Low tax rates have made it a magnet for global finance

Reviewed by Ebony Howard
Fact checked by Yarilet Perez

Singapore’s low taxes and other incentives for foreign investors qualify it as a tax haven. Resident taxpayers pay a progressive tax on personal income. For tax year 2024 and beyond, the highest marginal rate is 24% for income above S$1 million. Singapore generally doesn’t tax capital gains. Note that all figures in this article are quoted in Singapore dollars (SGD).

This kind of tax policy, and a location that makes it a gateway for companies that want to expand into emerging Asian economies, make this island city-state a global hub for international investment and commerce.

Key Takeaways

• Singapore is lauded as a center for international trade and finance.
• It is considered a tax haven with several favorable policies for people living and doing business there.
• The country offers several tax breaks, boasts a relatively low corporate tax rate and top personal tax bracket, and does not levy taxes on capital gains.

Singapore’s Corporate Rates

The corporate income tax rate in Singapore is a flat 17%. However, the effective corporate tax rate could be lowered by other incentives introduced by the Inland Revenue Authority of Singapore.

Startups in Singapore can take advantage of a tax exemption of up to S$125,000 on the first S$200,000 of income for their first three consecutive years of business. To qualify for the startup tax exemption, companies must be incorporated in Singapore and have a maximum of 20 shareholders. If all shareholders are not individuals, then at least one shareholder must be an individual who holds a minimum of 10% of shares.

Companies that have not previously claimed the Tax Exemption for New Start-Up Companies can claim the Partial Tax Exemption for Companies. This allows for an exemption of up to S$102,500 on the first S$200,000 of chargeable income.

Note

Between tax years 2017 and 2023, the top marginal rate was 22%. The highest tax bracket was defined as income above S$320,000.

Other Tax Breaks

Singapore also offers tax exemptions for businesses in certain industries. These include breaks for qualifying foreign banks, offshore funds, and global trading companies.

• Banks are eligible for a withholding tax exemption on payments to non-resident companies made between April 1, 2011, and December 31, 2026, that are based on agreements that take effect between those dates.
• Qualifying offshore funds are also exempt from tax on some income, including income from dividends, gains, profits, and interest from traditional investments including deposits, bonds, shares, stocks, and securities.
• Global trading companies are eligible for concessionary tax rates of 5%, 10%, and 15% for five years if they qualify for Singapore’s Global Trader Programme. Singapore typically grants Global Trader status to companies with established track records in international trade.

Oversight in Singapore

Banks and financial institutions in the city-state are required to exercise due diligence to help prevent money laundering and other international criminal activity.

Under Singapore law, records are private. As such, financial institutions are not required to provide access to personal data about individuals. However, Singapore provides exceptions to banking confidentiality agreements upon request by foreign authorities in cases where accounts were used to shield criminal activity. The Monetary Authority of Singapore regulates its financial institutions.

How Stable Is Singapore’s Economy?

Singapore’s economy is considered to be safe and stable. According to the World Bank, the nation functions on a “high-income” economy with strong investments in infrastructure, education, healthcare, and public services. Its regulatory environment is very business-friendly. Singapore’s economic growth was 1.1% in 2023 and the country ranked among the top countries in human capital development.

How Do I Invest in Singapore?

There are different ways to take advantage of Singapore’s growth. You can invest directly in companies based in the island nation by trading stocks through a brokerage account. You can also purchase American depositary receipts (ADRs) that trade on domestic exchanges, shares of exchange-traded funds (ETFs), and/or mutual fund shares that have Singaporean companies and assets (like bonds) in their portfolios.

What Is a Tax Haven?

A tax haven is a jurisdiction that offers favorable tax treatment to individuals and corporations, specifically to those who don’t permanently reside there. Tax havens may offer low tax rates, secrecy, asset protection, and financial privacy. They may also waive any residency requirements for favorable treatment. Some of the most common tax havens include the Cayman Islands, Switzerland, Bermuda, and Singapore.

The Bottom Line

Tax havens are often characterized by favorable tax treatment, especially when it comes to offshore corporations. This is one reason why Singapore is often considered to be one. Startups can take advantage of tax exemptions and capital gains are generally not taxed in the country. Singapore also provides financial privacy as long as there is no criminal activity suspected.

Correction—Oct. 20, 2022: This article has been edited from a previous version that misstated the currency for the marginal income tax bracket in Singapore as United States Dollars instead of Singapore Dollars.