How INPUT tax is calculated under GST

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Singapore has the lowest tax rates in Asia after Hong Kong. The high-tech location with its extensive tax breaks for various activities and industries offers foreign investors an attractive and competitive tax system.

taxes and expenses

Taxation in Singapore depends on:

  • Residency of the natural person: Is given if the person has stayed in Singapore for at least 183 days in the year prior to the tax assessment.
  • Residence of the legal person: Is based on the effective administrative seat, i.e. the place where fundamental business decisions are made and monitored. A mere representation of a foreign company is therefore not enough to be considered resident.
  • Place of income earned

Corporate taxation

Corporate income tax is calculated on all income from Singaporean or foreign sources, if this is incurred in Singapore or, in certain cases, is remittance to Singapore. If services are provided locally by non-resident companies, corporation tax is also due for this part of the service. The rate has been 17% since the beginning of 2010 and will remain unchanged this year. In general, it can be stated that the corporate tax has been steadily reduced in recent years.

For certain newly founded companies or companies in certain industries / sectors, tax rates that are reduced to 0% apply in some cases (e.g. new companies 0%, regional headquarters 5 to 10%). In other words, companies starting up in Singapore will not have to pay corporate income tax for the first three tax years provided their taxable income remains below 100,000 Singapore dollars (SGD).

All other companies can be partially tax exempt. This means that 75% of taxable profits of up to 10,000 SGD and 50% of the next 290,000 SGD are exempt from corporation tax. Thus, up to a taxable profit of 300,000 SGD, only just over 8.5% tax is due.

value added tax

The Goods and Services Tax (GST) is roughly equivalent in character to sales tax. It was last increased from 5% to 7% in July 2007. This rate (with the exception of alcohol and tobacco tax) should remain unchanged until 2016. The GST is levied on all taxable sales of goods and services in Singapore under the following conditions:

  • there is a taxable transaction: delivery or import of goods or the provision of services.
  • the taxable turnover is made in Singapore: delivery of goods or the rendering of services in Singapore: while there are only import duties in Singapore for a few product classes, the GST is also levied on all imports. If services are classified as “international” (i.e. essentially provided abroad) or if goods are exported or “trans-shipments” are carried out via a “bonded warehouse” or a free trade area, these are not taxed (or taxed at 0%).
  • the taxable turnover is made by a taxable person: taxable persons are all natural or legal persons.
  • the taxable turnover is carried out by the taxable person in the context of commercial activities: this essentially includes all chargeable activities.

Input tax deduction

GST paid to suppliers (with the exception of consumers) can be claimed from the competent authority as a so-called “input tax credit” (corresponding to input tax, the “output tax” would correspond to sales tax).

According to the relevant legal provisions, all natural or legal persons with more than SGD 1 million in sales are subject to GST and must register with the competent authority, the so-called “Comptroller of Goods and Services Tax” (both retrospective and a prospective assessment is possible). All companies below this limit can register voluntarily.

Double taxation treaty

Double taxation agreements exist with 61 countries, including Germany. The purpose of the agreement is to avoid double claims against taxpayers and to prevent tax avoidance in the area of ​​income taxes.

Input tax refund / invoicing

A GST refund is basically only available to tourists for goods purchased in Singapore

possible on the occasion of departure.

Income tax

Regardless of whether personal income is paid out in Singapore or outside of Singapore, natural persons are generally liable for tax in Singapore. Taxable income in Singapore includes the following types of income:

  • profits from a business, profession or vocation
  • earnings from full or part-time work
  • interest
  • pension, charge or annuity
  • Rent, royalties and other profits arising from property

In addition - especially when posting German employees under the more attractive salary conditions customary for foreign assignments - it is essential to note that benefits such as company apartments (or refunds or subsidies for rent), company cars and paid flights home to Germany represent, among other things, taxable benefits in kind. The current (from 2012) income tax for "permanent residents" can be found in the following table:

http://www.iras.gov.sg/irasHome/page04.aspx?id=1190

"Non-Residents" either pay 15% tax on their generated income or the same rates as "Permanent Residents", whichever is higher. In most cases, no tax is levied on the income from an employment relationship lasting a maximum of 60 days. There is a double taxation agreement with Germany. In addition, preferential tax treatment is provided for “non-residents” for a period of five years, provided certain criteria are met. For more information on this Not Ordinarily Resident Taxpayer Scheme, see:

http://www.iras.gov.sg/irasHome/page04.aspx?id=136

Source: Export report Singapore, Chambers of Industry and Commerce in Bavaria, status: 11/2012. This brochure is based on the Singapore country report, which was kindly provided by Aussenwirtschaft Austria. This is the foreign trade organization of the Austrian Chamber of Commerce.

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