Singapore employs a territorial tax system, meaning that only income earned or received in Singapore is taxable. Tax residents are subject to a progressive income tax rate ranging from 0% to 24% depending on their income level. For the year of assessment (YA) 2025, individuals earning below SGD 20,000 are exempt from income tax, while those earning more than SGD 500,000 will face increased marginal rates as part of the government’s effort to enhance income equity. This guide will provide an overview of tax filing in Singapore and the importance of professional accounting services.
Recent Updates for 2025
Several significant changes to the tax system have been introduced for 2025:
- GST Rate Increase: The Goods and Services Tax (GST) has increased from 8% to 9%, effective January 1, 2025. This policy update is part of broader fiscal reforms to strengthen the country’s revenue base and ensure long-term economic sustainability. While the change is incremental, its implications span the economy, affecting both businesses and consumers.
- Minimum Effective Tax Rate: A new minimum effective tax rate of 15% will apply to qualifying multinational enterprises (MNEs) with annual revenues exceeding EUR 750 million.
- Enhanced Tax Reliefs: Higher caps on tax reliefs for Central Provident Fund (CPF) contributions and dependent-related deductions have been introduced
Understanding Singapore’s Tax System
Singapore boasts a competitive tax regime, attracting both local and international businesses. Key taxes include:
- Corporate Income Tax: A progressive tax rate applies to companies, with various incentives available to encourage investment and innovation.
- Goods and Services Tax (GST): A consumption tax levied on the supply of goods and services within Singapore.
- Personal Income Tax: Residents and non-residents are taxed on their worldwide income earned in Singapore.
Tax Filing Obligations
Companies
Companies are required to file tax returns annually within a specific timeframe. Timely submission is crucial to avoid penalties and interest charges. Utilising approved accounting software facilitates efficient record-keeping and tax calculations.
Individuals
Individuals, including tax residents and non-residents with income sourced from Singapore, are also obligated to file tax returns annually. Various reliefs and deductions are available to reduce tax liabilities.
The Importance of Professional Accounting Services
Engaging the expertise of a qualified accounting firm offers numerous benefits. Accountants possess in-depth knowledge of Singapore’s tax laws and regulations, enabling them to assess tax liabilities and identify potential deductions and incentives accurately. This minimises the risk of errors and ensures compliance with tax obligations. Furthermore, accountants can handle the entire tax filing process efficiently and on time, freeing up valuable time for businesses to focus on core operations.
Beyond tax filing, accountants can advise on tax-efficient strategies to minimise tax liabilities, such as exploring available tax incentives and structuring business transactions optimally. They also assist in preparing comprehensive financial statements that comply with Singapore Accounting Standards. These statements provide valuable insights into a company’s financial performance and facilitate informed decision-making. Moreover, accountants ensure adherence to all relevant accounting and regulatory standards, helping businesses maintain a strong corporate governance framework and mitigate potential risks.
Choosing the Right Accounting Firm
Selecting the right accounting services in Singapore is crucial. Consider factors such as the firm’s expertise in your industry and relevant tax regulations, their experience in the Singapore business environment, their commitment to providing personalised attention, clear communication, and proactive support, and their utilisation of technology to streamline services and enhance efficiency.
Conclusion
Navigating Singapore’s tax landscape can be complex. By partnering with a reputable accounting firm, businesses can ensure accurate tax filing, minimise tax liabilities, and gain valuable insights into their financial performance. Investing in professional accounting services is an essential step towards achieving long-term success in Singapore.
InCorp Singapore offers a comprehensive suite of accounting and tax services, including tax filing, bookkeeping, financial statement preparation, and tax advisory. With a team of experienced professionals and a commitment to client satisfaction, InCorp Singapore can help your business navigate the complexities of Singapore’s tax system and achieve financial success.
FAQs
Q. What is the minimum salary to pay income tax in Singapore?
A. Tax residents in Singapore are taxed on a progressive rate from 0% to 24%. Filing of personal income tax returns is mandatory if their annual income is SG$20,000 or more.
Q. Do foreigners pay tax in Singapore?
A. Yes, but your tax liability will depend on your tax residency status. This is important as it determines the amount of taxes a foreigner pays in Singapore, with the cut-off periods being 60 days and 183 days.