For many years, businesses as well as individuals have been turning to Singapore as the region’s premier location to live, work and play. Favorable and encouraging business policies are the prime attractions for businesses. Singapore offers low income tax rates while still providing a high quality of life. This draws individuals to build their career opportunities in Singapore.
The country has been able to adopt and maintain an open and pro-business economy, while still being able to provide world class infrastructure at relatively low tax rates.
According to a survey conducted by KPMG in 2012, over the last year, the average top personal income tax rates globally have gone up by 0.3 percent.
Even in these difficult global economic conditions, Singapore has not altered its tax policy and still maintains a low tax regime.
Singapore Personal Income Tax
In Singapore, the highest personal income tax rate is 20%. This is applicable to residents earning more than S$320,000 per annum. Tax rules differ on the basis of tax residency. A flat rate of 15% is applicable for non-residents. In comparison, an individual in New York, earning US$300,000 annually, has to pay 33% as federal tax and an additional 7.85% as state tax.
As a result, a majority of expats moving to Singapore experience an increase in disposable income. This fact becomes even more apparent considering that more than 50% of the expats here in Singapore earn more than US$200,000 per annum.
Another key factor is that there is no inheritance or capital gains tax in Singapore. Individuals are taxed on income earned in the country and barring a few exceptions, are not taxed on income earned overseas.
Singapore Corporate Tax
Apart from significant advantages such as ease of company incorporation, stable political environment and superior business infrastructure, companies are drawn to Singapore because of favorable tax policies. The tax system in the country is characterized by an extremely low corporate tax rate, which is capped at 17%.
Singapore also has a single tier tax system which essentially means that there is no double taxation. Dividends paid out by the company to its shareholders is normally tax free although in some cases companies may choose to pay out taxable dividends. There is no capital gains tax for companies as well, and therefore gains such as those made upon sale of fixed assets are tax-exempt.
Tax in Singapore is on a territorial basis. This implies that companies are taxed only on income sourced in the country. Income sourced by a Singapore firm in a foreign country is taxed when it is deemed remitted into the country. Low Goods & Service Tax rate of 7%, tax exemptions and other tax incentives help create an extremely vibrant business environment.
World class infrastructure along with a low tax rate attracts foreign companies as well as professionals to Singapore. Despite global economic fluctuations over the years, government policies have been able to maintain this open and positive business environment.