers are required to pay GST on the payment processing services they provide in Singapore, affecting about 200 fintech companies.

The carbon tax reform has entered the second stage, with the tax rate raised to S$25/ton and the scope of impact expanded to companies with annual emissions exceeding 25,000 tons. The new system adopts a “baseline-credit” mechanism, and companies can offset part of their tax burden by purchasing qualified carbon credits. It is worth noting that starting from 2024, carbon tax expenditures will no longer be allowed to be deducted before income tax, which will significantly increase the actual tax burden of high-emitting enterprises.

Transfer pricing rules were strengthened and the “substantial activity test” was introduced. Companies are required to prove that their business activities in Singapore match the declared profit levels. The deduction limit for intra-group service expenses has been tightened, and additional proof of commercial rationality is required for the portion exceeding 5% of operating income. At the same time, the threshold for preparing contemporaneous information on related-party transactions has been reduced to S$10 million.

7.2 Things to note about cross-border business tax rates

The implementation details of the global minimum tax rate under the BEPS 2.0 framework have been clarified. Multinational enterprise groups with annual revenue exceeding 750 million euros must ensure that the effective tax rate in each jurisdiction is no less than 15%. Singapore has launched a domestic minimum top-up tax system (DMTT), allowing companies to pay the difference in taxes locally to avoid being levied by other countries.

The tax preferential policies for regional headquarters have been adjusted, and the application requirements for “substantial activities” have been added. Companies need to maintain adequate management, control and risk-taking functions in Singapore. The new rules require at least three senior managers to be based in Singapore and key decisions must be made locally. Enterprises that do not meet the requirements will be disqualified.

New cross-border e-commerce taxation regulations have been implemented, unifying the GST treatment of B2C remote services and low-value goods. Overseas suppliers need to register through the simplified GST registration mechanism (OVR), and those with annual turnover exceeding S$100,000 must register. In particular, e-commerce platform operators are reminded that they need to bear the obligation to collect and pay.

7.3 Compliance risk prevention

The focus of tax audits has shifted to the digital economy, and IRAS has strengthened supervision of cryptocurrency transactions, digital payments and e-commerce platforms. It is recommended that relevant enterprises establish a transaction tracking system to ensure complete reporting of income. According to the latest statistics, back taxes due to tax audits in the digital economy in 2023 will reach S$320 million.

Transfer pricing documentation requirements have increased, and companies need to adopt a “three-tier documentation” system. In addition to the master file and local files, eligible multinational enterprises are also required to prepare country-by-country reports. The document retention period is extended to 7 years, and the pricing policy needs to be updated regularly. It is recommended that enterprises introduce professional transfer pricing software to improve document management efficiency.

The tax dispute resolution mechanism has been optimized and a fast track for scheduled adjudication has been introduced. Enterprises can obtain tax bureau opinions in advance on the tax treatment of major transactions, effectively reducing compliance risks. At the same time, the scope of application of the Mutual Agreement Procedure (MAP) has been expanded to provide more ways to resolve cross-border tax disputes.

Frequently Asked Questions

8.1 Difficulties in applying tax rates

The determination of tax rates for mixed business models has always been a common concern for enterprises. Take a cross-border e-commerce platform as an example. It operates both commodity sales and technical services. The determination of its income classification and applicable tax rate needs to follow the “main purpose test”. When technical service income exceeds 30% of total income, it should be split and applied to different tax rates. IRAS 2024 specifically emphasizes that companies need to establish a reliable income classification mechanism and maintain corresponding business substance certification documents.

The conditions for applying tax incentives to start-ups often cause controversy. Qualifying new start-ups can enjoy partial tax exemptions for the first three years, but there are several key criteria to note: the company must be incorporated in Singapore; shareholders must be natural persons, and at least one shareholder holding more than 10% of the shares must actively participate in the operation. ;Business activities must be innovative in nature. The 2024 New Deal further clarifies that investment holdings or real estate development activities alone do not fall within the scope of preferential treatment.

The taxation standards for offshore income require special attention. Some companies mistakenly believe that all foreign-source income is tax-free, but actually need to meet the “control and management” test. If key business decisions are made in Singapore, the income may be deemed taxable even if it is sourced overseas. It is recommended that companies keep supporting documents such as board resolutions and contract negotiations to prove the true source of income.

8.2 Consultation on calculation methods

The reasonable calculation method of intra-group service expenses deserves attention. The new regulations in 2024 require the use of the “cost plus method” to determine service fees, and the markup rate needs to be supported by comparability analysis. It is recommended that enterprises establish a cost sharing agreement, clarify the allocation standards of various expenses, and keep a detailed cost calculation sheet. Special reminder that the actual benefit principle needs to be considered when allocating management expenses.

The calculation caliber for the super deduction of R&D expenses often raises questions. Qualified R&D expenditures include direct labor costs, material costs and depreciation of related equipment, but expenditures such as market research and routine testing are not included in the scope of super deductions. Starting from 2024, companies can choose a simplified calculation method and calculate the deductible amount based on 250% of direct labor costs, without separately accounting for other expenses.

The calculation of the interest deduction limit under thin capitalization rules requires special attention. For loans obtained by an enterprise from related parties, the deduction limit for interest expenses is limited by the debt-to-equity ratio. It is recommended to adopt a rolling calculation method and monitor changes in the debt-to-equity ratio on a monthly basis to ensure that it does not exceed the 3:1 standard. Any excess interest payments will be treated as dividends and will not be deductible for tax purposes.

