Singapore’s Taxable and Non-Taxable Income

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Introduction

Hi this is Tammy greeting everyone a wonderful day today. How are you all doing? I hope everyone is fine and doing great! I’ll give you an update about the Singapore economy despite the rate of the US dollar getting high right now. And yes the economic growth in this year’s 2nd quarter might be low, however, economists are expecting them to grow by the end of the 3rd quarter next year. And the examples for these are the manufacturing, construction, wholesale and retail industries, accommodation and food services. And these are expected to expand by next year by 2.8%.

So today, I’m going to talk about what are the taxable and non taxable income in Singapore. Many are planning to enter the Singapore market and so it is very important to know which incomes are taxable and which are not. 

What is taxable and non taxable

Let me explain first what is taxable, for example If your company is received in Singapore from outside Singapore, like the income from a business carried on in Singapore, then you have to pay tax.

And for the Singapore tax purposes, when a taxable income profits from any trade like from investment such as dividends, interests and rentals or any other profits from the property. 

You can also reduce your taxable income by deducting things such as business expenses, etc.

So what about the income received in Singapore from outside Singapore?

Income from outside Singapore is considered received in Singapore when it is remitted to Singapore or brought in the country. 

Some will also be used for debt in respect of a trade or business carried on in Singapore; or used to purchase any movable things that will be brought into Singapore for business purposes.

On the other hand, it is also applied to tax foreign income received in Singapore for those Singapore residents or an entity that is located in Singapore according to the law. 

What’s  good news for those non-resident individuals and foreign businesses is that, if they are not operating in or from Singapore, they don’t need to pay for the tax when they remit it in Singapore.

If the foreign-sourced income is subject to tax in Singapore and overseas, tax reliefs may be available to cancel the tax. But what are tax reliefs? Many are wondering what tax reliefs can do to alleviate this. 

Generally, such income is taxable in Singapore when remitted to and received in Singapore. Where the foreign income is carried on in Singapore, it is taxable in Singapore regardless of whether it is received in Singapore. Right?

Therefore, In many cases, foreign income is taxed two times. Yes, that’s the sad truth. It will be taxed once in the foreign jurisdiction and a second time in Singapore when it’s received. 

But there are tax reliefs available to Singapore tax residents to alleviate the double taxation. “Exemption or reduction in tax imposed on specified foreign income that is derived in a jurisdiction that has an Avoidance of Double Taxation Agreement with Singapore.”

So these are the taxable income in Singapore, but what about the non-taxable? Many of you are curious, what is the income that doesn’t need to pay tax?

I will mention all those non taxable income like the capital gains, and what are the capital gains? These are the gains on sale of fixed assets, gains on foreign exchange on capital transactions.

Frequent ask questions regarding taxable and non taxable

Now that I hope you understand what is taxable income and non taxable income, there are a few frequent questions some may have, I hope I can explain it here today.

  1. Are donations received, taxable?

It is taxable If the donations are not voluntary gifts and are paid in return for benefits granted by the receiving organization, they are business receipts and constitute income.

2.Carbon credits taxable?

Yes, it is taxable. If the company has purchased carbon credits for its business use, but sells the credits thereafter, the income derived will be considered as part and parcel of the company’s business income.

There is also Taxable Income Received in Singapore from Outside Singapore. And one of the most frequent questions are:

  1. Is foreign-sourced income that is kept offshore and used for payment for tax exempt dividends into the offshore bank account of your company received in Singapore, is subject to tax?

No it is not, because the foreign-sourced offshore income used by your company does not constitute income received in Singapore from outside Singapore.

  1. If the income is applied to purchase any movable property which is brought into Singapore, How much is the foreign-sourced income that is taxable?

The amount of foreign income that is applied to acquire the asset is taxable.

And there are alot more questions that you can actually find in the Singapore website of Singapore. All information that I have shared is researched through the Singapore government website as well. 

So if you have any questions please feel free to message us! Thanks everyone for listening, have a great day ahead!

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