5 Legitimate Ways to Save on Corporate Income Tax in Singapore

save on corporate income tax

Singapore is a well-known tax haven with low corporate tax rates. With the effect of YA 2010, the chargeable income of a company, be it local or foreign firms, are taxed as little as 17%.

Nevertheless, having low tax rates and experienced accounting services provider are not the only reasons why Singapore is a global magnet for entrepreneurs. There are other legitimate ways that companies in Singapore can save on corporate income tax, which is through schemes and grants that the country’s government introduced. Here are five examples of such schemes and grants that help companies to reduce the corporate tax rate further.

 

SUTE and PTE

The government introduces SUTE or Start-up Tax Exemption to support entrepreneurship and boost the development of local companies.

Companies that want to qualify for this scheme need to satisfy the following requirements:

  • The companies must be incorporated in Singapore
  • The business owner must be a tax-paying citizen of the country for the applicable Year of Assessments.
  • The companies should not have over twenty shareholders throughout the applicable YA.
  • A minimum of one amongst the twenty shareholders should hold a company share of ten per cent or more
  • The companies run businesses that are involved in any other sector except property development and investment holding

During Singapore’s 2018 Budget, exemptions are introduced in the scheme for startups that have incorporated their businesses in Singapore in less than three years, which include:

  • Exemption of 75% on the first SGD 100,000 of the startups’ regular chargeable income
  • Exemption of 50% on the following SGD 100,000 of the startups’ regular chargeable income

These exemptions, however, are only applicable if the YA of the first three YAs falls in or after the YA 2020.

Companies that are not qualified for SUTE can try to apply for the PTE or the Partial Tax Exemption scheme. Companies that are qualified for this scheme are exempted:

  • 75% on the first SGD 10,000 of the companies’ regular chargeable income
  • 50% on the next SGD 190,000 of the companies’ regular chargeable income

 

BIPS

To support corporate volunteerism, companies can claim the BIPS or Business and IPC Partnership Scheme. The scheme grants them a 250% tax deduction on qualifying expenses incurred from the 1st July of 2016 to 31st December of 2021, during which the companies send their staff to volunteer and offer services, which include secondments, to IPCs.

Every company that runs a trade or business in Singapore are qualified for this scheme as long as they send out their employees for volunteering services at IPCs. These businesses include the following:

  • Sole proprietorship, partnership, companies, and registered business trust
  • Associations that are considered to be operating a business

Companies that wish to know more about this scheme can head over to the official website of Inland Revenue Authority of Singapore, which provides a detailed explanation on the BIPS scheme.

 

PC and DEI

The PC or Pioneer Certificate Incentive and DEI or the Development and Expansion Incentive were established to support companies to develop capacities and conduct new or expanded business activities in the country.

Companies that are approved under the PC scheme qualify for a 5% tax rate deduction on income obtained from qualifying activities over the last five years. DEI scheme, on the other hand, allow approved companies to get 10% tax rate deduction on income gained from qualifying activities over the last five years.

The Singapore Economic Development Board provides more detailed information about these schemes.

 

DTDi

Companies that are planning to expand their businesses globally can benefit from the DTDi or Double Tax Deduction Scheme for Internationalisation. Approved companies are eligible for a 200% tax deduction on qualifying expenditure for the global market expansion and investment growth ventures, which incurred from 1st April 2012 to 31st March 2020.

Companies that wish to apply for this scheme should meet the following requirements:

  • Reside in Singapore and primarily aims to promote the trade of goods or provision of services
  • Posses the intention to internationalise the company

More information about the DTDi scheme can be found on the official website of Enterprise Singapore.

 

RHA and IHA

The RHA or Regional Headquarters Award, as well as the IHA or International Headquarters Award, are both established by the Singapore EDB.

The RHA is set up to motivate international companies to headquartered their regional operations in the country, which will eventually expand Singapore’s status as a regional business centre.

Official Singapore EDB’s website provides more details on both schemes.

 

Seeking Expert Help from Accounting Services Provider in Singapore

Getting help from a team of professional accounting services provider in Singapore can help companies to maximise their tax reduction and smoothen up the entire process of applying for a scheme.

Posted in Taxation.