Corporate Tax Exemptions & Incentives in Singapore: How to Qualify
Singapore’s pro-business environment is bolstered by a comprehensive array of corporate tax exemptions and incentives designed to attract investments and stimulate economic growth.
Understanding these incentives and the qualifications required is essential for businesses aiming to optimize their tax positions.
Understanding these incentives and the qualifications required is essential for businesses aiming to optimize their tax positions.
Overview of Singapore's Corporate Tax Regime
Singapore imposes a flat corporate income tax rate of 17% on chargeable income. However, through various schemes and incentives, the effective tax rate can be significantly reduced, enhancing the country’s appeal as a global business hub.
Key Tax Exemptions and Incentives
1. Start-up Tax Exemption (SUTE) Scheme
To encourage entrepreneurship, Singapore offers newly incorporated companies partial tax exemptions on their taxable profits for the first three consecutive years of operation.
Specifically, a 75% exemption is granted on the first SGD 100,000 of normal chargeable income, and a further 50% exemption on the next SGD 100,000. This scheme is detailed on the Inland Revenue Authority of Singapore’s (IRAS) website.
Eligibility Criteria:
Specifically, a 75% exemption is granted on the first SGD 100,000 of normal chargeable income, and a further 50% exemption on the next SGD 100,000. This scheme is detailed on the Inland Revenue Authority of Singapore’s (IRAS) website.
Eligibility Criteria:
- The company must be incorporated in Singapore.
- It must be a tax resident in Singapore for that year of assessment.
- The company must have no more than 20 shareholders throughout the basis period for that year of assessment, with all shareholders being individuals beneficially and directly holding the shares.
- The company must not be engaged in investment holding or property development activities.
2. Partial Tax Exemption for Companies
Companies that do not qualify for the SUTE can benefit from the Partial Tax Exemption (PTE) scheme. Under this scheme, a 75% exemption is granted on the first SGD 10,000 of normal chargeable income, and a 50% exemption on the next SGD 190,000.
3. Pioneer Tax Incentive
The Pioneer Tax Incentiveis designed to encourage companies to engage in high-value-added manufacturing or services. Qualifying companies can enjoy full tax exemption on qualifying profits for a period ranging from five to 15 years.
Eligibility Criteria:
Eligibility Criteria:
- The company must introduce high-tech skills or advanced technology to Singapore.
- It should contribute to the overall economic development of Singapore.
- The company must create employment opportunities for Singaporeans.
4. Development and Expansion Incentive (DEI)
The DEI encourages companies to expand their operations in Singapore. Approved companies can enjoy a concessionary tax rate of 5% or 10% on qualifying income for up to 10 years, with the possibility of extension.
Eligibility Criteria:
Eligibility Criteria:
- The company must be incorporated in Singapore.
- It should undertake projects that result in significant economic spin-offs.
- The company must commit to specific investment and employment levels.
5. Investment Allowance (IA)
The IA provides an additional capital allowance on qualifying capital expenditure incurred on approved projects. This incentive encourages businesses to invest in productive equipment.
Eligibility Criteria:
Eligibility Criteria:
- The project must be approved by the relevant authorities.
- The capital expenditure should be incurred within the specified approval period.
6. Research and Development (R&D) Tax Incentives
To promote innovation, Singapore offers enhanced tax deductions for qualifying R&D activities conducted in Singapore. Under Budget 2023, a 400% tax deduction is available for the first SGD 400,000 of qualifying R&D expenditure per year of assessment, applicable from YA 2024 to YA 2028.
Eligibility Criteria:
Eligibility Criteria:
- The R&D activities must be conducted in Singapore.
- The activities should aim to acquire new knowledge or create new products/processes.
- The company must incur the qualifying expenditure.
6. Research and Development (R&D) Tax Incentives
To promote innovation, Singapore offers enhanced tax deductions for qualifying R&D activities conducted in Singapore. Under Budget 2023, a 400% tax deduction is available for the first SGD 400,000 of qualifying R&D expenditure per year of assessment, applicable from YA 2024 to YA 2028.
Eligibility Criteria:
- The R&D activities must be conducted in Singapore.
- The activities should aim to acquire new knowledge or create new products/processes.
- The company must incur the qualifying expenditure.
7. Double Tax Deduction for Internationalization (DTDi)
The DTDi scheme allows companies to claim a 200% tax deduction on qualifying expenses incurred for international market expansion activities, such as overseas business development trips and participation in trade fairs.
Eligibility Criteria:
- The company must be registered in Singapore.
- The expenses must be incurred for qualifying activities.
- No prior approval is required for expenses up to SGD 150,000 per year of assessment.
8. Global Trader Programme (GTP)
The GTP aims to encourage global trading companies to use Singapore as their base for conducting international trading activities. Approved companies can enjoy a concessionary tax rate of 5% or 10% on qualifying trading income.
Eligibility Criteria:
Eligibility Criteria:
- The company must have a substantial track record in international trading.
- It should use Singapore as a base for principal trading activities.
- The company must commit to specific performance targets, such as local business spending and employment.
Conclusion
Singapore’s tax incentives play a crucial role in making the country one of the most attractive business hubs globally.
By leveraging these corporate tax exemptions and incentives, companies can significantly lower their tax burden while investing in innovation, international expansion, and productivity improvements.
Understanding the eligibility criteria and application process is essential for businesses to fully benefit from these schemes.
As Singapore continues to enhance its pro-business environment, staying informed about evolving tax policies and seeking expert guidance can help companies maximize their tax benefits while contributing to long-term economic growth.
By leveraging these corporate tax exemptions and incentives, companies can significantly lower their tax burden while investing in innovation, international expansion, and productivity improvements.
Understanding the eligibility criteria and application process is essential for businesses to fully benefit from these schemes.
As Singapore continues to enhance its pro-business environment, staying informed about evolving tax policies and seeking expert guidance can help companies maximize their tax benefits while contributing to long-term economic growth.
