In the latest budget speech 2007, our Finance Minister revealed that the top rate of personal taxes is 21%, reducing to 20% from Year of Assessment 2007. The marginal tax rates for the other income brackets will also be reduced, so that all taxpayers will benefit.

Corporate Taxes

Corporate taxes are coming down in many countries, particularly in Europe. Ireland has adopted a two-tier tax rate system: 12.5% for trading income, and 25% for non-trading income. Many Central and Eastern European economies, hungry for foreign investments, have flat taxes which are around 20%. Some are even lower – Slovakia and Poland have cut their rates to 19%, and Hungary has reduced its rate to 16%.

In order to help all companies and keep Singapore attractive as a business location, corporate tax rate will be reduced by two percentage points to 18%, with effect from YA2008.

Chart: Corporate Income Tax Rates (2005)

The Partial Tax Exemption threshold for companies will be increased from the current $100,000 to $300,000, with effect from YA2008. All companies will enjoy this exemption, but it will benefit SMEs the most. This will mean that almost 80% of taxable companies in Singapore will pay tax at effective rates of less than 10%. It also means that a company with chargeable income of $500,000 will pay tax at an effective rate of 12.5%, equal to Ireland and significantly lower than comparable rates in Hong Kong. 

Start-ups currently enjoy full tax exemption on the first $100,000 of their chargeable income for each of their first three years of assessment between YA2005 and YA2009. The YA2009 expiry date will be removed so that all start-ups will henceforth enjoy a full three years’ of exemption.

SMEs will be given a rebate on their labour expenses for two years. In the first year, this will take the form of a 2% cash rebate on the first $40,000 of total employer and employee CPF contributions of a firm. On the next $40,000 of total CPF contributions, a 1% rebate will be given. These percentages will be halved in the second year. This rebate will effectively offset up to 45% of the additional CPF cost that SMEs face in the first year.

Personal Tax

The trend in personal income taxes worldwide has also been downwards. Tax rates have been gradually lowered, most recently with a two-percentage point cut to 20%.

Goods and Services Tax

Singapore’s proposed GST rate of 7% is also relatively low by international comparison. Scandinavian countries such as Denmark, Norway and Sweden have the highest consumption tax rates at 25%, whereas countries like Japan and Taiwan have the lowest rate at 5%. 

Chart: Comparison of GST/VAT Rates Across Countries

To get detailed information on the tax system in Singapore, and learn of the latest updates and incentives for businesses, please:

Inland Revenue Authority of Singapore
Government operating revenue and authority.

Budget 2008
Details on measures to create a "best for business" environment that supports creativity and enterprise.