Worldwide Tax Summaries--SINGAPORE（1999-2000）(part1)
Worldwide Tax Summaries--SINGAPORE（1999-2000）(part1)
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For year of assessment 1999 there is a tax rebate for corporate income other than that from Singapore dividends, and another rebate is granted for property tax on commerCIAl and industrial properties up to June 30,2000.
TAXES ON CORPORATE INCOME
Tax on corporate income is imposed at a flat rate of 26%. There are no state or municipal taxes on income. The full imputation system is adopted in taxing corporate profits. There is a 10% tax rebate for year of assessment 1999, but it excludes Singapore dividends.
The tax residence of a corporation is determined by the place where management and control are exercised. This is generally taken to mean where the directors meet and exercise de facto control.
Goods and services tax/GST, or VAT, is charged at 3%. There are few exemptions; the main ones are finanCIAl services, life insurance and the sale or lease of residential properties.
Foreign workers levy/In certain industries there is a levy not exceeding S$ 470 per month for each foreign employee.
Property tax/Property tax is levied at 12% of the annual value of all houses, lands, buildings, and tenements. There is a 55% tax rebate for commerCIAl and industrial properties up to June 30,2000.
Stamp taxes/Stamp taxes are levied only on written documents relating to stock, shares and immovable properties. The rates vary according to the nature of the document and the values referred to in the document.
Tax rates on branch profits are the same as on corporate profits, and no tax is withheld on remittance of profits to the head office.
Inventory valuation/There are no speCIAl rules as to which basis of valuation of inventories (stock-trade) should be adopted in the case of a continuing business, as long as the basis is consistent from one year to another. However, the LIFO basis of valuation is not permitted for tax purposes. Generally, tax reporting conforms with book reporting.
Capital gains/There is no tax on capital gains. Where there is a series of transactions, the tax authorities may take view that a business is being carried on and attempt to assess the gains as trading profits of the corporation.
While capital gains are not taxed, profits from real property sold within three years of purchase are taxable as income. The proportion taxable decreases by a third with each year added to the holding period. Besides real property the tax applies to short-term gains from the sale of shares in a private company that holds 75% or more of its assets in the form of real property or shares in real property companies. The speCIAl rules apply only to properties located in Singapore.
Intercompany dividends/ There are no speCIAl concessions on Intercompany dividends, which are taxable in the hands of the recipient with credit for Singapore tax expressed as deducted therefrom.
Foreign income/ A corporation, whether resident or nonresident in Singapore, is taxed on foreign income when received in Singapore. Legislative provisions govern the basis of treating foreign income as received in Singapore. There are no speCIAl rules for taxing undistributed income of foreign subsidiaries. For treaty countries,double taxation is avoided by means of foreign tax credits granted under the various tax treaties. For nontreaty countries, unilateral tax credits are given in respect of foreign tax on branch profits, dividends and employment income derived therefrom and prescribed service income received form certain countries.
Stock dividends/ Stock dividends are not taxable.
Deemed dividends/ Certain distributions to shareholders under a
capital-reduction scheme or a share by-back exercise are treated as distributions of dividends.
Depreciation and depletion/ Tax depreciation is allowable on industrial buildings used for qualifying activities at specified rates, and on machinery and equipment on a straightline basis over their specified working life for all types of business. In lieu of the straight-line basis, accelerated tax depreCIAtion allowances can be claimed by all
businesses on all machinery and equipment, except for motorcars, motorcycles and light-goods vehicles, in equal installments over three consecutive years. A 100% depreCIAtion allowance is available on capital expenditure incurred on computers, robots, standby generators, pollution control and energy-efficient equipment, and prescribed automation
equipment. Tax depreciation is not required to conform with book depreciation. Gains on tax depreciable property are taxed as ordinary income to the extent that tax depreciation has been allowed, i. e.. clawback of tax depreCIAtion is taxed.
Net operating losses/ Loss carryover, including unutilized tax
depreciation allowances, is unlimited, provided shareholdings in the loss-making corporation have not changed beyond 50% of issued and paid-up capital. Additionally, for tax depreciation allowances, there should be no cessation of the trade concerned. Carrybacks of tax losses and unutilized tax depreCIAtion are not permitted. The tax authorities may
exercise discretion to allow carryover of tax looses and unutilized tax depreCIAtion even when there has been a change in shareholdings beyond 50%.
Payments to nonresidents, including foreign affiliates/ Such payments are deductible, provided they are fair and reasonable. Unless a lower treaty rate applies, interest, royalties and rental of movable property are subject to withholding tax at 15%. The tax so withheld represents a
final tax, and the reduced rate of 15% applies only to nonresidents that are not carrying on any business in Singapore or that have no permanent establishment in Singapore. Payments made in connection with the leasing of capacity on satellites are free from withholding tax up to July 10, 2002. Technical assistance and management fees are taxed at the prevailing corporate-rate.
Taxes/ Income taxes are not normally deductible in determining corporate income. The foreign workers levy and property taxes are deductible to the extent they are incurred wholly and exclusively in the production of income.
