Taxation of the income range between | applied tax rate

SGD 0 and SGD 20,000 | 0 %

SGD 20,000 and SGD 30,000 | 2%

SGD 30,000 and SGD 40,000 | 3.5%

SGD 40,000 and SGD 80,000 | 7%

SGD 80,000 and SGD 120,000 | 11.5%

SGD 120,000 and SGD 160,000 | 15%

SGD 160,000 and SGD 200,000 | 18%

SGD 200,000 and SGD 240,000 | 19%

SGD 240,000 and SGD 280,000 | 19.5%

SGD 280,000 and SGD 320,000 | 20%

SGD 320,000 and SGD 500,000 | 22%

SGD 500,000 and SGD 1,000,000 | 23%

over SGD 1,000,000 | 24%

How do you pay taxes in a country like Singapore, where milk and honey seem to flow? We address this question in this article. We look at the tax law of the tiger state, in particular what regulations exist in the area of income taxes and also shed light on other tax aspects. Only so much is already betrayed: Taxes on assets, i.e. property tax as well as inheritance and gift tax, there are no in Singapore. But a whole series of tax incentives in the field of corporate tax law.

1st Taxation in Singapore – Introduction

The Western circle of civilization, to which we count ourselves, to which we even want to preside as a pioneer, is probably the most progressive in its self-image. We have many things that other people worldwide long for: peace, freedom, prosperity and legal certainty. From our perspective, at least in Europe, we are hardly comparable with other countries in all these important characteristics.

You may already suspect it: if such sentences fall, then only in order to be taught a better one at once. True, because in Southeast Asia there is a small state that has come at least as far in many respects. Perhaps this small country has also managed to develop its economic potential much more and even to surpass us in it. But this assessment depends, above all, on whether we want to admit this. In any case, the standard of living and economic power in Singapore is enormous, which is why we ask ourselves in this article how this affects taxes in this country.

2nd General Information about Singapore

2.1. Geographical information about Singapore

At the beginning, some general data about Singapore. The Republic of Singapore is both an island and a city-state. Just north of the equator, it lies at the southern tip of the Malay Peninsula and is separated from the mainland only by the narrow road of Johor, which in the past earned it the status of a fortress. More specifically, it is more than one island, namely several major islands in an archipelago of many smaller islands. The Strait of Malacca, one of the most frequented sea routes in the world, separates Singapore to the west from Indonesia’s island of Sumatra.

By the way, Singapore is constantly growing – in the truest sense of the word. Because of land reclamation measures, the land area, which today corresponds approximately to that of Berlin, has increased significantly in recent decades. It is expected to grow even further in the coming years.

2.2 History of Singapore

2.2.1. Founding Legend of the City of Singapore

Enough geography, now on the history of Singapore. As a trading centre, the region gained importance early on. Already from the 3rd century reports from China about this place are known. Of course, Singapore received its current name only later. According to legend, he goes back to the prince of a neighboring empire, who settled where he is said to have spotted a lion. Obviously, it must have been a tiger, because lions are unknown in this region. But this does not diminish the radiance of the legend, so that now the city-state is dedicated to this lion (in Sanskrit Singha means lion and Pura city).

2.2.2. British colonial period

At the beginning of the 19th In the century, the British finally arrived. They claimed the islands and consolidated their claim by creating a crown colony. Increasing trade between Asia and Europe proved to be a fortune, because Singapore’s location at this important interface of global trade at that time made it an important transhipment point.

2.2.3. Singapore's independence from Britain

With a brief interruption due to the occupation by Japan during World War II, the Union Jack blew over the Lion City for more than a century. In the course of decolonization, Singapore gained independence from Britain, albeit initially as part of a federation with Malaysia, Sabah and Sarawak. But the union was fragile, so Singapore was excluded from the union in August 1965, which led to Singapore's independent independence.

2.2.4. Singapore becomes a tiger state

And it has remained, despite the difficult circumstances at that time, until today. In fact, the leadership at that time managed to pacify the ethnic groups and political factions that were divided in Singapore and to establish stability. What’s more, she even managed to develop the economic potential and let the city-state prosper.

This is by no means a matter of course. Because raw materials or other natural resources Singapore can not show any. It is his human potential. So it was obvious that in addition to trade, to which one remained faithful, they increasingly set themselves on industrialization. Later, finance, the IT industry and other service sectors were added. More recently, Singapore’s tax revenues have also benefited the biotechnology, pharmaceutical and medical industries. This, combined with a social free market economy, has made Singapore one of the four economically strong Southeast Asian states known as tiger states because they made the leap from developing to industrialized despite adverse circumstances. Singapore in particular can boast of having a gross domestic product similar to, or even surpassing, that of leading Western nations.