8.3 Policy interpretation and doubts

Common misunderstandings about the preferential intellectual property system need to be clarified. Companies often believe that they can enjoy preferential tax rates as long as they hold patents. In fact, they need to prove that substantial R&D activities were conducted in Singapore during the development of intellectual property rights. The 2024 New Deal emphasizes that supporting materials such as a list of R&D personnel and technical documents must be provided when applying for discounts.

There is a misunderstanding of the GST refund policy. Some companies mistakenly believe that all exports can apply for GST tax rebate. In fact, they need to distinguish between direct exports and indirect exports. Indirect exports through local intermediaries may not be eligible for tax refunds. It is recommended that enterprises carefully review the transaction chain to ensure that the “final destination” test requirements are met.

The applicable conditions for preferential tax policies for group reorganization need to be clarified. Asset transfers during corporate reorganization may qualify for tax exemption, but they need to meet the equity continuity test and the substantive operation test. Special reminder that the change in the equity structure before and after the reorganization must not exceed 50%, and the operating activities must remain substantially unchanged.

Further reading

The 2024 revision of the Singapore Income Tax Act (SITA) introduces a number of important changes. In particular, the amendments to Article 13Z have expanded the scope of tax incentives for investment holding companies and added tax exemptions for specific types of private equity investments. At the same time, the supplementary provisions of Article 14Q on digital economy taxation officially came into effect, providing a clear taxation framework for digital asset transactions and virtual economic activities.

The latest revision of the Goods and Services Tax Act (GST Act) focuses on the collection and management of cross-border digital services. The revised Article 14 clarifies the scope of the definition of electronic services and brings emerging business formats such as cloud computing and digital content subscriptions into the scope of tax collection and management. It is worth noting that the new version of the GST law brings Metaverse transactions into the regulatory framework for the first time, providing a legal basis for the taxation of virtual assets and digital commodities.

The 2024 version of the Economic Expansion Incentives Act (EIA) strengthens support for industrial transformation. A new “Special Provision for Digital Transformation” has been added to provide tax credits of up to 250% for companies adopting cutting-edge technologies such as artificial intelligence and blockchain. At the same time, “green development incentives” are introduced to support enterprises in transitioning to a low-carbon economy.

The Pillar 2 implementation plan under the BEPS 2.0 framework has attracted much attention. The Singapore Inland Revenue Authority has confirmed that it will implement a global minimum tax system from 2025 and is currently formulating domestic supplementary tax rules. According to statistics from the Singapore International Chamber of Commerce, this will affect about 150 multinational enterprise groups and is expected to bring about S$2 billion in additional tax revenue each year.

The tax provisions of the Regional Comprehensive Economic Partnership (RCEP) are beginning to take effect. The latest data shows that under the RCEP framework, Singaporean companies have saved a total tax burden of approximately S$800 million due to tax treaty benefits. Especially in the fields of intellectual property royalties and technical service fees, the application of preferential tax rates has significantly reduced cross-border transaction costs.

Carbon tax reform has entered a critical stage. Singapore is studying the feasibility of linking carbon tax to the carbon trading market and plans to launch a carbon credit trading platform in 2025. This will provide high-emission companies with more flexible emission reduction pathways while cultivating a local carbon finance market.

KPMG’s Singapore tax leader believes that taxation of the digital economy will become the focus of tax reform in the next five years. It is recommended that enterprises deploy digital tax management systems in advance. In particular, cross-border e-commerce platforms need to establish a real-time transaction monitoring mechanism to adapt to increasingly stringent compliance requirements.

The head of transfer pricing at Deloitte Asia Pacific pointed out that in the context of the world’s lowest tax rate, companies need to re-evaluate their regional headquarters location strategies. Singapore’s efficient business environment and comprehensive tax treaty network still have unique advantages, but companies need to pay more attention to the layout of substantive business activities.

Ernst & Young Singapore Tax Innovation Center released research showing that the application of artificial intelligence in the field of tax compliance will significantly increase. It is estimated that by 2025, more than 60% of tax declaration work will be processed intelligently. It is recommended that enterprises plan digital transformation as early as possible to improve tax management efficiency.

It is recommended to build a tax information database: establish a multi-level policy tracking mechanism. In addition to paying attention to the official releases of IRAS, you should also pay attention to the research reports of industry associations and professional institutions. It is recommended to set up a special policy research group to conduct regular policy interpretation and impact assessment.

Carry out forward-looking research: Regarding the tax treatment of emerging business models, it is recommended to conduct feasibility studies in advance. Especially when it comes to new areas such as the digital economy and green finance, we can refer to the handling experience of other developed jurisdictions to formulate response plans.

Establish an expert consultation network: maintain regular communication with tax experts and industry associations to obtain policy interpretations and practical experience in a timely manner. It is recommended to participate in relevant industry working groups and actively participate in policy consultations to strive for a more favorable policy environment for enterprises.

Regularly update the policy library: Systematically review tax policy changes every quarter to form internal reference guidelines. Pay special attention to the implementation period of transitional policies to avoid missing the preferential policy time window.

Track case studies: Collect and organize the latest tax ruling cases and analyze their implications for business operations. It is recommended to establish a case sharing mechanism to promote the exchange and accumulation of tax experience within enterprises.