Table of Contents
Table of Contents

What Makes Singapore a Tax Haven?

Its Low Tax Rates Have Made It a Magnet for Global Finance

Singapore's low taxes and other incentives for foreign investors qualify it as a tax haven. Resident taxpayers pay a progressive tax on personal income, with a top marginal rate of 22%. As of the 2019 tax year, the highest tax bracket is defined as incomes above $320,000 U.S. dollars. Generally, it does not tax capital gains.

That kind of tax policy, and a location that makes it a gateway for companies hoping to expand into the emerging Asian economies, have made this island city-state a global hub for international investment and commerce.

Key Takeaways

  • The small Asian nation of Singapore has been lauded as a center for international trade and finance.
  • Sometimes, known as a tax haven, there are several favorable policies for people living and doing business in Singapore.
  • The country offers several tax breaks, boasts a relatively low corporate tax rate and top personal tax bracket, and it does not levy taxes on capital gains.

Singapore's Corporate Rates

The corporate income tax rate in Singapore is a flat 17%. However, the effective corporate tax rate could be lowered by other incentives introduced by the Inland Revenue Authority of Singapore.

Start-up companies in Singapore can take advantage of a tax exemption of up to $125,000 on the first $200,000 of income for their 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 shareholder must be an individual who holds a minimum of 10% of shares.

Companies who have not previously claimed the Tax Exemption for New Start-Up Companies can claim the Partial Tax Exemption for Companies. This allows for an exemption of up to $102,500 on the first $200,000 of chargeable income.

Other Tax Breaks

Singapore also offers tax exemptions for businesses in certain industries. These include breaks for qualifying foreign banks, offshore funds, and global trading companies.

Banks are eligible for a withholding tax exemption on payments to non-residents made between April 1, 2011, and December 31, 2026, that are based on agreements that take effect between those dates.

Qualifying offshore funds are also exempt from tax on some income, including income from 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 three or five years if they qualify for Singapore's Global Trader Programme. Singapore typically grants Global Trader status to companies with established track records in international trade.

Oversight in Singapore

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. The Monetary Authority of Singapore regulates its financial institutions.

Article Sources
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  1. Dhammika Dharmapala and James R. Hines Jr. "Which Countries Become Tax Havens?," Pages 1058, 1067. Journal of Public Economics, 2009.

  2. Inland Revenue Authority of Singapore. "Income Tax Rates."

  3. Inland Revenue Authority of Singapore. "Gains from Sale of Property, Shares and Financial Instruments."

  4. Inland Revenue Authority of Singapore. "Corporate Tax Rates, Corporate Income Tax Rebates, and Tax Exemption Schemes."

  5. Inland Revenue Authority of Singapore. "Common Tax Reliefs That Help Reduce the Tax Bills."

  6. Internal Revenue Authority of Singapore. "Payments That Are Not Subject to Withholding Tax."

  7. Inland Revenue Authority of Singapore. "Dividends."

  8. Inland Revenue Authority of Singapore. "Gains from Sale of Property, Shares and Financial Instruments."

  9. Inland Revenue Authority of Singapore. "Interest."

  10. Enterprise Singapore. "Global Trader Programme."

  11. Monetary Authority of Singapore. "Anti-Money Laundering."

  12. Singapore Statutes. "Banking Act, Section 47: Privacy of Customer Information."

  13. Singapore Statutes. "Banking Act, Third Schedule."

  14. Monetary Authority of Singapore. "Regulation."

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