Corporate Taxation – Singapore Vs Hong Kong

A meaningful determinant for setting up a business in a given jurisdiction is the tax regime in force. In this regard, both Hong Kong and Singapore boast of being one of the lowest tax jurisdictions in the world. Detailed below is a comparative overview of the tax system in Singapore Vs HK.

Tax jurisdiction

Singapore

  • Taxes are levied on a territorial rule i.e. companies and individuals are taxed on Singapore sourced income.
  • Foreign sourced income (branch profits, dividends, service income, etc.) will be taxed when it is remitted or deemed remitted into Singapore unless the income was already placed under taxes in a jurisdiction with headline tax rates of at the minimum 15%.

Hong Kong

  • Taxes are levied on the territorial rule i.e. only on income “derived from or arising in” HK and not on income sourced outside the SAR.
  • No tax is levied on profits arising oversea, already if they are remitted to Hong Kong.

Corporate Tax Rate

  • Singapore: Current corporate income tax rate – 18%. However, corporate income tax rate effective 2010 – 17%. observe: The effective tax rate is much lower – below 9% for profits up to SGD 300,000 and capped at 18% for profits above SGD 300,000
  • Hong Kong: Current corporate income tax rate – 16.5%

Goods and sets Tax (known as VAT/Sales tax in other countries)

  • Singapore: 7%
  • Hong Kong: Nil

Capital gains tax

  • Singapore and Hong Kong: Nil (Capital loss expenses are correspondingly not allowed as deductions)

Group relief for losses

  • Singapore: Allowed
  • HK: Not allowed

Withholding tax

  • Singapore: Interest, royalties, rentals from movable similarities, management and technical fees, and director’s fees paid to non-residents (individuals or companies) are unprotected to withholding tax. There is no withholding tax levied on dividends. 
  • Hong Kong: Royalties, rentals from movable similarities, and fees paid to non-resident entertainers or sportsmen for their performances in Hong Kong are unprotected to withholding tax. There are no withholding taxes levied on dividends and interest.

Double Tax Agreements

  • Singapore: More than 50 bilateral comprehensive tax treaties
  • HK: DTA network of 37 treaties

Tax Year

  • Singapore: 1 January – 31 December
  • HK: 1 April – 31 March

Filing tax returns

Singapore:

  • Tax returns along with audited accounts must be filed with the Inland Revenue Authority of Singapore by 31 October each year.
  • observe: idle companies (i.e no accounting transactions for the financial year) and exempt private companies (not more than 20 shareholders and shares are not held by another company) with an annual turnover of less than SGD 5 million are exempt from audit requirements and can file unaudited accounts.

Hong Kong

  • Tax returns along with audited accounts must be filed with the Inland Revenue Department by 31 April each year. The auditor must be a member of the HK Institute of Certified Public Accountants and must keep up a practicing certificate.
  • observe: idle companies (i.e no accounting transactions for the financial year) and small corporations (i.e total gross income does not go beyond HKD 500,000) are exempt from audit requirements and can file unaudited accounts.  

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