Singapore offers a wide range of tax credits and incentives to attract businesses and encourage economic growth. Due to the variety of tax incentives available, business owners and investors should consider working with professional accounting services to find the best options for their companies.
This article will give you an overview of the current tax credits and incentives for businesses in Singapore, updated with the latest information for 2024.
Corporate Income Tax Rate
The standard corporate income tax rate in Singapore is 17%. This rate applies to both local and foreign companies on their taxable income earned in Singapore.
However, the effective tax rate for many companies is often lower due to various tax exemption schemes and incentives offered by the government. These schemes are designed to support businesses of different sizes and stages of growth.
For instance, there are two main tax exemption schemes that can reduce a company’s tax burden. We will discuss these schemes in more detail in the next section.
Tax Exemption Schemes
Singapore offers two tax exemption schemes to lighten the burden of tax on companies, especially smaller and newer businesses. These schemes are the Tax Exemption Scheme for New Start-Up Companies and the Partial Tax Exemption Scheme for Companies.
Tax Exemption Scheme for New Start-Up Companies
This is designed to support entrepreneurship and help new companies in their first three years of operation.
Eligibility criteria
- The company must be incorporated in Singapore
- It must be a tax resident of Singapore
- It must have no more than 20 shareholders
- At least one shareholder must be an individual holding at least 10% of the shares
Companies whose main activities are investment holding or property development are not eligible for this scheme.
Tax exemption rates and limits
For the first three consecutive Years of Assessment (YAs), qualifying companies can enjoy:
- 75% exemption on the first SGD 100,000 of normal chargeable income
- A further 50% exemption on the next SGd 100,000 of normal chargeable income
This means the maximum tax exemption for each YA is SGD 125,000.
Partial Tax Exemption Scheme for Companies
This corporate tax incentive applies to all companies that do not qualify for the start-up exemption, including companies limited by guarantee.
Eligibility
All companies are eligible unless they are claiming the tax exemption for new start-up companies.
Current exemption rates and limits
- 75% exemption on the first SGD 10,000 of normal chargeable income
- A further 50% exemption on the next SGD 190,000 of normal chargeable income
The maximum exemption under this scheme is SGD 102,500 per YA.
The Takeaway
Companies should carefully consider which scheme they qualify for and how it applies to their specific situation. Yes, these schemes help reduce tax liability but they are just one part of Singapore’s broader system of corporate tax incentives.
Industry-Specific Tax Incentives
Singapore offers numerous tax incentives targeted at specific industries and activities to encourage investment and growth in key sectors. Here are some of the most significant industry-specific tax incentives.
Pioneer Tax Incentive
This tax incentive is for companies engaged in innovative or high-value-added activities. Qualifying companies can enjoy the following:
- Tax exemption on qualifying income for up to 15 years
- Eligibility is subject to approval based on the company’s investment, skills and economic contributions to Singapore
Development and Expansion Incentive
Companies that are looking to expand or upgrade their operations in Singapore can enjoy this incentive. It offers:
- A reduced tax rate of 5% or 10% on incremental income from qualifying activities
- An initial period of up to 10 years, which can be extended
Investment Allowance
If you are a company making substantial investments in equipment for approved projects, you can benefit from this. Tax exemption on a specified percentage (up to 100%) of approved capital expenditure. The allowance is in addition to the normal tax depreciation.