The secret of the economic recovery, however, is that Singapore has used taxes very purposefully to achieve its ambitious goals. Although the state has also promoted many social projects there, such as housing, fiscal policy also plays a decisive role in the spectacular success. So now let’s see how to pay taxes in Singapore.

Tax Law in Singapore: Basics for Tax Collection

3.1. Taxation principle in Singapore

In Singapore, taxes are paid primarily only on domestic income. In Singapore, therefore, we are following the principle of territoriality in taxation. However, this also applies to people who are resident abroad. However, since different taxation rules have been introduced for such persons than for those resident in the country, it is therefore also necessary to deal with residence here. Which different taxation exists in this case, we discuss in the section on income tax.

Another exception is when a natural Singapore resident receives foreign income through a Singaporean company. These are also taxable.

3.2 Residence in Singapore in relation to taxes

In order to do this, you have to consider whether you were a natural person in Singapore for at least 183 days in the year preceding the tax assessment or whether you were working there. From an employment as Executive Director is to be refrained from. By way of derogation, you can also be taxable in Singapore once you have been present or employed in Singapore for a period of three calendar years. This can even be the case from a period of 14 months: for example, moving to Singapore in December 2021 and moving abroad in January 2023.

Also considered taxable if you have been present or worked in Singapore for a total of 183 days for two consecutive years. It is therefore irrelevant whether one has fulfilled the condition on 183 days in one of the two years. In addition, the tax liability in this case relates exclusively to these two years.

3.3. Regulations for the tax period in Singapore

Moreover, the basis for the assessment period is generally the calendar year. However, the following year, in which tax determination is carried out regularly, is also of great importance for Singapore's tax law. This basis thus differs significantly from that in Germany as well as in other countries worldwide. As a rule, however, this leads to the same result, namely a taxation in the year after earning income or profits.

4th Tax in Singapore: Income Tax

4.1. Types of income subject to income tax in Singapore

Income tax in Singapore is primarily subject to income from self-employment and non-self-employment, as well as rental and lease, if it takes place in the country. However, taxation in Singapore also exempts some types of income that are taxable in Germany. For example, in Singapore you pay no taxes on dividends, interest or severance payments.

Another astonishing difference to German income tax law in Singapore is that there is no payroll tax to be considered. Therefore, in Singapore, all employees are required to submit an annual income tax return. The deadline is normally April 15. However, if you file an electronic income tax return, you can do so by 18 April.

4.2. Determination of income

Income minus the permitted advertising costs forms the income. From this you can deduct tax-permissible donations. These are only allowed if they flow to institutions where the tax approach of donations has been recognized. From this, the taxable income is calculated.

Again, a number of tax breaks can be deducted from this. These include, among other things, a personal deduction (SGD 2,000; one Singapore dollar (SGD) corresponds to about EUR 0.70 for spouses with low (worldwide) income of at most SGD 4,000. A deduction is also provided for children (SGD 4,000 per child under 16, provided the worldwide income is a maximum of SGD 4,000). Alternatively, for disabled children, a deduction of SGD 7,500 can be used without taking into account the child’s income. For parents in care you can set SGD 5.500, or SGD 9.000, if they live with the taxable person. If the parents are disabled, SGD 10,000 or SGD 14,000 are considered permissible instead. But also payments in a pension provision (for example in the pension fund or a life insurance) and health insurance benefit under certain conditions a reduction of the taxable income. It is important here that the sum of all personal deductions is limited to SGD 80,000.

Furthermore, tax law in Singapore takes into account losses (also caused by depreciation). It allows offsetting with other income under certain conditions. A loss carry forward is possible without limitation, but a loss carry forward into the previous calendar year only up to an amount of SGD 100,000.

4.3. Taxation of individuals resident in Singapore

Singapore taxes the income of natural residents through a progressive tax rate. The graduation takes place over twelve levels, which record the income above the basic allowance of SGD 20,000.

The tax rates shown here apply to income taxation for the calendar year 2023 in 2024. Compared to the previous year, tax rates in the two highest income brackets have increased slightly.

4.4 Taxation of foreign residents in Singapore

Unlike Singapore residents, foreign taxable individuals pay a flat tax rate of 24 % on their income from domestic sources. For wages and salaries, by way of derogation, a flat rate of 15% is provided for. However, if, after deduction of all advertising costs and other regularly permitted deductions under taxation as a taxpayer established in the country, this amount of taxation is higher, the taxation shall take place in this way. Another exception applies to executive directors based abroad, because in their case a flat-rate withholding taxation takes place at a tax rate of 24 %.

