Singapore leads by example in the region by being a highly business-friendly environment to investors and entrepreneurs. The city-state actively implements reduced corporate income tax rates as well as tax exemptions and incentives. Numerous government grants and funding sources for start-ups and SMEs are also readily available. These are just some of the factors why it has maintained its attractiveness for finance, business, and commerce.
Singapore leads by example in the region by being a highly business-friendly environment to investors and entrepreneurs. The city-state’s continuous effort to offer reduced corporate income tax rates, widely-varied tax exemptions, incentives, as well as government grants and funding sources are just some of the most important factors why it has maintained its attractiveness for finance, business, and commerce.
This guide provides a detailed overview on tax exemptions and incentives for Singapore companies.
Types of Tax Exemptions
- Start-up Tax Exemption (SUTE) Scheme – The SUTE scheme, applicable to newly-incorporated start-up companies locally, provides relevant support to like-minded business owners whose main goal is entrepreneurship, innovation, and involvement in the local enterprise it belongs to. This scheme applies to the first three consecutive YAs (Year of Assessment) for all eligible companies. Details about the tax exemptions are listed below:
YA 2020 onwards
- 75% tax exemption on the initial chargeable income of up to SGD 100,000
- 50% tax exemption on the succeeding chargeable income of up to SGD 100,000
For eligibility, all newly start-up companies must meet the following requirements:
- Must only have up to 20 shareholders for the entire duration of that YA
- All shareholders are individually direct beneficiaries of the company’s shares
- At least one shareholder is a direct beneficiary for a minimum of 10% of the ordinary shares issued by the company
Companies that are ineligible for this tax exemption:
- Main business’ dealings are in investment holding
- Principal activities involve property developments for the purpose of investment and/or sale
- Partial Tax Exemption – Companies that are ineligible under the SUTE scheme can still qualify for partial tax exemption, with reduced tax imposition on chargeable income of up to SGD 200,000 for that specific YA.It works as follows:
YA 2020 onwards:
- 75% tax exemption on the initial chargeable income of up to SGD 10,000
- 50% tax exemption on the succeeding chargeable income of up to SGD 190,000
This would lead to SGD 152,500 total amount of tax exemption. Only chargeable income beyond SGD 300,000 would be levied with regular corporate tax.
- Corporate Income Tax (CIT) Rebate – This CIT Rebate, which is available for every Singapore-resident company, has been approved by the Minister for Finance for YA 2018 and YA 2019. The main goal of this is to unburden companies with business costs and to ease the move for company restructuring.The CIT rebate is explained as follows:
- For YA 2018, there is 40% rebate on payable tax with a SGD 15,000 cap
- For YA 2019, there is 20% rebate on payable tax with a SGD 10,000 cap
Please note: The CIT rebate does not apply to non-resident companies if their incomes are already subject to final withholding tax.
- Expenses Incurred Prior to Commencement of Business – As the government continues to encourage and support enterprise developments, newly set-up companies can be unimpeded from business’ costs that come with the preparation and running of an organisation.
Simply put, newly-registered companies can now enjoy tax-deductible revenue expenses incurred during the entire year, right before the commencement date of a company where there is production of income. The commencement date of a company is defined as the day when the first dollar of business receipt is earned.
- Capital Allowances (CA) – The CA Allowance tax incentive scheme, which is provided for all Singapore companies, clears business owners of expenses incurred on fixed assets necessary for business operations. The privilege to claim capital allowances or to write off assets can be granted when the business owner(s) is/are legally liable to make the purchase payment(s) which must be claimed within a year or over the prescribed working life of the asset.
- 100% Capital Allowance in one year (Section 19A): applicable for assets such as computers, prescribed automation equipment, and low-value assets (not beyond SGD 5,000)
- Capital Allowance in three years (Section 19A): applicable for all assets including office equipment purchased with cash or under hire purchase agreement
- Capital Allowance over the asset’s expected life span: applicable for assets purchased with cash or under hire purchase agreement based on the Sixth Schedule of the Income Tax Act
- Renovation and Refurbishment (R&R) Expenses – Under Section 14Q of the Income Tax Act, all Singapore companies can be granted with tax deduction on qualifying expenditures incurred for renovations and refurbishments within their particular businesses, professions, or trade.
Starting YA 2013, the entire amount of R&R expenses have a cap of SGD 300,000 for every three-year consecutive basis period which is a 100% cap prior YA 2013.The R&R expenses are inapplicable for investment holding companies as their businesses or trades do not exist for tax purposes as their profits from rentals, interests, or dividends are classified as passive investment income.
Let Corporate Services Singapore assist you and your Company.
If you need professional assistance in filing your corporate taxes or managing your bookkeeping and accounting duties, let Corporate Services Singapore do the work for you. Our highly experienced accounts specialists will work very closely with you to reduce your Company’s tax liabilities and increase your Company’s tax savings.