The process of ensuring that a business owner’s company can proceed with business does not finish with business registration in Singapore alone. There are still compliance requirements to adhere to even after the company has been given the go ahead. One major setback that a lot of companies can face would be difficulty in complying with tax requirements while balancing out business capital.
To better aid newly established companies, the governing authorities of Singapore have come up with various means to promote growth. Some of these solutions involve schemes and reliefs.
Foreign Tax Credit
In cases where business owners choose to undergo singapore company formation but earn part of their income as foreign income, there is a possibility that their income will be subjected to taxation twice- once based on foreign jurisdiction, and then again after the income has been remitted into singapore. To reduce double taxation problems, eligible companies are able to claim for foreign tax credit through Double Tax Relief (DTR) and Unilateral Tax Credit (UTC).
Double Tax Relief allows tax residents in Singapore to claim credit after their foreign tax is paid. For singapore tax residents who do not have DTAs with singapore, they will be granted a UTC for foreign-sourced income received instead. Companies who receive passive income outside of Singapore will be taxed locally in the year of remittance instead, where foreign tax credit will then be given when it is taxed in Singapore.
Loss Carry-Back Relief
Businesses who have undergone singapore company formation are allowed to ‘carry-back’ their unutilised capital allowance and trade losses to reduce tax payable for an immediate preceding year of assessment. Qualifying deductions under the Loss Carry-Back Relief is carried back when capital allowances are granted or when the business incurred trade losses. In order to qualify for this system, companies will first have to take a substantial shareholding test, and then make a claim for loss carry-back relief in their income tax returns.
There’s also the Group Relief System which treats companies of the same group as one single company entity. Loss items of a company will be deducted through the assessable income of others within the group. To qualify for the Group Relief system, the companies who are involved with transferring and receiving loss items both must undergo singapore company formation and belong to the same group. They will also be required to have the same financial year end and maintain at least 75% shareholding threshold.
Revised Group Relief forms can only be submitted if the corporation has issued a notice of assessment to reveal company tax position changes. It’s also essential to make sure that the system is beneficial since election for Group relief is an irrevocable process.
These are just some of the relief systems a business owner can look further into and consider after their business registration in Singapore. With more capital and reduced expenditure in tax, business owners can devote more of their capital in improving business growth without worrying about repercussions.