In Singapore, there are two distinct types of income tax: personal income tax and corporate income tax. Here are the difference between personal income tax and corporate income tax in Singapore:
1. Applicable Entities:
- Personal Income Tax: Personal income tax applies to individuals who are Singapore tax residents or have earned income in Singapore, regardless of their residency status.
- Corporate Income Tax: Corporate income tax applies to incorporated companies, partnerships, and other corporate entities that are registered or deemed to be tax resident in Singapore.
2. Taxable Entities:
- Personal Income Tax: Individual taxpayers are subject to personal income tax on their employment income, business income, rental income, investment income, and other types of taxable income they earn.
- Corporate Income Tax: Corporate income tax is imposed on the taxable income of companies and corporate entities, including profits from business operations, investments, and capital gains.
3. Tax Rates:
- Personal Income Tax: Singapore adopts a progressive personal income tax rate structure, with tax rates ranging from 0% to 22%. The tax rates increase as the individual’s income rises.
- Corporate Income Tax: Singapore has a flat corporate income tax rate of 17% for taxable income. However, there are certain tax incentives and schemes available that may lower the effective tax rate for qualifying companies.
4. Taxable Income:
- Personal Income Tax: Individual taxpayers are taxed on their net income, which is calculated by subtracting allowable deductions and reliefs from their total taxable income.
- Corporate Income Tax: Corporate entities are taxed on their chargeable income, which is derived by deducting allowable expenses, capital allowances, and tax incentives from their revenue.
5. Filing and Payment:
- Personal Income Tax: Individual taxpayers are required to file their personal income tax returns annually with the Inland Revenue Authority of Singapore (IRAS) by the specified deadline. They are also responsible for paying their personal income tax liabilities.
- Corporate Income Tax: Companies must file their corporate income tax returns annually with IRAS, accompanied by audited financial statements. They are also responsible for paying their corporate income tax liabilities.
6. Compliance Requirements:
- Personal Income Tax: Individual taxpayers are required to maintain accurate records of their income, expenses, and supporting documents for at least five years. They must also report any changes in their personal circumstances to IRAS promptly.
- Corporate Income Tax: Companies must maintain proper accounting records, prepare financial statements according to accounting standards, and comply with the statutory filing requirements and deadlines set by IRAS.
It’s important to note that both personal income tax and corporate income tax are subject to specific rules, regulations, and exemptions. It is advisable to consult with tax professionals or seek guidance from the Inland Revenue Authority of Singapore (IRAS) for comprehensive and up-to-date information regarding individual and corporate tax obligations in Singapore.