Israel – Singapore Tax Treaty

Business Activity in Singapore

Singapore promotes open investment policies and a strong free-market economy while actively managing and supporting its economic growth. Singapore has a competitive tax regime that is attractive to businesses and individuals because there are many favorable policies about living and doing business in Singapore. The country provides numerous tax incentives, has a relatively low corporate tax rate and high personal tax bracket, and doesn’t impose tax on capital gain.

Future foreign investments in fields such as digital innovation, pharmaceutical production, sustainable development, and cybersecurity will flow into Singapore. The country is making a significant effort to move towards automation, artificial intelligence, integrated systems, and sustainable development so that it can take a regional position in these areas. It is, however, an established center of medical research and device manufacturing.

Bilateral Agreements between Singapore and Israel

• Double Taxation Agreement

Convention on the Prevention of Double Taxation

The new agreement between the Governments of Israel and Singapore regarding the avoidance of double taxation was signed on May 18, 2005, and entered into force on the first of December 31, 2005.

To read the agreement in English, click here.

Applicability of the MLI

Both Singapore and the State of Israel have signed the Multilateral Convention, commonly known as the MLI. The MLI is a convention that is meant to fix double taxation treaties according to the BEPS framework.

Israel signed the MLI on the 7th of June 2017, with its provisions entering into force on the 1st of January 2019. Singapore, as well, affixed its signature to the MLI on the 7th of June 2017, and its provisions became effective as of the 1^st of April, 2019.

Residency for Tax Purposes in Singapore

Residency of an Individual

An individual is considered a tax resident in Singapore if a foreigner:

1. Lives in Singapore;
2. Stays or works in Singapore for 183 days or more during the previous calendar year (excluding company directors);
3. You stay or work in Singapore for three consecutive calendar years, even if these years are not fully completed.
4. Works continuously across two calendar years, staying in Singapore for at least 183 days during that period (this doesn’t apply to company directors, entertainers, or certain professionals).
5. Has a work pass valid for at least a year and will be treated as a tax resident, but this status may be reviewed when leaving Singapore.

To read about how an individual is considered a resident of Israel, click here.

Residency of a Company

In Singapore, a company is considered a tax resident if its business decisions are managed and controlled in Singapore. This usually means the place where the company’s directors hold meetings to make key decisions.

To learn about how a company is considered a resident of Israel, click here.

The Tax System in Singapore

Singapore Authority is called the Inland Revenue Authority of Singapore.

Income Taxation: 0% to 24%

Taxation of Companies and Branches: 17%

VAT: 9%

Capital Gains Tax: NA

Withholding Tax

Inheritance Tax Singapore

Since 2008, Singapore does not apply an estate tax.

Relocation to Singapore

Singapore is a thriving city with lots of business opportunities and is known as an electronic/technology center. On top of the strong economy, Singapore also has a universal healthcare system for both the citizens and permanent residents of the country, and it has very clean and safe neighborhoods for families. All of these aspects, on top of the incredible scenery and multicultural exposures, make Singapore a popular destination for relocation within the Asia Pacific Region. Despite the relatively high cost of living in Singapore, the country’s tax system is considered lenient, with very low taxes. For instance, income tax ranges from 0% to 24% for residents and 22% for foreigners. The standard tax rate for goods and services is only 8%, and notably, there is no capital gains or inheritance tax at all. Singapore’s tax system makes it an extremely attractive destination for investments and foreigners in general.

About 2,500 Jews live in Singapore, many of whom are expats from countries like the United States, Australia, New Zealand, Morocco, Belgium, the United Kingdom, South Africa, and Israel.

Real Estate Taxation in Singapore

Property tax is made at the end of each year according to the value of dwellings, land, buildings, or other property. The tax rate that applies to owner-occupied properties is 0% – 32% and the tax rate for non-owner-occupied property is 12% – 36%. These rates are calculated from the annual value ranges, which are reviewed seasonally. In the case of non-residential buildings (i.e., commercial or industrial buildings/lands), the tax rate is 10%.

