Benefits of Investing in a Singaporean Company (from a Tax Perspective)
Singapore is well-known for providing a variety of tax incentives for different types of companies and industries. The primary purpose of such incentives is to enhance the economic and technological development of the country.
The good thing about the Singapore tax incentives is that they are not limited to any one particular sector. Instead, such incentives cover a broad range of industries like manufacturing, shipping, and many more.
The tax incentives are provided in the form of complete exemption from the tax or a significant reduction in the tax rates. The eligibility of these incentives is highly dependent on the nature and working of the company.
Companies that are applying for tax incentives in Singapore must go through an extensive process of making sure they meet the legal requirements and rules set by ACRA, IRAS, EDB, Enterprise Singapore or other government bodies.
Although each type of tax incentive has its own criteria and method of approval, you should keep in mind that generally, applicants are required to perform high-value activities in Singapore and commit to the betterment of the local economy.
Following are some of the major tax incentives for Singaporean companies:
1. Pioneer Tax Incentives
Under the pioneer tax incentive, companies that produce approved products or services with the help of state-of-the-art technology can apply for tax exemption. Such kind of exemption can last for five years (subject to further extension upon approval). Even if the company does not get a maximum exemption, it can apply for a reduced tax rate.
2. Development and Expansion Incentives
The purpose of the development and expansion incentive is to help companies that provide more high-value products and expand their operations. Such kind of tax incentive is applicable for five years (subject to further extension upon approval) with a 5% tax exemption under the Pioneer incentive.
The overall tax relief period can vary from project to project. However, this period can last up to a maximum of 40 years.
Applying for this tax incentive can be challenging, especially if you are not familiar with the complete eligibility. By acquiring the services of a professional accounting firm in Singapore, applying for such tax incentives can become quite easy.
3. Investment Allowance
The investment allowance scheme allows Singaporean companies to get a tax exemption of up to 100% depending on the profits of the company. It is mainly associated with the capital expenses of qualifying projects and activities. Companies that want to make massive investments in the automation industry can apply for a 100% tax exemption on capital expenditure.
4. Singapore Tax Incentives for Internationalization
Singapore offers a double tax deduction scheme to facilitate companies that establish their business in overseas territories. Such tax incentives cover manpower expenses as well. It is considered to be one of the most beneficial Singapore tax incentives for internationalization because it covers the majority of the taxes.
5. Intellectual Property Development Incentives
The purpose of the IDI scheme is to encourage research and development among Singaporean companies. Successful applicants of his incentive will be eligible for a significant reduction in the tax rate of up to 5% or 10%, depending on the overall qualifying income.
6. Mergers Allowance
In cases where a company is merged or acquired by another company, the company is eligible to apply for a mergers and acquisitions allowance. This tax incentive allows a company to claim up to a 25% tax incentive on the different types of costs associated with mergers and acquisitions. Companies that are incorporated in Singapore can apply for this tax incentive.
Other than the tax relief incentives and schemes discussed above, there are many other tax incentives in Singapore reserved for different industries.
Most of the tax schemes deal with one particular industry. Therefore, it is always a good idea for companies to engage the professional services of an accounting firm in Singapore so that they can enjoy all the tax incentives they deserve. For more information, feel free to get in touch with us.
7. The Financial Sector Incentive (FSI) Scheme
The FSI scheme is a comprehensive tax incentive in Singapore that covers a variety of financial institutions, bond intermediaries, fund managers, and operational headquarters. Companies that want to expand their financial operations in Singapore can also apply for the FSI scheme. However, it is important to note that the FSI scheme has very strict qualifying conditions.
In a Nutshell
Generally, income generated from high growth and value-added activities is incentivized under the FSI scheme. A wide range of financial activities is eligible for a 13.5% tax rate according to the rules and regulations of the FSI scheme.
Companies that acquire the services of accounting firms in Singapore typically find it easier to apply for the right tax incentives.