Singapore is considered a tax haven because of its low personal and corporate tax rates and other incentives for foreign investors. It levies 20% on personal incomes in the highest tax bracket, defined as incomes above 320,000 Singapore dollars, and does not tax capital gains. The city-state attracts international investment because of its strategic location as a gateway for companies planning to expand into emerging Asian economies. The Inland Revenue Authority of Singapore (IRAS), a statutory board of the Ministry of Finance, is responsible for collecting taxes. The island city-state located between Malaysia and Indonesia had a population of 5.5 million, as of May 2016, and has a reputation as a global hub for commerce and finance.
Corporate Tax Rates
The corporate income tax rate in Singapore is 17% for companies with incomes over $2 million. However, the effective corporate tax rate could be lowered by other IRAS incentives. The Productivity and Innovation Credit (PIC) Scheme, for example, allows companies a complete corporate tax exemption if they earn 28 million Singapore dollars per year. Start-up companies in Singapore can also take advantage of the zero tax exemption on their first $100,000 of income for the first three consecutive years of business. To qualify for the startup tax exemption, companies must be incorporated in Singapore and have a maximum of 20 shareholders. One of the startup shareholders must be an individual shareholder and hold a minimum of 10% of shares. After the startup period, companies with incomes up to $300,000 are also eligible for a partial tax exemption that translates to an effective tax rate of 8.5%.
Industry-Specific Tax Exemptions
Singapore also offers industry-specific tax exemptions for certain businesses. Industries eligible for tax exemptions include foreign banks, qualifying offshore funds and global trading companies. Additionally, banks are eligible for a withholding tax exemption on payments to non-resident individuals, which applies to payments made between April 1, 2011 and March 31, 2021, based on agreements that take effect between those dates. Qualifying offshore funds are also exempt from tax on specified income. Singapore defines specified income as dividends, gains, profits and interest from traditional investments including deposits, bonds, shares, stocks and securities. Global trading companies are eligible for concessionary tax rates of 5 to 10% for five to 10 years if they qualify for Singapore's Global Trader Scheme. Singapore typically grants Global Trader status to companies with established track records of performance in international trade.
Investor Privacy Rights
The Monetary Authority of Singapore (MAS) regulates financial institutions. All banks and financial institutions in the city-state are required to exercise due diligence to help prevent money laundering and other international criminal activity. Under Singapore law, records are private and financial institutions are not required to provide access to personal data about individuals. However, Singapore provides exceptions to banking confidentiality agreements upon request by foreign authorities in cases where accounts were used to shield criminal activity.