Transfer of Funds from Israel to Singapore

According to section 170(a) of the Israeli Income Tax Ordinance, all payments transferred to non-Israeli residents are subject to a 25% withholding tax. However, this tax can be reduced or even waived if certain conditions are met. Our firm handles withholding tax matters with the Israeli Tax Authority.

As mentioned above, the countries have signed a tax treaty, that allows taxpayers to submit a 2513/2 form – Statement regarding a payment to a foreign resident that is exempt from withholding tax, to potentially transfer the payments without paying the withholding tax.  

In addition to assisting with withholding tax matters, our firm also helps with other issues related to transferring funds abroad. This includes providing an accountant’s approval regarding the payment of taxes, reviewing additional actions required under the CRS standard, and more.  

Moreover, banks often raise many difficulties and charge high fees for converting shekels into other currencies. Therefore, consulting with a specialist before transferring the funds is highly recommended, click here to contact us.  

For more information on money transfers abroad, click here.  

Types of Business Entities in Singapore

The following are the main business entity types in Singapore:

Sole Proprietorship: Owned by a single individual, this is the simplest form of business. The owner has full control but is personally liable for all debts and obligations.

Private limited company: This is a type of business structure where the ownership is held by fewer than 50 people, and it is not open to the general public. In Singapore, the majority of privately incorporated businesses are registered as LLCs, and it’s the most advanced and flexible type of business form here. Shareholders of these types of companies may consist of individuals, corporate entities, or both.

Public Limited Company: This type of business entity has the option to offer shares to the general public, and must have a minimum of 50 shareholders. A public limited company has strict rules and regulations due to its ability to raise funds from the public, and it is typically listed on stock exchanges, providing a platform for trading its shares. Overall, it’s an entity meant for large businesses.

 Public Company limited by guarantee: This type of business entity is meant for non-profit purposes. In Singapore, a non-profit organization (NPO) is an organization that supports and engages in activities of both public and private interest and doesn’t make any monetary profit.

Incentive Laws in Singapore

Singapore has many different tax incentives that people may take advantage of. Applicants who apply for such incentives must satisfy strict requirements and are expected to undertake large economic activities in Singapore.

Some other factors that will be considered are whether Singapore is a base form for implementing regional growth strategies, such as the introduction and anchoring of leading-edge skills, technology, and activities in Singapore; and contributions to the growth of R&D and innovation capabilities.

Other tax incentives include:

• Pioneer tax incentive: Its purpose is to encourage companies to develop new capabilities and to undertake new or expanded economic activities in Singapore.
• Development and Expansion Incentive: Allows companies working on new, high-value projects, upgrades, or expansions to apply for a lower tax rate of at least 5% for up to 10 years. The total tax benefits for a project can last up to 40 years.
• Investment allowance Incentives for internationalization: They aim to encourage companies to become international and to engage in global activities.
• Enterprise Innovation Scheme: Its purpose is to encourage businesses to engage in research and development activities, innovation, and capability development. This program was announced by the Singapore government and the Minister of Finance, and under this program, existing tax benefits will be enhanced, and new tax benefits will be introduced. In addition, eligible businesses can choose to convert up to 100,000 dollars of their total recognized tax expenses for the relevant tax year into cash at a conversion rate of 20%.

When a company is considered a tax residence, it may endure special benefits. Some of these benefits include:

1. Exemption or reduction in tax imposed on specified foreign income that is derived in a jurisdiction that has an Avoidance of Double Taxation Agreement (DTA) with Singapore.
2. Tax exemption on specified foreign income such as foreign-sourced dividends, foreign branch profits, and foreign-sourced service income under Section 13(8) of the Income Tax Act 1947 3.
3. Foreign tax credit for the taxes paid in the foreign jurisdiction against the Singapore tax payable on the same income.
4. Tax exemption for new start-up companies.

Singapore Double Tax Treaties