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[ESTABLISHING A BUSINESS ENTITY IN SINGAPORE]
Tax residency Companies are generally taxed in the same manner regardless of whether they are tax residents. However, non-resident companies are not able to enjoy certain benefits available to resident companies. Some of these benefits include: (1) Tax exemptions for start-up companies. (2) Tax benefits under double taxation agreements (DTAs). (3) Tax exemptions on foreign-sourced dividends, foreign branch profits, and foreign-sourced service income. A company is regarded as a tax resident if the control and management of the company is exercised in Singapore. One of the key factors in determining where such control and management is exercised is the location of the company's board of directors' meetings where strategic decisions such as those on company policy and strategy are made. Double Taxation Agreements (DTAs) Singapore has entered into DTAs with over 100 tax jurisdictions, including Australia, China, Japan, the United Arab Emirates and the United Kingdom. A DTA is an agreement concluded between Singapore and another jurisdiction (a treaty partner) which serves to relieve double taxation of income that is earned in one jurisdiction by a resident of the other jurisdiction. It spells out the taxing rights between Singapore and the treaty partner on the different types of income arising from cross-border economic activities between the two jurisdictions. The DTA also provides for reduction or exemption of tax on certain types of income.
When a Singapore tax resident earns foreign income from a treaty partner, the Singapore tax resident may claim benefits under the DTA that entitles the tax resident not to pay tax or to pay tax at a reduced rate in the foreign jurisdiction. When a Singapore tax resident receives foreign income, it may suffer tax in both Singapore and the foreign jurisdiction. The DTA provides relief against this double taxation by allowing the Singapore tax resident to claim a credit of the foreign tax suffered against its Singapore tax payable on the same income. Grants for Foreign Companies/Start-Ups To develop a vibrant ecosystem for businesses in Singapore, the Singapore government is on a constant look-out to lower barriers to entry and exit for businesses as well as to enable local businesses to seize new opportunities locally and overseas. In a bid to encourage businesses to establish a strategic base in the city-state and manage their growth strategies and international operations from here, the government provides a range of incentives to a broad spectrum of industries. These include tax holidays and concessions, accelerated depreciation schemes, grants and favourable loan conditions. Depending on the incentive or business grants in Singapore being sought, the approving government authority may be the Singapore Economic Development Board (EDB), Enterprise Singapore, Monetary Authority of Singapore (MAS) or Maritime and Port Authority of Singapore (MPA) etc. Some of these incentives and grants available are negotiated and agreed on a case-by-case basis, and the award period typically ranges from three to up to ten years.
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ILN Corporate Group – Establishing a Business Entity Series
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