Refundable Investment Credit
This incentive is for companies making substantial investments in key economic sectors. It offers:
- Up to 50% investment credit on qualifying expenditure
- Credits can be used to offset income tax payable or refunded in cash
Financial Sector Incentive (FSI) Scheme
This scheme supports various financial activities in Singapore. Qualifying companies can enjoy:
- Concessionary tax rates of 10% or 13.55% on income from qualifying activities
- Applicable to a wide range of financial institutions and activities
Intellectual Property Development Incentive (IDI)
This incentive encourages companies to commercialise their intellectual property. It offers:
- Reduced tax rates of 5%, 10%, or 15% on qualifying IP income
- The rate depends on the extent of R&D activities conducted in Singapore
Maritime Sector Incentive (MSI) Scheme
From the name itself, this incentive is for Singapore’s maritime industry. It includes:
- Tax exemption for shipping companies
- 10% concessionary tax rate for international freight and logistics operators
- Various other incentives for ship investment, leasing and management
Global Trader Programme (GTP)
This program is designed for companies engaged in international trade. It offers:
- Concessionary tax rates of 5%, 10%, or 15% on qualifying trading income
- Applies to physical trading, brokering of physical trades and derivative trading income
All these incentives are subject to approval from the relevant government agencies and often require companies to meet specific criteria and commitments. The exact terms and conditions can vary, and companies are encouraged to seek professional advice to determine their eligibility and the potential benefits of these schemes.
Innovation and R&D Incentives
Singapore strongly encourages innovation and research and development (R&D) activities through various tax incentives. These incentives aim to position Singapore as a hub for innovation and technological advancement.
Enterprise Innovation Scheme (EIS)
This was introduced for Years of Assessment 2024 to 2028 and provides enhanced tax deductions for various innovation activities:
- Qualifying companies can claim up to 400% tax deduction or allowances on qualifying expenditure for:
- R&D projects conducted in Singapore (capped at SGD 400,000)
- Intellectual property (IP) registration (capped at SGD 400,000)
- IP acquisition or licencing (capped at SGD 400,000, for companies with less than SGD 500 million annual revenue)
- Employee training (capped at SGD 400,000)
- Innovation projects with polytechnics and other qualified partners (capped at SGD 50,000)
- Cash Conversion Option:
- Eligible businesses can opt to convert the above tax deductions into a non-taxable cash payout. This is set at 20% of the first SGD 100,000 of qualifying expenditure, with a maximum payout of SGD 20,000 per year.
Research and Development (R&D) Tax Incentives
In addition to the EIS, Singapore offers other R&D tax incentives:
- Enhanced tax deduction for staff costs and consumables used in R&D activities conducted in Singapore
- Qualifying expenditure on R&D activities conducted overseas may also be eligible for tax deductions, subject to certain conditions
These are particularly beneficial for companies in technology-intensive sectors or those looking to develop new products and services. As with any corporate tax incentives, they come with specific qualifying criteria and documentation requirements. Companies should maintain detailed records of their R&D activities and expenditures to support their claims.
Internationalisation Support
Singapore also implements measures aiming to help local businesses grow beyond its borders and establish a global presence.
Double Tax Deduction for Internationalisation (DTDi)
The DTDi scheme is designed to support companies in their overseas expansion efforts.
- Eligible companies can claim a 200% tax deduction on qualifying expenses for international market expansion and investment development activities
- Qualifying expenses include:
- Overseas business development trips and missions
- Overseas market surveys and feasibility studies
- Overseas trade fairs and exhibitions
- Overseas advertising and promotional campaigns
- Product/service certification for overseas markets
- Automatic DTDi is granted on the first SGD 150,000 of qualifying expenses incurred per Year of Assessment (YA)
- For expenses exceeding SGD 150,000, approval from Enterprise Singapore or the Singapore Tourism Board is required
Mergers and Acquisitions Allowance
This scheme encourages Singapore companies to grow through strategic acquisitions.
- Acquiring companies can claim tax allowances on the cost of qualifying share acquisitions
- 25% of the acquisition value can be claimed over 5 years
- The allowance is capped at 10 million SGD for each YA
- Additional benefits include:
- Stamp duty relief on the transfer of shares
- 200% tax deduction on transaction costs, capped at SGD 100,000
Conditions
- The acquiring company must be incorporated and tax resident in Singapore
- It must have at least 3 local employees (excluding directors and shareholders)
- The target company must be a qualifying company as defined by IRAS
These internationalisation support measures are part of Singapore’s strategy to help local companies become globally competitive and so they can explore new markets and grow through strategic acquisitions.
