As part of its continual drive to encourage the setting up of new businesses in Singapore, the government has rolled out a series of tax incentives to let firms enjoy higher profit margins.
These incentives range from exemptions on income and capital to claiming for renovations and training. Let’s examine some of the tax incentive schemes start-ups can tap on.
1. Startup Tax Exemption (SUTE) Scheme
A newly-incorporated company that meets the qualifying criteria can claim for full tax exemption on the first $100,000 of its income for the first 3 years. A further 50% exemption is given on the next $200,000 of income for the same 3 years.
However, the firm must be incorporated in Singapore and a tax resident for the year of assessment before the company can claim for exemption. Companies that do not qualify for this scheme will still be eligible for partial tax exemption.
2. Corporate Income Tax (CIT) Rebate
The Ministry of Finance also has rolled out incentives to help businesses cope with rising business costs. Companies will receive a 30% Corporate Income Tax (CIT) Rebate, subject to a cap of $30,000, for the Years of Assessment (YA) 2013, 2014 and 2015.
It will be given to all companies, including Registered Business Trusts, companies that are not tax resident in Singapore and companies that receive income taxed at a concessionary tax rate.
3. Productivity & Innovation Credit (PIC)
PIC grants 400% tax deductions on up to $400,000 of a company’s expenditure per year and/or 60% cash payouts for investment in innovation and productivity improvements. However, firms must invest in the following 6 qualifying activities to be eligible:
- Acquisition and leasing of information technology and automation equipment
- Training of employees
- Acquisition and in-licensing of intellectual property rights
- Registration of patents, trademarks, designs and plant varieties
- Research and development activities
- Design projects approved by DesignSingapore Council
4. Angel Investors Tax Deduction Scheme (AITD)
The AITD encourages angel investors to stimulate more investments into Singapore-based start-ups. An approved angel who pumps in a minimum of $100,000 into a qualifying start-up can enjoy tax deductions of up 50% of his investment amount at the end of a 2-year holding period. However, the tax deduction is subject to a cap of $250,000 in each year of assessment.