Singapore’s flat corporation tax rate of 17% is usually the first thing that comes to mind when discussing business in the Lion City. And while that has clear benefits in simplicity and monetary value, there is so much more to Singapore’s corporate tax system that is of immense benefit to investors.
With a well-developed culture of creating an economy that is as investor-friendly as possible, Singapore has spent decades creating legislation that cuts through red tape to encourage investment and innovation.
With that sheer depth of the regulatory framework comes an element of complexity — there are simply so many ways to take advantage of Singapore’s tax system, it can be hard to know where to start.
With that being said, let’s look at the foremost corporate tax exemptions that you can expect to benefit from when you invest in Singapore.
Singapore Tax Exemption 1: Start-up Tax Exemption (SUTE)
The SUTE is an excellent example of Singapore’s commitment to making starting a business as easy as possible. Any start-up company that qualifies for the SUTE will have its chargeable income reduced by up to 75% in its first three years of operation.
The SUTE will be applicable for the company’s initial three consecutive YAs, with the exemption starting from the first YA, even if the company has not yet generated any chargeable income.
So, if the company begins generating chargeable income only in its third YA, it will be eligible for a single year of tax exemption under the SUTE.
In order to qualify for SUTE, the start-up must:
- Be incorporated in Singapore
- Be tax resident in Singapore for that financial year
- Ensure the company’s total shares are held by a maximum of 20 shareholders throughout that financial year where:
- All of the shareholders are individuals, or;
- At least one of the shareholders is an individual holding at least 10% of the issued ordinary shares.
Qualifying start-ups incorporating from 2020 onwards will have SUTE applied as such:
|Chargeable Revenue||Percentage Exempted from Tax|
Singapore Tax Exemption 2: Partial Tax Exemption
After those three years, all new companies and start-ups will also qualify for a Partial Tax Exemption (PTE). Companies that did not qualify for SUTE will still be able to benefit from the PTE, assuming you meet the criteria.
From 2020 onwards, qualifying companies will benefit from:
- A 75 per cent exemption on the first $10,000 of normal chargeable income, and;
- An additional 50 per cent exemption on the next $190,000 of normal chargeable income.
- The maximum tax exemption a company can receive is $102,500 for each YA.
Singapore Tax Exemption 3: Corporate Income Tax (CIT) Rebate
Taking things further, all companies incorporated in Singapore will benefit from a Corporate Income Tax (CIT) rebate up to the value of $15,000 per annum. To qualify for the CIT, the entity simply needs to be incorporated in Singapore, which also includes non-tax resident companies, registered business trusts, and any companies already receiving income that is taxed at a reduced rate.
Singapore Tax Exemption 4: Foreign Sourced Income Exemption Scheme (FSIE)
While foreign-sourced income for Singapore companies is subject to tax in Singapore, the Foreign Sourced Income Exemption Scheme (FSIE) does a lot to mitigate tax responsibilities in this area.
To benefit from the FSIE, the foreign income must have already been taxed in the source country, at a headline corporate tax rate of at least 15%. The FSIE also needs to be shown to be beneficial to the particular resident taxpayers.
A Singapore incorporated company can benefit from the FSIE on the following revenue streams:
- Foreign-sourced service income — any income that is generated by a resident taxpayer for services from a foreign country.
- Foreign branch profits — any profits from a Singapore incorporated company that is registered as a branch of a foreign parent company. Non-trade or non-business income from a foreign branch does not qualify.
- Foreign-sourced dividends — any dividends paid by a foreign company that has been deposited into a foreign custodian account before being sent into Singapore. Any dividends must be remitted into Singapore within one year of it being sent to the custodian account.
Singapore Tax Exemption 5: Pioneer Certificate Incentive (PC)
The Pioneer Certificate Incentive (PC) is for any company that has been approved as a pioneer in its field. This generally means that the company’s expertise is more advanced than what is currently available in Singapore.
Qualifying companies will receive a concessionary tax rate of 5 per cent for up to five years.
Singapore Tax Exemption 6: Development and Expansion Incentive (DEI)
The Development and Expansion Incentive (DEI) offers a reduced tax rate to companies that promise to benefit the wider economy of Singapore. Qualifying companies will be subject to a reduced tax rate of 5 per cent over the next ten years.
While we’ve done our best to provide an overview of the tax exemptions available in Singapore, the advantages of doing business in Singapore cannot be fully told in such a short article. There are a myriad of other tax exemptions and financial advantages available to forward-thinking investors who know where to look.
If you’d like to learn more from our team of expert lawyers, bankers, and accountants, please do take the time to reach out to us — we are sure to save you time, money, and headaches.
FAQs on Corporate Tax Exemptions in Singapore
- Partial tax exemption is given to all companies in Singapore on chargeable income of up to $300,000 as follows: 75% tax exemption on your first $10,000 of chargeable income and a further 50% exemption on the next $290,000 of your chargeable income.
- For Private Limited Companies, their shareholder membership must all be:
- Increased flexibilityShareholders through the basis period for that Year of Assessment (YA), or
- At least one of whom is an individual throughout the basis period for that YA, and the contribution of that individual under the memorandum of association of the company to the assets of the company in the event of it being wound up amounts to at least 10% of the total contributions of the members of the company throughout the basis period for that YA
- No, the cumpany must first set-off the unitilised tax losses brought forward against the current year, unless it does not meet the qualifying conditions for set-off. If so, the losses will be disregarded and unavailable for set-off against current/future profits.
- Yes. It is eligible the SUTE scheme for new companies for its first 3 consecutive YAs if it meets all the above qualifying conditions.
Need Support with your Corporate Taxes?
InCorp Global’s team of taxation experts can help you organize your finances and help you gain the most benefit from Corporate Tax Exemptions.
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