The Inland Revenue Authority of Singapore, the largest tax revenue collector, is responsible for the
assessment, collection and enforcement of taxes, duties and levies under the various revenue Acts.
The types of taxes levied in Singapore are : company income tax, personal income tax, property tax, estate
duty and stamp duty. There is no capital gains tax, defence surcharges etc. The 2% payroll tax previously payable by employers in respect of their employees rendering services in
Singapore has been suspended since 1 April 1985. A goods and services tax (GST) has been introduced with effect from 1 April 1994.
With effect from the Year of Assessment 1997, the rate at which companies are taxed, previously at 27%, has
been further reduced to 26% on income after deductible expenses, depreciation allowances, trading losses and donations to approved charities. Where profits are distributed to
shareholders in the form of dividends, the tax is passed on in the form of a credit which certain defined categories of individual shareholders (principally Singapore residents) are
entitled to recover to the extent that the company rate of 26% exceeds the top rate at which they are liable to tax personally. A number of tax incentives which confer tax exemption
or reduced taxation are available to companies engaged in qualifying manufacturing, service and export trade activities.
The government has reduced with immediate effect the withholding tax from 27% to 15% for payments to
non-residents of royalties and rent for movable properties. The reduction will also apply to interest payments other than interest on bank deposits and inter-bank transactions. The
reduced rate will facilitiate the development of Singapore as a knowledge centre and a node for technology transfer. This will benefit creative services as well as knowledge and
technology intensive activities. It will further facilitiate the country's regionalisation efforts as business enterprises which need to borrow offshore for venturing overseas or
expanding their overseas operations will benefit from lower borrowing costs.
Individuals resident in Singapore for tax purposes are liable to Singapore income tax in respect of :
(a) Income accruing in, or derived from, Singapore: and (b) income received in Singapore from outside.
Assessable income includes accommodation and other benefits in kind provided by the employer. Leave passages
are assessable to tax based on 20% of the cost if certain conditions are satisfied. Personal income tax is charged on a sliding scale.
Effective the Year of Assessment 1997, the top income tax rate of 30% for resident individual taxpayers is reduced by
2 percentage points to 28%, with appropriate reductions in the other tax brackets. An across-the-board one-off tax rebate of 10% will be given in the Year of Assessment 1996.
The present 14 tax brackets in the personal income tax schedule will be reduced to 10. The new tax bracket structure
has been designed to lighten the tax burden on the middle income group, with chargeable incomes between $25,000 and $100,000.
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NON-RESIDENT INDIVIDUALS EMPLOYED IN SINGAPORE
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Income from employment exercised for a period or periods which together do not exceed 60 days in a calendar year is
exempted from tax. This does not apply to professional entertainers and non-resident directors of companies resident in Singapore.
Employment exercised for more than 60 days and less than 183 days is taxed at 15% on the full amount of emoluments,
provided the tax payable is not less than that payable by a resident in the same circumstances.
Property tax is levied on immovable properties. It is computed as a percentage applied to the annual value which is
the gross amount for which a property is expected to be let from year to year. Effective 1 July 1996, the property tax on industrial, commercial and residential properties is 12%.
Owner-occupied residential properties are, however, taxed at the same concessionary rate of 4%. Tax-exemption limit for owner-occupied property doubled to $150,000 from the Year of
Assessment 1997. With immediate effect, stamp duty on property leases is being halved.
The Finance Minister Richard Hu estimated a healthy surplus of $6.41 billion for the coming financial year 1996-97, a
hefty increase of one-third over the previous year. The country's situation of being able to produce budgetary surpluses year after year is a result of buoyant revenues resulting from
continued strong economic growth, combined with prudent spending. For the record, the country has been running a budget surplus since 1988-89.
As regards the distribution of funds to ministries, the single largest allocation ($5.7 billion, or 4.3% of GDP)
continues to go to Defence, followed by Education ($4 billion, 3% of GDP), Home Affairs ($1.2 billion, 0.9% of GDP) and Health ($1.1 billion).
By 1998, all public sector units including government-funded statutory boards will be run as autonomous agencies,
with their own say in financial and personnel matters. This major change is in line with making the public sector, especially the civil service stay ahead in a fast changing world and to
offer high quality service to more demanding Singaporeans. The objective is to create a public sector which will provide higher quality service at lower cost through better management
practices.
