Last Updated 24 Feb 2019
Corporate tax is unavoidable in Singapore. However, with proper tax planning, it is possible for businesses to pay less tax/defer its tax payments. Hence, businesses will minimize their tax and maximize returns for stakeholders and as such, more resources will be available for reinvestment. Under-declaration of taxes in past years may result in accumulated tax debts, penalties, late payment interest and/or imprisonment when queried/investigated by the tax authorities.
Here are some of the possible ways to minimize corporate tax?
- Take advantage of Singapore’s current low corporate headline income tax rate and also the available full/partial tax exemption on the first SGD200,000/- of taxable income for each assessment year for the first three years of assessment if your company fulfils certain conditions;
- Consider tax incentives available that allows a reduction in current income tax rate or even exempt from income tax for a specified period of time;
- Re-structure your Singapore company by exploring available alternatives in order to minimize exposure to withholding tax requirements for certain payments to non-Singapore tax residents;
- GST is a broad-based value-added tax imposed on domestic consumption of goods and services in Singapore. If your company is in the business of importers and exporters, you may wish to look into the various GST schemes available that may ease your cash flow;
- Consider carrying out a voluntary GST Assisted Self-Help Kit (ASK) annual review of your past GST declarations to voluntary disclose omissions and errors detected in the quarterly returns so as to minimize/waive penalties for under-payment of GST debts that are not expected to occur;
- Maximize and claim eligible wear and tear allowances;
- Defer taxable income i.e. not remitting foreign sourced investment income that is subjected to income tax here when remitted; or avoid remittance of taxable income by re-investing outside Singapore;
- Ensure that all/most of the expenditures incurred are for business purpose and are tax deductible. eg. Interest-bearing funds borrowed for non-business use, the interest expense will not be tax deductible. Likewise, a company should try to avoid the provision/reimbursement of cost of private motor cars and its running expenses for their employees for use to carry out its business activities as these are deductions prohibited under Section 15 of the Singapore Income Tax Act;
- Where a company has unabsorbed tax losses &/or unused wear and tear allowances carried forward for future utilization, the company should try to avoid a substantial change (more than 50% change) in its shareholdings’ composition (and its trade/business activities for unused wear and tear allowances if any) until the amounts carried forward are fully utilized;
- Consider whether Group Relief system is applicable.