Singapore tax rates a big reason for relocation of entrepreneurs from Australia
September 25th, 2009Singapore, September 15, 2009 – A recent study of taxes in Singapore and Australia finds that businessmen from Australia have good tax reasons to consider relocating to Singapore.
The analysis reveals a wide gap in corporate income tax rates between Singapore and Australia. Singapore’s corporate income tax rate stands at less than 9% for profits up to S$300,000 and flat 17% above S$300,000. On the other hand, Australia’s corporate tax rate of flat 30% is almost the double that of Singapore.
Additionally, Singapore’s territorial system of taxation lends itself an advantageous position over Australia. Singapore resident companies are taxed only on income that arises from Singapore or when foreign sourced income is remitted into Singapore. The income sourced overseas and retained outside the country is not taxable. In comparison, Australian resident companies pay corporate tax on their worldwide profits.
One of the other interesting aspects of the study is the differences in the tax treatment of dividends between the two countries. Under Singapore’s single-tier tax system, tax paid by a company on its profits is the final tax and all dividends paid to its shareholders are exempt from further taxation. In contrast, resident shareholders in Australia receive a tax credit on their dividends only when it is declared in their personal tax returns. Non-resident shareholders are not eligible for any such tax credits.
Indirect tax such as VAT or GST is an area of concern for most businesses, as it increases the selling price of goods and services. While Australia’s VAT rate is 10%, Singapore’s GST rate stands at 7%.
Most companies and entrepreneurs who are looking at business opportunities in foreign locations are naturally concerned with the problem of double taxation. This is where tax treaties play an important role as they enable companies to access relief from double taxation, either by way of tax credit, tax exemption or a reduced tax rate. Singapore has concluded nearly 70 treaties while Australia has around 42 treaties in place.
According to Andrew Chen, a spokesperson from the Singapore Company that released the tax analysis report, “we have noticed that more companies these days are looking to structure their operations at a minimum tax cost. The question of where to set up a business has become as important as what, when, why and how to set up a business. Amongst various factors, it is the degree of tax friendliness of a given country that is being given most importance by entrepreneurs. Singapore’s tax system is one of the main reasons companies choose Singapore as their Asia Pacific headquarters or regional base.”
The study confirms that Singapore adopts a more progressive and flexible tax system as compared to Australia. With its tax friendly policy, Singapore offers companies and entrepreneurs better business prospects in an increasingly complex and volatile global environment.
To learn more about the topics discussed here, see Singapore tax rates and Singapore income tax guides.