5th Taxes in Singapore: Corporate Tax

The territoriality principle also applies to corporate taxation in Singapore. This means that you have to distinguish whether a legal entity is based in Singapore or abroad. In addition, one must distinguish whether domestic or foreign income is available. In the case of income from abroad, taxation in Singapore only takes effect when a payment is made domestically (or is fictitiously accepted by law).

5.1. Calculation of corporate tax

As a general rule, corporations in Singapore pay a flat rate of 17% corporate tax. In fact, this is only slightly more than the corporate tax rate of 15% in Germany. Unlike our corporate taxation, however, there is no trade tax in Singapore. In any case, this is sufficient to meet the internationally agreed global minimum taxation of companies.

However, there are tax breaks in Singapore that are used to tax companies and certain startups. Thus, each corporation can receive a tax exemption of 75% on the first SGD 10,000 and 50% on the subsequent SGD 190,000 of their income. Only then is the full amount of income subject to tax liability.

In the first three years of their existence, startups can alternatively use a tax exemption of 75% on the first SGD 100,000 and 50% on the subsequent SGD 100,000 of their income. However, there are restrictions regarding the entrepreneurial activities of the startups. This tax relief is excluded if startups are used for asset management or if they are holding companies.

5.2. withholding tax in Singapore

A withholding tax is provided for foreign-only entities with income in Singapore. It depends on the type of income that the foreign company earns in Singapore. Dividends from a Singapore-based subsidiary or a participation under another corporate structure are not subject to withholding tax. For interest payments, the tax rate of the withholding tax is between 0 and 15%, depending on whether and how a double taxation agreement affects the withholding tax. This also applies to payments for the transfer of assets in Singapore to foreign companies. A withholding tax between 0% and a maximum of 10% must be paid if licence payments are made abroad.

In any case, with regard to withholding taxation in Singapore, there are numerous special features with their respective derogations, the full explanation of which would go beyond the scope of this article. Therefore, we only go into one example here, namely withholding taxation in relation to a company in Germany. This is very easy to present, because there is only a withholding tax on license payments. It is 5%.

5.3 Additional taxation in Singapore

Unlike withholding tax, there is no additional taxation or other CFC scheme in force in Singapore (CFC = controlled foreign corporation).

5.4. Tax incentives for companies

Singapore would hardly have become a tiger state if it had not created incentives for entrepreneurs and companies in the field of taxes. In this regard, we provide a brief overview of the main tax incentives, which complement the two tax breaks presented in the section on corporate tax.

On the one hand, this includes an incentive to promote development and expansion, which can be used by companies that invest in new, high-quality projects. Those who meet the necessary criteria can expect a reduction in the applicable tax rate to up to 5%. This provision may apply for up to 10 years at the initial stage. This also applies to projects that aim to grow and expand a company or to upgrade it in another way. Furthermore, a company can receive such a tax incentive for several such projects. Overall, however, the support is limited to 40 years.

If such a project leads to the development and marketing of new, also high-quality technologies for which you are pioneering, you can even get a tax exemption over a period of five to 15 years. Thereafter, the incentives to promote development and expansion open further opportunities to reduce taxes in Singapore.

In this regard, the promotion of research and development projects in Singapore is also worth mentioning. Among other things, this includes the possibility of obtaining a tax deduction of 400% on the costs of research and development projects up to a maximum amount of SGD 400,000. This also applies to the registration, acquisition or licensing of rights in intangible assets. Costs up to the same limit for the training of employees are also eligible in this way. As an alternative to tax consideration, even a disbursement of subsidies at special conditions is possible.

6. Other Taxes in Singapore

6.1. VAT

The counterpart to the German sales tax in Singapore is the Goods and services tax, GST for short. Since 2024, the general tax rate has been 9%. Excluded are financial services, the sale or rental of residential property, the sale of cryptocurrencies and digital tokens, and the importation and trading of precious metals. In the exceptional cases mentioned, no sales tax is payable.

Sales tax can only be levied on their deliveries and services in Singapore if they are registered in this regard. This is mandatory from an annual turnover of SGD 1,000,000. Voluntary registration is also possible, albeit under certain conditions. A refund of VAT is only possible for registered companies.

Under certain conditions, foreign companies are also required to register in Singapore. This is the case if a company in Singapore has an annual turnover of at least SGD 100,000, but at the same time has a worldwide turnover of 1,000,000.

6.2 Stamp duty on transactions

Although there is no sales tax on the sale of residential properties, there is a stamp duty, which generally affects all real estate transactions. In addition, a stamp duty is also applicable to the transfer of other rights. The tax is based either on the selling price or the market value, depending on which approach leads to a higher tax. By the way, this generally applies to all transactions covered by the stamp duty.

