What benefits does Singapore tax residency open for entrepreneurs? Why is it better for offshore business to develop in Asia? Mainly, Singapore is attractive for international business due to its convenient and well-thought-out tax policy. The country’s authorities have created such a system so that residents would like to pay taxes, so that entrepreneurs believe that it is a favorable deal. What is this incredible system? It’s simple: it’s when tax rates are minimal, especially in the early years of a new company, and a variety of incentives are available.
What are the benefits of registering an offshore company in Singapore?
- Attractive and diverse labor market. Singapore is a serious financial center, thousands of talented professionals emigrate to this city every year in search of new career opportunities. This means that employers will not experience a shortage of staff.
- Digital currency like bitcoins can be legally accepted as payment for goods and services.
- This is a market with high purchasing power. Singapore has a population of 6 million, which means that business can be conducted not only internationally, but also focus on selling goods and services to locals. For comparison, the population in popular offshore locations in the Caribbean rarely exceeds half a million people.
- Favorable geographical location at the junction of trade routes and convenient transportation links with the whole world. Singapore has the busiest port in the world.
- The procedure for registering a legal entity is fast and simplified, a business profile can be obtained in a few days.
- Owners of 100% of shares of companies can be non-residents, and not only individuals, but also legal entities, such as an offshore foreign trust.
- Confidentiality of information on the beneficiaries of an offshore company is ensured as follows: information on the director and secretary must be disclosed, but data on shareholders is not public.
- There is no minimum start-up capital requirement.
- This is a digitized country, a significant part of communications between government agencies and entrepreneurs takes place online, personal presence of the owner of the company in Singapore is desirable only during the opening of a corporate bank account.
The peculiarity of the tax system of Singapore
- The country has signed 107 agreements so that local residents and entrepreneurs do not face the problem of double taxation of the same income. The full list of Singapore’s DTAs can be found on the IRAS (Inland Revenue Service) website.
- There is a territorial principle of taxation, however, if overseas earned income is remitted to Singapore, it becomes part of the tax base. But if taxes are paid from overseas earnings in another jurisdiction (from the source of the profits), there is no longer a tax liability in Singapore.
3 The following foreign income is exempt from taxation: dividends from foreign sources, profits of foreign branches of the company, income from the provision of services abroad.
- the total corporate tax rate is one of the lowest in the world, only 17%, although the full rate should not always be paid, for new companies the government has developed the following system of discounts for the first three years of business activity:
- The first SGD 100,000 earned is exempt from taxation by 75%.
- The next SGD 100,000 earned is exempt from taxation by 50%.
- In total, as much as SGD 125,000 (SGD 75,000 + SGD 50,000) is disregarded as income for new resident companies in the first three years of operation.
For the fourth year of operation, when the company is no longer considered a start-up, the partial tax exemption is as follows:
- The first SGD 10,000 is exempt from tax by 75%.
- The next SGD 190,000 is exempt from tax at 50%.
- Total, as much as SGD 102,500 (7,500 + 95,000) is not counted as income.
- Capital gains (e.g. gains from the sale of assets, investments, or foreign exchange gains) are never taxed.
- Many different deductions are provided, like business expenses, to further reduce the taxable base.
As you can see, the legislation of Singapore provides a lot of mechanisms to optimize tax expenses both at the start of business activities and in the future. However, it is worth noting that this system of discounts, deductions, incentives and exemptions is quite confusing and complicated, so you can’t do without tax consultants.