Debunking The 5 Common Myths About Corporate Tax
Singapore’s pro-business environment, underpinned by its competitive tax legislations and inviting corporate incentives, has continuously attracted businesses, both local and international, to start-up operations within the island.
But despite its straightforward tax laws, negative myths and rumours about them continue to circulate, discouraging potential start-ups and companies from taking the plunge.
To help ease the minds of prospective business owners, we’ve looked into five of the most common Singaporean corporate tax myths and debunked them accordingly.
Capital gains are subject to taxation
Since nearly every country worldwide imposes a tax on capital gains, it’s understandable to presume that the same circumstances can be expected in Singapore. Fortunately, this is not the case since the country doesn’t hold capital gains taxable, including any and all gains acquired from either fixed asset sales or foreign exchanges involving capital transactions.
Additionally, there are also plenty of instances wherein income gained can be counted as capital gains and receive an exemption from this tax as long as the company possesses all the necessary documentation beforehand.
No other tax exemptions due to preexisting low tax rates
Another false assumption is the lack of tax exemption schemes due to the country’s already low and competitive tax rates.
This couldn’t be farther from the truth, given that the IRAS has three official tax reliefs for companies that aid in reducing their tax, namely: Tax Exemption Scheme for New Start-Up Companies, Deduction of Expenses Incurred Before Commencement of Business, and Partial Tax Exemption for all companies.
Starting businesses in the country is subject to double taxation
The possibility of double taxation can be intimidating to those that want a start a business in Singapore or expand their reach into the country. This scheme is counterproductive to the government’s efforts of inviting more business prospects into the island and is thus non-existent.
Singapore’s Double Taxation Agreements (DTA) with 88 countries worldwide offer protection against this scheme, thus making the country an excellent foundation for business start-ups to achieve success.
Fulfilment of tax obligations must be done in advance
To clear the confusion early on, Singapore’s corporate taxes are determined and paid for annually (i.e. after each financial year-end) and always on a preceding year basis.
The Estimated Chargeable Income declaration, submitted within three months from the end of their financial year to the IRAS, shall serve as the basis of the company’s first tax bill. The IRAS will issue the last tax bill later on after the company files their yearly corporate tax return.
Filing of audited accounts is a must
Although it’s necessary to have a business’s accounts audited prior to filing them, this requirement doesn’t necessarily apply to all businesses.
Singapore’s ACRA has outlined the circumstances that allow companies to file their accounts despite being unaudited. A primary example is Private Exempt Companies (PECs), of whom are exempt from filing audited accounts.
Conclusion
Myths regarding important topics such as corporate taxation shouldn’t be taken at face value. If you’re unsure about certain corporate tax schemes, it’s best to rely on the professionals from an audit firm.
OneStop Professional Services is an award-winning accounting firm that provides services for every business’s needs, such as taxation services. Apart from taxation, we also handle other vital corporate requirements such as company secretary services, audit services, and nominee director services.
