One of the main attractions for incorporating in Singapore is the corporate income tax rates and strong financial incentives provided by the Singapore government. The corporate tax rate is a fixed 17% for foreign and local entrepreneurs. Also, the city-state government supports startups with exemptions for the first three years after incorporation. We’ve compiled a detailed overview of the Singapore tax system, focusing on tax exemptions for companies on this page.
Currently, Singapore’s main tax rate is capped at 17%. However, with the Singapore government’s tax exemption and incentive programs, the effective tax rates for companies can be much lower.
|Tax rate on corporate profits for up to 300,000 SGD||Effective tax rate at 8.5%|
|Tax rate on corporate profits above 300,000 SGD||17%|
|Tax rate on capital gains accrued by the company||0%|
|Tax rate on dividend distribution to shareholders||0%|
|Tax rate on foreign-sourced income not brought into Singapore||0%|
|Tax rate on foreign-sourced income brought into Singapore||0 – 17% subject to conditions|
The tax exemption scheme for new companies was introduced in the Year of Assessment (YA) 2005 to support entrepreneurship and help local companies grow. The Start-Up Tax Exemption (SUTE) provides withholding tax for the first 3 years of operation. Under this scheme, new companies that meet the criteria below receive the following tax exemptions for the first three consecutive YAs depending on where the YA falls:
New companies that qualify are granted a tax exemption of 75% on the first S$ 100,000 of taxable income and an additional 50% tax exemption on the next S$ 100,000 of taxable income.
Eligible new companies are granted a full tax exemption of 100% on the first S $ 100,000 of taxable income and an additional 50% tax exemption on the next S$ 200,000 of taxable income.
The above tax reliefs are open to all new companies that meet the following criteria:
Note that certain companies are not allowed to use tax schemes, including:
All companies are eligible for the Partial Tax Exemption (PTE) unless they already claim under Start-up Tax Exemption (SUTE). Under PTE, companies enjoy the following exceptions.
Certain types of income originating from abroad are free of tax; this includes:
To qualify as tax-exempt, income sourced from abroad that is sent to Singapore must meet the following three conditions:
Here are some other tax incentive schemes available to further reduce corporate taxable income if the company meets the specified criteria.
The DEI scheme is available for companies planning to scale up their operations in Singapore or expand into globally leading industries. Under the DEI, all income derived from eligible activities is exempt from tax or taxed at a rate of 10% for a period of 5 years.
To qualify for the DEI scheme, companies are required to meet certain criteria:
Under the investment allowance scheme, companies can receive a tax credit of up to 100% of the capital expenditure spent on eligible projects during the tax year. Typically, Singapore provides investment allowances for a period of 5 years. However, certain cases can last up to 8 years. The types of projects that are eligible for an investment allowance include:
There are two filings that companies must submit to IRAS; first, Estimated Allowable Income (ECI). ECI is the company’s taxable income after deducting tax allowable expenses, which the company should file within three months from the company’s first financial year-end.
Second, Form C/C-S (Corporate Income Tax Return) is due by November 30 for paper submissions or December 15 via electronic filing. Form C filing requires companies to attach tax calculations, financial reports, detailed income statements, and other supporting documents. In contrast, the C-S form is a simplified filing that does not require additional documents.
The tax return filing may seem complicated to you, but you don’t have to deal with it yourself. Biz Atom has got you covered. As your tax agent, we will prepare tax computations for you, check all the necessary documents required for the filing, and submit them to IRAS.
Singapore has one of the most favorable tax jurisdictions in the world. There are various tax incentives and reliefs provided for companies. With tax exemptions on capital gains and dividends, shareholders can get more return on their investment.
Keep your tax routine in sync and get the tax exemptions you are entitled to with the Biz Atom accounting services. Contact us to learn how it works!
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