What is income tax? Definition, rates and examples in Singapore
Learn what income tax is, who pays it in Singapore, the YA 2026 rates and how to calculate it for your business.
Published Wednesday 30 September 2026
Table of contents
Key takeaways
- Income tax is a tax on the chargeable income of individuals and businesses, and it helps fund Singapore’s public services
- Sole proprietors and partners pay personal income tax on business profit, while companies pay a flat 17% on chargeable income
- Tax resident individuals pay progressive rates for Year of Assessment (YA) 2026, with 0% on the first $20,000 and a top rate of 24%
- Most small companies pay well below 17% once partial tax exemption and the 50% YA 2026 Corporate Income Tax (CIT) Rebate apply
What is income tax?
Income tax is a tax the government charges on the money individuals and businesses earn. In Singapore, the Inland Revenue Authority of Singapore (IRAS) collects it, and the revenue helps pay for public services such as schools and healthcare.
Income and income tax are easy to mix up. Income is all the money you earn from every source before any deductions, such as wages and business revenue. Income tax is the share of that money you pay to IRAS after allowable deductions and reliefs.
Say your café brings in $150,000 in sales this year. That $150,000 is income, and you’re taxed on what’s left after costs and claims, which IRAS calls chargeable income.
Types of income tax in Singapore
How your earnings are taxed depends on your business structure. Individuals and unincorporated businesses pay personal income tax, while companies pay corporate income tax.
Personal income tax for individuals and unincorporated businesses
Personal income tax applies to what you earn as an individual, including your salary. As a sole proprietor, your business profit is added to your other income and taxed at personal rates.
Partnerships work in a similar way. The partnership files its own return, and each partner reports their share of the profit on their personal return.
Corporate income tax for companies
A company is a separate legal entity, so it pays tax on its own chargeable income at a flat rate. Any salary the company pays you as an owner counts as your personal income and is taxed at personal rates.
Who pays income tax in Singapore
Your tax residency decides which rates apply to you. If you’re a foreigner, you’re usually a tax resident for a YA after 183 days or more in Singapore in the previous calendar year. That’s the main test under IRAS residency rules.
Non-residents are taxed on different terms. Their employment income is taxed at a flat 15% or at resident rates, whichever gives the higher amount. Other income, such as director’s fees and rental income, is taxed at 24%, according to IRAS individual income tax rates.
Singapore income tax rates for YA 2026
Tax resident individuals pay progressive rates, so each slice of chargeable income has its own rate. For YA 2026, IRAS applies these resident rates:
- 0% on the first $20,000
- 2% on the next $10,000
- 3.5% on the next $10,000
- 7% on the next $40,000
- 11.5% on the next $40,000
- 15% on the next $40,000
- 18% on the next $40,000
- 19% on the next $40,000
- 19.5% on the next $40,000
- 20% on the next $40,000
- 22% on the next $180,000
- 23% on the next $500,000
- 24% on income above $1,000,000
The top rate is 24%. The most recent Personal Income Tax Rebate was for YA 2025, at 60% of tax payable capped at $200. IRAS hasn’t announced one for YA 2026.
Companies pay a flat corporate income tax rate of 17% on chargeable income. Most small companies pay less, because exemptions and the YA 2026 CIT Rebate bring the bill down.
How to calculate income tax
The basic formula is: income tax = chargeable income × tax rate. You can work it out in six steps:
- Add up your income from all sources for the year.
- Subtract allowable business expenses and capital allowances to find your taxable profit.
- Deduct any personal reliefs to reach your chargeable income.
- Apply partial or start-up tax exemption if you run a company.
- Multiply by the tax rate: resident progressive rates for individuals, or 17% for companies.
- Take off any rebate available for that YA.
Here’s how those steps play out for two businesses with the same $100,000 chargeable income. The company ends up paying less, thanks to exemptions and the rebate.
Company example with partial tax exemption
A company has $100,000 chargeable income for YA 2026 and doesn’t qualify for start-up tax exemption. Partial tax exemption makes $52,500 exempt: 75% of the first $10,000 ($7,500) plus 50% of the next $90,000 ($45,000).
That leaves $47,500 taxed at 17%, which is $8,075. The 50% CIT Rebate for YA 2026 then halves the bill to $4,037.50, an effective rate of about 4%.