Ministries with better financial management get to keep a portion of their savings for the next financial year, which
may be used to pay for new programmes and capital equipment or set aside to meet future contingencies.
GST is tax on domestic consumption. Specifically, it is a tax on the supply of goods and services in Singapore. GST
is charged when :
a taxable supply of goods or services takes place the taxable supply is made in Singapore they are made by a taxable
person; and they are made in the course or furtherance of any business carried out by the taxable person Generally apart from the cost of complying with the various rules and regulations of
GST, the registered businesses do not stand to lose or gain from this form of taxation. GST is transaction based and is levied irrespective of the profitability of the supply. It is levied
on both capital and revenue transactions. The tax will eventually be borne by the consumers when they purchase these goods and services for consumption.
GST is administered by the Inland Revenue Authority of Singapore (IRAS). The Comptroller of Goods and Services Tax,
henceforth known as the Comptroller, is responsible for the administration of this system of tax. GST is collected either by the Customs and Excise Department or any business registered with
the Comptroller for GST purposes.
The computation of GST is based on : Tax Rate multiplied by Value of Taxable Supply. The current tax rate is either
3% or 0% depending on the type of supply. The current tax rate is either 3% or 0% depending on the type of supply. The consideration for any taxable transaction will hence be arrived at by
adding GST to the value of taxable supply. Where GST is not separately shown in arriving at the consideration for the supply, GST will be computed as follows : Tax Fraction multiplied by
Consideration. At the tax rate of 3%, tax fraction is 3/103. GST is computed to the nearest cent. In the event that the GST computed is equal to half a cent, it should be rounded upwards.
The supply of services is :-
· defined as anything which is not a supply of goods; and
· done for a consideration, including, if done so, the granting assignment or surrender of any right.
Just as the supply of goods, the supply of services can either be standard or zero-rated. Exempt services are set out
in Fourth Schedule of the GST Act.
All services performed by a taxable person, other than services defined as international services, will be considered
as standard rated supplies. International services are zero-rated supplies. In determining whether services are standard or zero-rated, the location of the supplier is critical. Generally,
the supply of service shall be treated as made in Singapore and hence, be subject to GST at the standard rate if the supplier belongs in Singapore, unless such services are categorised as
international services.
The location of the supplier's usual business establishment and residence will determine where the supplier belongs.
Where the supplier has business establishments in more than one country, the business establishment which is most directly involved in the performance of the service will be used.
All services performed by a taxable person will be subject to GST if they are not classified as international or
exempt services as defined in the GST Act. Generally, international services related to services that are performed outside Singapore or relating to goods and properties located outside
Singapore. The granting of zero rating to such services in line with the rationale of granting zero rating to exports. International services are in fact "exported services".
Under the reverse charge system, the taxable person, being a deemed supplier of the service, will have to charge the
output GST on the value of the service (supply). At the same time, as he is also the buyer of the service, he claims a refund for the input GST. Accordingly, there should be no cash outlay
if the person is fully taxable as the output GST collected from himself will be equal to the input GST he is claiming for a refund. It is only an accounting exercise. However, for a
partially exempt taxable person, as part of the input GST will not be recoverable from the Comptroller (as they would have been attributed to exempt supplies), he will have to pay the
residual of the output GST not offset by the input GST to the Comptroller.
Rights and Responsibilities Upon Registration A taxable person has the following rights and responsibilities:
· Levy out put GST on all its taxable supplies and account for all output GST to the IRAS.
· Seek refunds or offset for all allowable input GST paid or payable.
· Periodically complete and file GST returns on a timely basis
· Provide tax invoice within 30 days for all taxable supplies made. If a tax invoice is not provided, a serially printed tax receipt should be issued unless the Comptroller approves
otherwise.
· Maintain proper accounting and other records and preserve these records for seven years.
· Provide all information as required by the Comptroller and to assist in any GST audit.
· Inform the Comptroller, within thirty days, of any change to his name, constitution or ownership of the registered business or any event which may affect the status of his registration.
There are additional responsibilities if the taxable person is also registered under the Major Exporters Scheme or the Bonded Warehouse Scheme.
