Taxation of an LLC in Singapore

Updated on Friday 22nd May 2020

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The limited liability company (LLC) is one of the preferred forms of doing business in Singapore. It offers many advantages, from a convenient degree of liability for founders to certain tax exemptions or incentives, depending on the type of business. The taxation of an LLC in Singapore is convenient, mainly because there are partial exemptions on the normal chargeable income.

Our experts in setting up a private limited company in Singapore can help you understand the taxation principles for this type of business structure and the advantages it offers.
 

The corporate income tax for a Singapore LLC

The corporate income tax is one of the main taxes levied on companies in Singapore. The tax burden in this city is a low one compared to other locations throughout Asia and this is one of the main reasons why investors choose to set up a business here. The income tax for companies in Singapore has a 17% rate and two partial exemptions apply for the year of assessment 2020 and onwards, in case of new start-up companies:
 
  • 75% exemption on the first 100,000 $ of normal chargeable income;
  • 50% exemption on the next 100,000 $ normal chargeable income.
 
The tax exemption scheme for new companies was introduced in 2005 as a way of encouraging new businesses. companies that qualify are offered this exemption for the first three consecutive years of assessment in their existence. Right now, this scheme applies when the first three years fall into two categories, namely, the year 2020 and onwards and the year 2019 and before this date. Maximum exemptions apply, as per the following example designed for a private limited company in Singapore that was incorporated in the year of assessment 2019:
 
  • 200,000 $ maximum exemption: applicable to the year of assessment 2019, composed of two exempted amounts of 100,000 $.
  • 125,000 $ maximum exemption: for the year of assessment 2020, consisting of two exempted amounts of 75,000 $ and 50,000 $.
  • 125,000 $ maximum exemption: for the year of assessment 2021, also composed of two exempted amounts of 75,000 $ and 50,000 $.
 
Please keep in mind that this is only an example and different rates may apply when the company is incorporated in a different year. Investors who wish to know more about the scheme can reach out to our agents specializing in the registration of the private limited company in Singapore.
 
The main qualifying conditions for this scheme are the following: it applies to all companies except those for which the primary activity is an investment holding and those that are engaged in property development for sale, investment or both. In order to qualify, companies must be incorporated in Singapore, be a Singapore tax resident and have a total share capital that is beneficially held directly by no more than 20 shareholders. Our agents can provide more details on the qualifying conditions.
 
All other types of companies, including companies limited by guarantee, are subject to the following partial tax exemption:
 
- 75% exemption on the first 10,000 $ of normal chargeable income;
- 50% exemption on the next 190,000 $ of normal chargeable income.
 
From 2010 to 2019, this exemption had different rates. One of our agents specializing in the Singapore limited company and its taxation can provide more details about how these schemes changed over the years.

Branches in the city are taxed at the same 17% rate and benefit from the same partial exemption. Moreover, branches are subject to the provisions of the double tax treaties signed by Singapore. 
 

Corporate tax rebate in Singapore

 
A corporate tax rebate is also available in Singapore and it is offered to all companies for the purpose of reducing the burden of the business costs and encouraging the restructuring of companies. In the year of assessment 2020, companies receive a corporate income tax rebate of 25%, capped at 15,000 $. This corporate income tax rebate is calculated on the tax that is to be paid, after the tax set-offs, such as foreign tax credit, gave been deducted. For more details on this rebate, please reach out to our private limited company Singapore agents.

Companies need to consider accounting in Singapore and the reporting requirements which are specific to the city-state. One of our experts in the registration of private limited companies in Singapore can answer your questions related to these issues.
 

Other taxes for a PTE LTD in Singapore


Singapore has a low tax regime. However, apart from the corporate income tax, these are the other main taxes for limited liability companies in Singapore:
  • the goods and services tax;
  • the stamp duty;
  • the property tax.

There is no capital gains tax in Singapore. The goods and services tax is the equivalent of the value-added tax and has different rates, with a standard rate of 7 percent. One of our agents can provide more details on the goods and service tax.
 
The policies on the corporate income tax as well as other applicable taxes for LLCs in Singapore are overseen by the Ministry of Finance.
 

Accounting compliance for private limited companies in Singapore

 
Apart from observing the applicable taxation schemes, investors who open a private limited company in Singapore will also need to observe the general accounting and reporting principles. All companies, not only LLCs, are required to keep proper records of their business transactions. These records are to be stored for a period of five years from the year of assessment. Failure to comply with these terms may result in penalties as well as a cancellation of the expenses that might be claimed by that company.
 