Sole proprietor example with progressive rates
A tax resident sole proprietor earns $70,000 in wages and $30,000 in business profit. That’s $100,000 in total, and this example assumes it’s already chargeable income after reliefs.
Tax on the first $80,000 is $3,350, and the next $20,000 is taxed at 11.5%, adding $2,300. The total bill is $5,650, with no personal rebate to take off for YA 2026.
Tax reliefs, exemptions and rebates
Reliefs, exemptions and rebates each lower your tax at a different stage of the calculation. Knowing which ones you can claim helps you plan ahead.
As a tax resident individual, reliefs reduce your chargeable income. The total of all personal tax reliefs you claim is capped at $80,000 for each YA.
For companies, exemptions shrink the part of chargeable income that’s taxed. Partial tax exemption makes 75% of the first $10,000 and 50% of the next $190,000 exempt, according to IRAS corporate tax guidance.
A new company may claim start-up tax exemption instead for its first three YAs: 75% of the first $100,000 and 50% of the next $100,000. Qualifying conditions apply; investment holding and property development companies, for example, can’t claim it.
Rebates come off the tax itself. Budget 2026 announced a 40% CIT Rebate for YA 2026, and on 7 April 2026 it was increased to 50% of tax payable. Companies that employed at least one local employee in 2025 receive part of this benefit as a $2,000 cash grant, and the total benefit is capped at $40,000.
Reporting and paying business income tax
Businesses pay income tax on profit, so your records need to show revenue and expenses clearly. The starting point is your net profit before tax, adjusted for tax items such as capital allowances.
IRAS may ask for invoices and receipts to support your figures, so keep them organised. Regular bookkeeping keeps them ready when you file.
As a sole proprietor or partner, you report business income in your personal income tax return. Companies have an extra step: filing Estimated Chargeable Income (ECI) within three months of their financial year end.
A company can skip ECI filing when annual revenue is $5 million or below and ECI is nil. Filing ECI within one month of year end lets you pay by General Interbank Recurring Order (GIRO) in up to 10 instalments.
Filing within two or three months gives you eight or six instalments instead. Companies then file Form C-S or Form C by 30 November, and an accountant can review both before you submit.
What info a business needs to calculate income tax
An accurate tax figure depends on accurate records for the year. Gather these before you start:
- Revenue and expenses from your income statement
- Capital allowances on qualifying fixed assets, claimed in place of accounting depreciation
- Reliefs, exemptions and rebates you qualify for, such as the YA 2026 CIT Rebate
- Invoices and receipts that back up each figure
Depreciation in your accounts isn’t tax-deductible, which is why capital allowances take its place. If these terms are new to you, a grounding in small business accounting makes each figure easier to find.
Make income tax simpler with Xero
Tax time runs smoothly when your records stay up to date all year. With Xero accounting software, you capture transactions and receipts in one place and turn them into financial reports for your return.
Want expert help with your return? Find a tax professional in the Xero Advisor Directory, then choose a plan and get one month free.
FAQs on income tax
Here are quick answers to other common questions about income tax in Singapore.
Is there capital gains tax in Singapore?
Generally, no: IRAS confirms Singapore has no capital gains tax. Gains from trading, such as buying and selling property for profit, can still be taxed as income.
What is chargeable income?
Chargeable income is your income after allowable deductions and reliefs. It’s the figure the tax rates apply to, so every valid claim lowers your bill.
Do sole proprietors pay corporate income tax?
Sole proprietors pay personal income tax on their business profit at resident rates. If you incorporate, the company pays 17% on its chargeable income, and the salary you draw is taxed as your personal income.
What does Year of Assessment mean?
The YA is the year IRAS assesses tax on income earned in the year before. YA 2026 covers income you earned in 2025.
At what income do you start paying tax in Singapore?
Tax residents pay 0% on the first $20,000 of chargeable income, so tax starts above that amount. At $30,000 chargeable income, for example, your tax is $200.
Related terms
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Disclaimer
This glossary is for small business owners. The definitions are written with their requirements in mind. More detailed definitions can be found in accounting textbooks or from an accounting professional. Xero does not provide accounting, tax, business or legal advice.