What Makes Singapore a Tax Haven?

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What Makes Singapore a Tax Haven?

Singapore qualifies as a tax haven due to its low taxes and other benefits for international investors. Residents are subject to a progressive income tax with a top marginal rate of 22%. For the 2019 tax year, the highest tax bracket is defined as earnings above $320,000 USD. In general, capital gains are not taxed.

This kind of tax structure, along with the island city-position state’s as a gateway for firms looking to grow into rising Asian economies, has made it a worldwide center for international investment and trade.

Key Takeaways

  • Singapore, a tiny Asian country, has been recognized as a hub for international commerce and finance.
  • Singapore is often referred to as a tax haven because of its beneficial rules for persons residing and conducting business there.
  • The government provides various tax incentives, has a low corporate tax rate and highest personal tax level, and does not tax capital gains.

Singapore’s Corporate Rates

Singapore’s corporate income tax rate is a flat 17%. However, various benefits given by Singapore’s Inland Revenue Authority may reduce the effective corporation tax rate.

In Singapore, new businesses may benefit from a tax exemption of up to $125,000 on their first $200,000 in revenue during the first three years of operation. Companies must be formed in Singapore and have a maximum of 20 shareholders to qualify for the startup tax exemption. One shareholder must be a person who owns at least 10% of the company’s stock.

Companies who have not previously claimed the Tax Exemption for New Start-Up Companies are eligible to apply for the Partial Tax Exemption for Companies. This provides for a $102,500 exemption on the first $200,000 of chargeable income.

  Taxable Wage Base Definition

Other Tax Breaks

Singapore also provides tax breaks to firms in specific areas. Breaks are available to eligible international banks, offshore funds, and worldwide trading organizations.

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

Qualifying offshore funds are also tax-free on certain income, such as dividends, gains, profits, and interest from conventional assets such as deposits, bonds, shares, stocks, and securities.

If they qualify for Singapore’s Global Trader Programme, global trading enterprises may benefit from tax breaks ranging from 5% to 10% for three or five years. Companies having a proven track record in international trading are often granted Global Trader designation by Singapore.

Oversight in Singapore

Banks and financial institutions in the city-state must perform due diligence to aid in the prevention of money laundering and other international criminal activities.

Records are private under Singapore law, and financial firms are not compelled to grant access to personal data about people. However, on the request of foreign authorities, Singapore makes exceptions to banking confidentiality agreements in circumstances where accounts were used to conceal illegal behavior. Singapore’s financial institutions are regulated by the Monetary Authority of Singapore.

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