Taxes are one of the key considerations for setting up an offshore company. One of Singapore’s unique advantages is its simple and low tax system. Singapore’s tax system is characterized by low corporate and personal income tax rates; tax incentives and tax relief measures; absence of capital gains tax; absence of dividend tax; territorial one-tier tax system and an extensive tax treaty network.
As Singapore follows a territorial basis of taxation, taxes apply to income that is accrued to or derived by the company from Singapore or foreign-sourced income received in Singapore. Foreign-sourced income received in Singapore that meets certain qualifying conditions is exempted from Singapore tax, while foreign-sourced income that is not remitted into Singapore is exempted from Singapore taxation. Singapore follows a single-tier tax policy which means once the income has been taxed at the corporate level, dividends can be distributed to shareholders tax free.The corporate income tax rate is approximately 8.5% for profits up to S$300,000 and a flat 17% above S$300,000. Furthermore, a newly incorporated company enjoys 0% tax rate on the first S$100,000 taxable income for each of the first three tax filing years, provided the company has a maximum of 20 shareholders of which at least one is an individual shareholder holding at least 10% of the shares.