A company is liable to pay tax on income accrued in or derived from Singapore or income received in Singapore from outside Singapore in respect of:
- gains or profits from any trade or business
- income from investment such as dividends, interest and rental
- royalties, premiums and any other profits from property
- other gains of an income nature
What is not taxable
Capital gain is not taxable. Examples of receipts that are capital in nature are:
- Gains on sale of fixed assets
- Gains on foreign exchange on capital transactions
Income may be exempted from tax under the provisions of the Singapore Income Tax Act. Some examples are:
- Exempt shipping income derived by a shipping company
- Foreign-sourced dividends, branch profits & service income received by a resident company that satisfies the qualifying conditions.
Grants will be taxed as part of the gains or profits from the trade or business if they are given to supplement the trading receipts or to defray operating expenses of the company, unless exemption from tax is provided under the provisions of the Singapore Income Tax Act (e.g. the SME cash grant is not taxable).
On the other hand, if the grant is given to the company to acquire capital assets, it is capital in nature and is not taxable.
As the SEC is given to defray employers’ operating costs, it is a revenue receipt and is taxable.
Details of the SEC, which applies to employees on the payroll from Jan 2011 to Dec 2013, can be found on Singapore Government website.
Based on the Annual Distribution Statement from Central Depository Pte Ltd (CDP), where the distributions are reflected as tax-exempt income, the distributions are not taxable. However, if the distributions are reflected as income distributions in respect of a particular Year of Assessment (e.g. income distributions from 1 Jan 2010 to 31 Dec 2010, Year of Assessment 2011), the company is required to report the gross income distributions as taxable income in the income tax return for the Year of Assessment as indicated in the Distribution Statement (e.g. Year of Assessment 2011).