As a rapidly emerging market, Singapore has become a leading offshore jurisdiction for incorporating offshore business entities. Singapore is not only characterized by high-end infrastructure, advanced ICT and a cosmopolitan business climate, but a fiscal regime which is highly appealing to investors.
Similar to Hong Kong, Singapore levies taxes on companies based on residency which is assessed depending on the country in which the Singapore company is controlled and managed. Singapore companies can freely determine whether operations are undertaken in Singapore or in another jurisdiction and can be owned by non residents as equally as local nationals and citizens. Singapore companies which operate offshore and are not resident are therefore not subject to Singapore taxation and in this way is totally capable of operating as an offshore company. On the other hand, resident Singapore companies including branches of foreign companies and subsidiaries are subject to a corporate tax rate which was lowered to 17% in 2010. Prior to this, resident Singapore companies paid 18%.
Singapore’s economic predominance as an international trading and financial center has made the issue of double taxation a major concern. Overseas based and Singapore companies require relief from double taxation for trading activities as well as the remission of income, funds and dividends from one country to another. Due to this, Singapore has extensive anti double tax provisions which are applicable in numerous circumstances. Singapore has thus built an extensive network of tax agreements which generally aim to avoid double taxation of persons and corporations, while concessionary fiscal regimes and tax credits are provided as alternatives which address and avoid double taxation as well.
Generally, Singapore offshore business entities stand to benefit from DTA’s enable incoming and outgoing dividends to be relieved from onerous withholding tax charges, corporate income tax on dividends and from capital gains tax on the sale of shares. As such, Singapore offshore companies and entities are not exposed to their dividends being subject to withholding tax in Singapore if tax was already paid in a country with which Singapore has a DTA in the process of remitting the dividends. Plus, if a Singapore holding company receives dividends in Singapore from a subsidiary which is based in a country with which Singapore has signed a DTA, full exemption from corporate tax may be granted according to the provisions of the double tax agreement and the category in which the income is placed, or a tax credit may be given. In the event that dividend was remitted to Singapore from a subsidiary country with which Singapore has no DTA’s, a tax credit is extended only if no less than 25% of the foreign company’s shares are held by the Singapore company. On the other hand, dividends sent out of Singapore to overseas parent companies do not necessarily suffer withholding tax if income tax was already paid on the funds.
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