Furthermore, one must distinguish whether the stamp duty is payable solely by the acquirer, the seller or jointly. The latter case concerns additional taxes under the stamp duty, which we will discuss in more detail in a moment.

6.2.1 Stamp duty on real estate transactions

The stamp duty borne by a buyer can be up to 6% for the purchase of residential properties and up to 5% for other properties. A supplementary stamp duty of up to 65 % and a stamp duty of up to 15 % borne by the seller may also apply. They depend on various factors. This includes the type of real estate, the status of the acquirer’s residence and the previous period in which the property was held in the ownership of the seller. In addition, the number of objects held also influences the amount of the stamp duty.

6.2.2. Stamp duty on corporate transactions

The stamp duty also applies to the transfer of company shares, which is incurred at 0,2 %.

6.2.3. Stamp duty on the sale of holdings in real estate companies

In addition, there is also a regulation concerning asset managers who essentially own residential properties in Singapore. In this context, a real estate portfolio whose value is 50 % or more of the net present value of an undertaking shall be considered as a threshold for defining such an undertaking. If shares in such a company are transferred, there is an additional tax under the stamp duty for both the seller and the acquirer. The tax can be up to 71% for the buyer and up to 12% for the seller. This also applies if the acquirer obtains the status of owner in such an asset management company. Additional regulations concern real estate transactions with trusts in Singapore.

6.2.4. Tax on stamp duty on leases

Even when entering into lease agreements, a stamp duty is due in Singapore. A distinction must also be made here. On the one hand, 0,4 % of the total lease amount is incurred if the lease is agreed for a period of up to four years. Or take the average lease over the entire duration of the lease over a period of more than four years and multiply that amount by a factor of four and apply the 0,4 % stamp duty. If a lease is less than SGD 1,000 on average per year, however, there is no stamp duty on the lease.

6.3. Property tax

A general property tax is unknown in Singapore. However...

6.4 Property tax in Singapore

In Singapore, there is an equivalent to the German property tax, which applies there as so-called property tax only on real estate. For better distinction, we prefer to use the term property tax.

Unlike in Germany, the annually updated property value serves as a tax base in Singapore. This annual value of real estate depends on the rental income generated by renting or could be generated by comparable real estate rather than on the market value of the real estate. This is a significant difference to the property tax in Germany.

Furthermore, in Singapore, a distinction is made between properties that serve residential purposes and those that are attributable to other regulations. The latter require a property tax of 10% of the current property value.

A distinction is also required for residential properties. It depends primarily on whether you use them for your own living purposes or rent them. Depending on the value of the property, the tax rate of owner-occupied residential property is between 0 % and 32 %. For rented residential properties, the tax rate is between 12 % and 36 %.

6.4. Inheritance and Gift Tax

There is no tax regime in Singapore for transfers of assets by way of gift or inheritance; They are tax-free.

6.5. Taxes on greenhouse gas emissions in Singapore

Singapore now also taxes greenhouse gas issuers. The threshold here is an annual emissions of 25,000 t CO2 equivalent. In such a case, a tax of SGD 25 per tonne of CO2 equivalent is incurred. This scheme applies until 2025 inclusive. Thereafter, the levy on SGD 45 per tonne of CO2 equivalent for the years 2026 and 2027 and later continues to increase. From 2030 onwards, the levy is expected to be 80 per tonne of CO2 equivalent.

7th Taxation in Singapore: Double Taxation Agreement

Singapore is heavily dependent on international cooperation due to its export- and service-oriented economy. It is therefore reasonable to conclude that Singapore has a vital interest in ensuring that its companies are not subject to double taxation abroad. The list of countries and tax regimes with which Singapore has concluded an agreement to avoid taxes (double taxation agreement) is correspondingly long. These include Germany, Austria, Switzerland and many other European Economic Area (EEA) countries.

8th taxes in Singapore – our conclusion

You have certainly noticed the many special features of Singapore’s tax law. They show that you can set tax accents in fiscal policy in a completely different way than in Germany. The territoriality principle with which Singapore levies taxes offers a variety of incentives. Nevertheless, Singapore has managed to preserve its tax sovereignty by other means. Because despite the many incentives that Singapore offers entrepreneurs at home and abroad in the field of taxes, the country can afford a voluminous state budget. The fact that Singapore is right with this strategy is also proven by the ongoing economic and social success that this policy was able to achieve despite some crises in the past. Based on this, Singapore is preparing to further expand its success by further strengthening its investment climate, innovative spirit and infrastructure. Can we be surprised? Hardly at all.