Singapore Fact-File Part 4:
Individual Business Tax-Efficient Structures

4.1 Singapore Individual Business Trusts and Foundations

The use of trusts, foundations or non-profits

There are no tax-efficient domestic structures for small businesses in Singapore as such. However, a private limited company is a pretty tax efficient vehicle, as the territorial tax system allows ordinary incorporated small businesses to benefit from a significant degree of tax efficiency. On the Singapore-sourced income of incorporated entities, the corporate income tax rate is 17%; however, 75% of the first SGD10,000, and 50% of the subsequent SGD290,000 is exempt.

In terms of asset protection, however, a Singapore trust may be just the thing. Singapore trust law is based on English trust principles, although being a common law country, a significant proportion is based on judicial decisions rather than legislation (although there is often statutory follow-up).

Modification of the trust laws put in place a perpetuity period (governing the amount of time during which a trust must distribute its property) of 100 years, and strengthened the foreign elements provisions, to provide increased protection against forced heirship.

Under Singapore’s trust laws, and in keeping with the territorial tax system in place, a trust that is settled by a non-resident, with non-resident beneficiaries, even where it is administered by a resident trustee, will not be subject to Singapore income tax, except where income is earned there.

Non-charitable purpose trusts (trusts that are established for a specific purpose, without any beneficiaries as such) are generally not recognised under Singapore trust law.

Other Tax-Efficient Structures

The territorial nature of the Singapore tax system means that there are no specifically tax-privileged structures; since only income earned in Singapore or remitted there is taxable, an ordinary limited company represents a fairly tax efficient solution.