Other Notable Incentives
There are also other incentives designed by the government to attract and retain businesses in specific sectors or activities.
Here are some of the notable ones.
Finance and Treasury Centre (FTC) Incentive
This is a government initiative encouraging companies to use Singapore as their base for conducting treasury management activities.
- Qualifying FTCs enjoy a concessionary tax rate of 8% or 10% on income from qualifying activities
- These activities include international treasury and fund management, corporate finance advisory and economic/investment research
- Withholding tax exemption on interest payments to overseas banks and approved network companies for qualifying FTC activities
Real Estate Investment Trusts (REITs) Incentives
Singapore provides tax incentives to promote the REIT market.
- Distributions to foreign, non-individual investors are taxed at a reduced rate of 10%
- Tax exemption for S-REITs on certain foreign-sourced income
- GST remission for S-REITs, allowing them to claim GST on their business expenses regardless of whether they’re GST-registered
Infrastructure Project Finance Incentives
The following incentives are available to position Singapore as an infrastructure financing hub.
- Tax exemption on income from qualifying investments in infrastructure projects/assets
- Tax exemption on income from qualifying project debt securities
- Concessionary tax rates for companies providing project finance advisory services
Headquarters Schemes
Singapore also encourages multinational companies to set up their regional or global headquarters in the country.
- Various tax incentives are available depending on the level of economic commitments
- These may include concessionary tax rates on qualifying income from headquarters activities
- The specific benefits and requirements vary based on the particular headquarters scheme
Variable Capital Companies (VCC)
This is a new corporate structure for investment funds.
- A VCC is treated as a company and a single entity for tax purposes
- Existing tax incentives for funds are extended to qualifying VCCs
- Fund managers managing an incentivised VCC may enjoy a 10% concessionary tax rate
Aircraft Leasing Scheme
To promote the aircraft leasing industry,
- Approved aircraft lessors enjoy a concessionary tax rate of 8% or 10% on qualifying income
These incentives demonstrate Singapore’s commitment to remaining competitive in various key sectors of the global economy. They are designed to attract specific types of businesses and activities that the government sees as strategic for the country’s economic development.
How to Apply for Tax Incentives
Here is a general guide on how to apply for these incentives.
- Determine Eligibility
- Review the requirements for each incentive
- Assess if your company meets the qualifying criteria
- Prepare Required Documentation
- Gather all necessary financial statements and corporate documents
- Prepare a detailed business plan outlining how you’ll meet the incentive’s objectives
- Submit Application
- Most incentives require application through the respective governing bodies:
- Economic Development Board (EDB) for many industry-specific incentives
- Enterprise Singapore for internationalisation support
- Monetary Authority of Singapore(MAS) for financial sector incentives
- Inland Revenue Authority of Singapore (IRAS) for general tax exemptions
- Most incentives require application through the respective governing bodies:
- Application Review
- The relevant authority will review your application
- This process may involve meetings or requests for additional information
- Approval and Implementation
- If approved, you’ll receive an offer letter outlining the terms and conditions
- Accept the offer and implement the necessary measures to comply with the conditions
- Ongoing Compliance
- Meet annual reporting requirements to maintain the incentive
- Keep detailed records of relevant activities and expenditures
Important Considerations
- Application processes and requirements can vary significantly between different incentives
- Some incentives are automatically applied (like certain tax exemptions), while others require pre-approval
- The application process for major incentives can be complex and time-consuming
- Approval is often not automatic and depends on the company’s plans and potential contributions to Singapore’s economy
Conclusion
These corporate tax credits and incentives offer your business significant opportunities to reinvest in growth. To make sure that your company makes the most of them, it’s best to work with an experienced accounting service provider in Singapore. They can help you identify the right incentives, guide you through the application process and ensure full compliance.
