Rikvin Consultancy Lauds the New Book on Singapore Tax System and Credits the System for Singapore’s Economic Boom

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“The book is elaborate & exhaustive and rightly hailed as the go-to book for the tax practitioners here. Corporate tax rates play a key role in influencing the level of economic activity in a country. Singapore’s thriving economy and the incredible resilience it demonstrated amidst the global economic crisis proves the attractiveness of the Singapore tax system,” says Rikvin consultancy, a Singapore company incorporation specialist and tax advisory firm.

Singapore Company Registration Specialists

Singapore Company Registration Specialists

Singapore is prompt in reacting to the global economic changes, instead of merely slashing tax rates, government aims to push companies to be competitive by encouraging innovation and productivity.

Rikvin’s comment comes on the sidelines of the launch of the book, “The Law & Practice of Singapore Income Tax", on 24th June by President S R Nathan at the Revenue House. The book is a product of the tax community's first collaboration between the public and private sector. The book is compiled by 39 authors and editors who are from the accounting, auditing and legal fields, as well as IRAS. The book is aimed at practitioners, hence deals in detail with the nuances of the tax law and practice.

Satish Bakhda of Rikvin Consultancy, which also provides tax advisory services, says “We welcome the authoritative treatise on the subject, which will be a handbook for the practitioners; we strongly believe that the book will continue to deal with the subject in breadth and depth in the subsequent issues. At Rikvin, we have also launched downloadable briefs on Singapore Corporate Tax, and this is more of a ready reckoner targeted at novice readers and entrepreneurs who need quick information on the tax regime and latest changes. We have been receiving good reviews and response from visitors to our site and from our clients, so we have no doubt that at the professional level the practitioners will immensely benefit from the new book as well as it will soon become the industry’s must-read”

Further elaborating on the tax regime in Singapore he says “Singapore’s headline corporate tax rate which was 26%, at the start of the new millennium, has dropped by over 34% and presently has stayed at 17% since 2010. Singapore takes a proactive and dynamic approach when it fixes the taxes, this has made it a very attractive investment destination and its inclusive regime also ensures a safe operating environment for small businesses as well. New growth engines such as Integrated Resorts were possible because of the favorable tax regime likewise, financial sector enterprises were able to chalk growth and sustain amidst the tough times because of the special incentives extended to them. The government recognizes the cash crunch experienced by startups hence has special schemes to encourage enterprise growth by easing cash-flow hiccups. It is this comprehensive approach that drives up Singapore’s reputation as enterprise hub”

Singapore - true to its reputation as a pro-enterprise regime - constantly reviews and revises its tax structure to sustain its competitiveness in the region. As of 2010, the average Asia Pacific corporate tax rate is 27% and Singapore has the third lowest corporate tax rate after Macau and Hong Kong.

Special exemptions are in place to aid the growth of SMEs and to facilitate enterprise growth. For up to S$300,000 taxable profits, companies pay only 8.5%. This is a huge privilege to small companies. Qualifying startups, in the first three years of the incorporation, enjoy a full exemption on the first S$100,000 of the profit and only 8.5% tax is applied to profits between S$100,001 – S$300,000. This exemption encourages the spirit of entrepreneurship and also makes the city-state especially attractive to several international companies as well as foreign entrepreneurs who deem it is the right place to establish subsidiaries.    

Singapore follows a territorial taxation policy, whereby only incomes earned in Singapore or received in Singapore is subjected to local tax. Since June 2003 foreign sourced dividends, branch profits and service income received in Singapore is exempted from tax, provided, the income was remitted from countries with a headline tax rate of at least 15% and the income was subject to some form of tax in the foreign country. Also Singapore follows a Single-Tier taxation policy whereby dividends received by shareholders are not subjected to tax. Capital gains or losses are not taxable or deductible in Singapore.

In order to evolve into a thriving business hub the government extends various industry specific tax incentives. The objective of such an incentive structure is to develop and maintain an invigorating and balanced enterprise ecosystem while attracting foreign investments. Singapore also aims to be the regional base for international companies therefore has a Headquarters Scheme in place, which allows for a reduced tax rate of 10%-15% on chargeable profit of qualifying companies that set up their regional or international headquarter activities in Singapore.

Singapore endeavors to facilitate companies expand across borders and Avoidance of Double Taxation Agreements (DTA) plays a significant role in this endeavor by relieving companies from double tax burden. Singapore has concluded DTA with over 60 countries and continues to expand its treaty network.

In 2011 budget, contrary to the widespread expectation of a slashed headline corporate tax rate, the government retained the headline corporate tax rate at 17% but a one-off tax rebate of 20% on tax payable capped at $10,000 for Year of Assessment (YA) 2011 was extended to ease the inflationary burden on the companies. Small companies that made CPF contribution in the previous year, but had little or no tax liabilities were extended a SME Cash Grant amounting to 5% of their revenues in YA2011, subject to a cap of $5,000.

In order to promote productivity and innovation and for companies to pursue a long-term growth strategy by capitalizing on the eased cash-flow, the government introduced Productivity and Innovation Credit (PIC) in 2010. Further enhancements were made to the scheme in 2011 budget. The enhanced PIC scheme provides for a tax deduction of 400% (up from the previous 250%) on the first S$400,000 (up from S$300,000) spent for each of the qualifying activities. In the case of small companies it provides a cash conversion, where a cash payout of 30% can be received by the business for the first S$100,000 of qualifying expenditure in lieu of a tax deduction.

Satish Bakhda says “Singapore is prompt in reacting to the global economic changes, instead of merely slashing tax rates, as government aims to push companies to be competitive by encouraging innovation and productivity. The tax structure also stimulates the spirit of entrepreneurship which brings more productive economic spin-off, thus beefing up and reinforcing the country’s image as an enterprise hub”

About Rikvin.com:

Rikvin offers form a Singapore company and incorporation services for entrepreneurs worldwide. Established in 1998, Rikvin specializes in Singapore company registration, Employment Pass, EntrePass and related corporate services.

Rikvin Pte. Ltd.
20 Cecil Street, #14-01, Equity Plaza, Singapore 049705
Main Line : (65) 6438 8887
Website: http://www.rikvin.com/

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