Due to the various tax incentives available in the country, both entrepreneur and investors should consult with professional accounting services company to guide them through the best applicable incentives for their companies. This article will provide you with insights about tax credits and incentives for businesses in Singapore, updated with the latest Budget 2020.
Corporate Income Tax Rebates
Introduced back in 2013, the Corporate Income Tax or CIT scheme applies to both individuals and companies. It is a part of the Singapore government’s 3-year Transition Support Package. It aims to ease business expenses.
As of YA 2020, every tax-paying business in Singapore will get a 25% corporate income tax rebates with a limit of up to SGD 15,000. Companies can also anticipate better tax treatments for a year, which include quicker investments’ write-down in machinery and plants and refurbishments and renovation sustained for YA 2021.
Wage Credit Scheme
Also part of the 3-year support package, the wage credit scheme or WCS allows the government to co-fund the salary rises of Singaporean workers with a gross monthly income of up to SGD 4,000. It was initially valid for three years, but during the 2015 budget, the scheme was extended for three more years. And in 2018, the program was extended further for another three years.
In 2019, the Singapore government co-funded 15% of salary increase, down from the 20% the previous year.
In Budget 2020, employers will receive an 8% grant of every employee’s monthly wage, up to a monthly maximum of SGD 3,600, for three months. Employees who are Singaporeans or permanent residents are qualifying for the grant.
As for the existing wage credit scheme, it will obtain up to SGD 1.1 billion enhancement to support the increases in salary for local employees. The program will currently co-fund twenty percent of the salary increase in 2019, and fifteen percent of salary increases in 2020, for Singaporean workers with gross monthly earnings of up to SGD 5,000.
Tax Exemptions for Start-ups
Introduced back in 2005, this tax exemption scheme, also known as SUTE, aims to support new companies and entrepreneurs in Singapore. From 2020, eligible companies can get up to seventy-five percent tax exemption on the first SGD 100 thousand of their chargeable earnings during the first three consecutive years. The next SGD 100 thousand chargeable income can obtain a tax exemption of up to fifty percent.
Companies can only obtain this scheme for their first three annual assessments. After such a period, they can opt for the partial tax exemption scheme.
Partial Tax Exemptions
Businesses that are not eligible for SUTE may be qualified for the partial tax exemption or PTE scheme. From 2020, companies can get a tax exemption of seventy-five percent on their first SGD 10 thousand of chargeable income. They can receive a fifty percent tax exemption for the next SGD 190 thousand.
This incentive is introduced by the EDB, where businesses can receive up to one hundred percent tax exemption of fixed capital cost incurred, which is the expenditure incurred for eligible projects within five years. The period can also extend to eight years. Businesses can obtain the tax exemption only if they make significant investments on a project’s automation.
Industry-specific Tax Incentives
The industry-specific tax incentives are administered by four leading government establishments, including the Singapore EDB, IRAS, IE Singapore, and MAS. Some sectors qualified for these incentives include:
- Fund management
- Research and development
- Financial companies
Company owners can find more of this list on these agencies’ specific websites.
Enterprise Finance Scheme
IE Singapore provides the enterprise finance scheme or EFS and offers financing needs for local companies to grow their businesses. The EFS covers six areas, which include loans for SME working capital, SME fixed assets, venture debt, trade, project, and merger and acquisition.
Double Tax Deduction for Internalization (DTDi)
The DTDi scheme encourages local businesses to expand overseas. It permits eligible companies to claim a tax deduction of twice the qualifying cost incurred for suitable activities. It covers the cost of market preparation, exploration, promotion, and presence.
Pioneer Tax Incentives
This tax incentive allows companies engaging in the production of high-value-added services or products to apply for a pioneer certificate. This certificate entitles them for tax exemption for a period of five to fifteen years.
Merger and Acquisitions Scheme
Apart from the merger and acquisition loans, the merger and acquisition program offers a double tax deduction, relief of stamp duty and tax allowance on merger and acquisition activities.
Other Essential Highlights of Budget 2020 for Singaporean Entrepreneurs
The following are other critical highlights of tax-incentives-related issues in Budget 2020:
- Good and Services Tax (GST): In light of the economic challenges today, Singapore’s GST will remain at 7% in 2021.
- Wage offsets for senior employees: A new Senior Employment Credit, will offset up to eight percent of salary, depending on the employees’ age, ranging from fifty-five years old and above, earning up to SGD 4,000 per month. It will be valid for two years, beginning the 1st of January 2021 up until the end of 2020.
- Wage offsets for people with disabilities: An Enabling Employment Credit scheme will offset salary when employers hire workers with disabilities. This scheme will be active for five years, starting from 2021 to 2025
Seeking Professional Help from Accounting Services Agencies in Singapore
There are a variety of corporate tax credits and incentives in Singapore. Start-ups, especially foreign investors, should seek the guidance of registered accounting services provider in Singapore to understand better which scheme suits their companies’ best.