Under the GST Act, all entities with taxable supplies exceeding $1 million will have to be registered. In determining
whether the value of an entity's supplies will exceed $1 million, the following basis will be used :
· Retrospective Basis
· The total value of supplies for the current quarter and the last three quarters will be used. However, if it can be shown that the taxable supplies for the next twelve months are not
going to exceed $1 million, no registration is required.
· Prospective Basis
· The projected total value of supplies for the next twelve months will be used.
· In arriving at the total value of the supplies, the following are, however, disregarded :
· supplies of goods and services that are capital in nature which are incurred in the furtherance of the entity's business;
· exempt supplies; and any supplies made by the entity when it was previously registered.
· It is the responsibility of an unregistered taxable person to register himself if he meets the criteria for registration. If he fails to do so, he is guilty of an offence punishable by
law.
Prior to 1 April 1994, the IRAS has sent out registration forms to all known eligible registable businesses. If an entity who meets the registration criteria has not received the requisite
details to register, it should contact the IRAS immediately.
For businesses with taxable supplies below $1 million and which are not registered, it will have to monitor its sales, both actual and potential, regularly to ensure timely registration when
its taxable supplies exceed or are expected to exceed $1 million.
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EXEMPTIONS FROM REGISTRATION
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If a trader only makes exempt, out of scope or zero-rated supplies and these supplies exceed $1 million, the trader
may apply for exemption to register.
If the trader is exempted from registration, he will not be able to recover any input GST paid on its purchases.
For entities with taxable supplies below $ 1 million, it can elect for voluntary registration if it :
· makes taxable supplies; or
· carries on a business and intend to make such supplies in the course or furtherance of the business.
The Comptroller may impose conditions for this registration. Once registered, the entity will have to remain
registered for a period of two years.
In deciding whether an entity should opt for voluntary registration when its taxable supplies are below $1 million,
it should weigh the cost of compliance against the value of any irrecoverable input GST on its purchases. Voluntary registration should only be considered if one transacts with suppliers and
customers who are registered for GST purposes.
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REGISTRATION BY SUB-UNITS (DIVISIONAL REGISTRATION)
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Where appropriate, the sub-units of a taxable person's business may register separately for GST purposes. This form
of registration will be approved by the Comptroller if he is satisfied that :-
· there will be real difficulty for the taxable person to submit a single return
· the sub-units maintains independent accounting system and
· each sub-units is separately identifiable by the nature of the activities or geographical location.
Unless the Comptroller approves otherwise, the sub-units must have the same prescribed accounting period. Once
divisional registration is effected, it must stay for at least two years.
Transactions between these separately sub-units will be subject to GST.
The GST Act allows two or more taxable persons to register as a group when these taxable persons are considered as a
group under certain criterion set out in the GST Act.. For the purpose of ascertaining eligibility to register as a group, two or more taxable persons may be treated as a group if :
· one of them controls each of the others or all of them; or
· two or more individuals carrying on a business in partnership control all of them
In determining whether two or more corporate bodies are eligible to register as a group, the rules as set out in
Section 5 of the Companies Act shall apply.
If the group is eligible and wishes to register as a group, it will register in the name of a representative member.
All members in the group will be jointly and severally liable for any tax due from the representative member. The Comptroller may set conditions for such registration. On registration as a
group, intra-group transactions will be disregarded for GST purposes.
All members within the group will have the same registration number and prescribed accounting periods. Each member of
the group will have to maintain their own accounting records.
To register as a group, the Comptroller must be notified in writing at least ninety days in advance of the effective
date of the group registration.
Provisions under different treaties are made to eliminate or minimise double taxation on the same income earned.
Double tax relief arrangements have been made by Singapore with 31 countries:
· Malaysia
· Japan
· United Kingdom
· Australia
· Belgium
· Germany
· France
· Thailand
· Switzerland
· Denmark
· Sweden
· Norway
· Israel
· Netherlands
· New Zealand
. Canada
· Italy
· Philippines
· Sri Lanka
· South Korea
· Bangladesh
· Finland
· Taiwan
· India
· The People's Republic of China
· Indonesia
· Papua New Guinea
· Pakistan
· Poland
· Vietnam
· Mexico
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General Section