Generally, tax credits are given only for tax paid on income derived from treaty countries. However, for nontreaty countries unilateral tax credits are given for certain types of foreign income.
Other significant items / There are restrictions on the deductibility of automobile expenses.
The tax deduction for medical expenses is limited to 2% of total payroll.
Where the company is exempt or taxed at a reduced rate, the expenses disallowed will be taxed at the prevailing corporate rate.
There is no provision for group taxation.
There are various tax incentives. Where appropriate, exempt dividends may be paid to shareholders, other than preferred shareholders, out of the after-tax profits, if any.
Inward investment/ The various incentives include the following.
1. Pioneer industries-Corporations manufacturing approved products with high technological content, providing qualifying services or engaging in countertrade activities may apply for tax exemption for five to ten years.
Dividends paid out of exempt pioneer profits are not subject to tax in the hands of recipients, provided they are not in respect of preferred shares. Corporations may apply for their postpioneer profits to be taxed at a reduced rate under the Development and Expansion Incentive (see below).
2. High-value-added or expanding industries-Corporations engaging in new high value-added projects, expanding or upgrading their operations, or undertaking incremental activities after their pioneer or postpioneer period may apply for their profits to be taxed at a reduced rate of not less than 10% for an initial period of up to 10 years. The total tax relief period is subject to a maximum of 20 years (inclusive of the postpioneer relief period previously granted, if applicable). This is known as the Development and expansion Incentive.
3. Export of services-An approved enterprise providing selected services with respect to overseas projects is given tax exemption on 90% of the qualifying export income. The exemption is given for a period of five years, with provision for an extension.
Capital investment/ The various incentives include the following
1. Investment allowance-Tax exemption is granted on an amount of profits based on a specified percentage (up to 100%) of capital expenditure incurred for qualifying projects or activities within a period of up to five years. Dividends paid out of exempt profits are not taxable to the recipient, provided they are not paid in respect of preferred shares.
2. Venture capital-The venture capital incentive permits the deduction of investment losses (i. e. Losses
a. By a Singapore citizen or permanent resident or by a holding company in investing in a venture capital company. In the latter case the holding company should be incorporated and resident in Singapore and at least 50% owned by Singapore citizens or permanent residents;
b. By a holding company in investing in a technology company that in turn holds an investment in an overseas company that is developing or using new technology for a product, process or service;
c. By a holding company in investing in an "overseas investment company." The latter being a Singapore company that invests in an overseas company to acquire technology from the overseas company or to gain access to an overseas market for its holding company.
There is no loss relief is the shares are held for less than two years or if they are sold after eight years from the date when the venture capital company, technology company or " overseas investment company" is approved for this incentive. The relief is not available to the transferee of such shares.
FinanCIAl services/ The various incentives include the following.
1. Asian currency units(ACUs)- FinanCIAl institutions pay tax at a reduced rate of 10% on the net income derived by their ACUs from qualifying offshore transactions. Their incremental profits may qualify for a further reduced rate of 5%.
2. Syndicated offshore loans, guarantees, performance bonds, and offshore underwriting facilities- The income derived by an ACU of a finanCIAl institution or an ASC (approved securities company) from syndicated offshore activities where the syndication work is carried out in Singapore is exempt from tax.
3. Offshore gold, financial futures, silver, and platinum trading transactions-Corporate members of SIMEX (Singapore international Monetary Exchange) pay tax at a reduced rate of 10% on the income derived from offshore transactions in gold, silver and platinum; from petroleum, commodity or finanCIAl futures on approved exchanges or in approved markets; and from spot currency transactions and margin deposits held for
nonresidents. The top 20 most active members can enjoy a further reduced rate of 5% on their incremental profits from the trading of new futures and options contracts.
4. Offshore fund management- ACUs and AFMs (approved fund managers)pay tax at a reduced rate of 10% on the fees derived from providing fund management services, including advisory services in respect of nonresident funds. All fees are exempted from tax for five to ten years from February 28, 1998 if the funds managed are S$5 billion or more.
5. Managing initial public offerings of and trading in
foreign-currency-denominated securities-ACUs and ASCs are exempted from tax on income derived from transactions in foreign-currency -denominated securities listed on the SES (Stock Exchange of Singapore) and issued by qualifying companies. The tax holiday was granted for five years from
income year 1997.
6. Credit rating services-Approved credit rating agencies in Singapore pay tax at a reduced rate of 10% on the income earned from providing credit rating services in respect of the issue of foreign-currency-denominated securities in Singapore. This tax concession is for an initial period of five years from income year 1997.
7. Finance and treasury center (FTC)- Income derived by an FTC from approved finance and treasury center activities, such as regional and international treasury and fund management, corporate finance and advisory services, economic and investment research and analysis, and credit control and administration, is taxed at a reduced rate of 10%.
8. Debt securities-A package of tax exemption and reduced tax rate is available to various players in the Singapore bond market.
Other incentives/ Other incentives include the following.
1. Operational headquarters (OHQ) -The income earned by an approved operational headquarters in providing management, technical, finanCIAl, and other supporting services to affiliates outside Singapore and its