SINGAPORE Law and Practice Contributed by: Yang Shi Yong, Drew & Napier LLC
1.3 Tests for Determining Tax Residence Companies A company is a Singapore tax resident if its control and management is exercised in Singapore in the preceding calendar year. The concept of control and management is not defined in the Act but is generally taken to refer to the location where the board of direc - tors’ powers of control and management are exer - cised. This is a question of fact to be determined by the circumstances of each case. Tax Transparent Entities Tax transparent entities, such as partnerships, do not have a separate identity for income tax purposes. Instead, one has to determine the partners’ tax resi - dency. An individual partner is a Singapore tax resident if, in the preceding calendar year, they reside (except for reasonable temporary absences) in Singapore, or they are physically present or exercise employment in Singapore for at least 183 days. Foreigners are con - sidered Singapore tax residents under two administra - tive concessions: • they stay or work in Singapore continuously for three consecutive years; or • they work in Singapore for at least 183 days for a period straddling two calendar years (subject to other conditions). A corporate partner’s tax residency is determined in the same manner as a company. 1.4 Applicable Corporate and Individual Tax Rates Companies The corporate tax rate is 17%. Companies may be exempt from tax on certain types of income. They may also be taxed at a concessionary rate on qualifying income under the various tax incentives. Tax Transparent Entities The tax rate for tax transparent entitles, such as a partnership, will depend on the profile of the partner. An individual partner who is a Singapore tax resident is taxed progressively, with the top marginal tax rate
at 24%. An individual partner who is not a Singapore tax resident will be taxed at a flat rate of 24% on their trade income. A corporate partner’s tax rate is the same as that of a company. Sole Proprietorship The tax rate of a sole proprietor is the same as that of an individual partner. Singapore taxes income based on source and receipt. The source basis applies to income, such as gains and profits from trade, employment and interest, which accrues in or is derived from Singapore. The receipt basis applies to income received in Singapore from outside Singapore, such as when it is remitted into Singapore. Taxable profits are calculated based on accounting profits after making tax adjustments. The usual tax adjustments include the adding back of non-deduct - ible expenses, non-taxable receipts, and current and brought-forward capital allowances, losses and approved donations. 2.2 Technology Investments In addition to the usual tax deduction for Research and Development (R&D) expenses, various additional deductions may be available (subject to conditions) for intellectual property and R&D expenses, including: 2. Corporate Tax Regime 2.1 Taxable Profits • an additional deduction of 300% on up to SGD400,000 of qualifying intellectual property registration costs (excluding government grants or subsidies) incurred in the basis period until the year of assessment 2028; • an additional deduction of 300% on up to SGD400,000 of expenses (excluding government grants or subsidies) to license from another per - son of any qualifying intellectual property rights (excluding trade marks and software user rights) until the year of assessment 2028; and
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