Below, we present a short summary of the tax filing submissions that are expected from a Singapore company after the end of a year of assessment (calculated here as the end of the year in question, the 31st of December):
 
  • 31 March: this is the maximum date to file the estimated chargeable income form; a notice of assessment is issued within a week from the submission date.
  • 30 November/15 December: file corporate income tax return or the C-S/C form via the online or e-File platform; new companies receive this form two years after their incorporation.
  • Payment: the tax is due within one month from the receipt of the notice of assessment for the C-S/C form.
  • Objections: any objections on the computation of the final form are to be submitted within two months from the receipt of the notice of assessment.
Dormant companies are subject to different policies, for example, they may not be subject to the requirement to file the corporate income tax return.

Further tax relief in Singapore

 
The tax exemption for new start-ups and the partial exemption for all companies, described above, are two of the common tax relief options that are available to those who open a Pte Ltd in Singapore. Another method through which companies can reduce their bills is the deduction of expenses that have been incurred before the business was commenced (even though ordinarily only expenses that are incurred after the business is commenced are deductible for tax purposes).
 
A concession to the ordinary tax deduction regime takes place for revenue expenses that have been incurred one year before the first day of the financial year in which the company has actually earned profits. The following situation can be used as an example: a company that was incorporated in June 2017 earns its first income from a business receipt in September 2019. In this case, the revenue expenses incurred between January and December 2018 (the year before the financial year in which the company earned its first business income) is also deductible in the following year of assessment (in this case, the year of assessment 2020). Using the same example, the revenue expenses incurred between the month of incorporation and the end of the financial year (December 2017, the year of assessment 2018) are non-deductible as they are not incurred one year before the date of the commencement of the business.
 
A private limited company in Singapore can be regarded as one that has commenced its business activities even if it has not year earned its first income of the business. This can occur when the company has determined its profit-making structure and started its first commercial activity.
 
We recommend that interested company owners reach out to our agents specializing in setting up a private limited company in Singapore for detailed information about tax relief on expenses that have been incurred before the commencement of business.
 
The employment assistance payment or the re-employment of older employees (EAP) is tax-deductible. A company may choose to offer this to an eligible older employee who was normally retired when the company cannot find a suitable candidate.
 
The incentive offered by a company to its employees in the form of employee stock options is tax-deductible. These stock options allow employees to purchase shares in the company at a fixed price. 
 

Donations approved for tax deduction purposes

 
Donations are non-deductible expenses for companies in Singapore, however, business owners can claim deductions for certain donations, made to approved Institution of a Public Character or to the Singapore Government. The following types of donations are deductible ones:
 
  • Cash donations: only straight-out donations that are not for the material benefit of the donor are tax-deductible; these must be made to an approved Institution of a Public Character and not all registered charities are approved for this purpose;
  • Shares donations: gifts of public shares listed on the Singapore Exchange;
  • Artifact donations: gifts to museums can also be made by corporate donors; the artifact must be considered worthy of collection by the National Heritage Board;
  • Land and building donations: gifts of land or buildings made to approved Institutions of a Public Character are also tax-deductible, with certain conditions on the appraisal of the market value of the donated property.
 
Donations are non-tax deductible when the donor is advertising at the event or programme of the Institution of a Public Character (the donor displays his products or banners at the event, for example).
 
Businesspeople who are interested in knowing more about the approved donations can reach out to our agents who specialize in setting up a private limited company in Singapore.
 
The 250% tax deduction for qualifying donations is extended until 31 December 2021.
 
It is useful to note that the donation receipt that is issued by the approved Institution needs to indicate its character, meaning that it will include the words “tax-deductible”. For this purpose, companies are required to state their identification number to the Institution when making their donation.
 
Investors who open a private limited company in Singapore can claim tax deductions that were made in the preceding year. For example, a donation made in 2019 will be included for deduction purposes on the tax assessment for the year 2020. The donation amount does not need to be declared when submitting the income tax return. These deductions are included in the tax assessment based on the data received from the Institution that received the donation. The Inland Revenue Authority does not accept claims for tax deductions based on donation receipts. 
 
Investors who need more information on the applicable taxes for a Singapore LLC, as well as those who require more information on accounting and reporting can contact us for more details.