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Tax Incentives for Businesses in Singapore

Singapore is known all over the world for its investment-friendly environment and being a regional startup hub. 

 

Numerous policies, regulations, and Singapore tax incentives make it one of the best places to do business. This is the reason why many companies, including multinational ones, open offices in Singapore. 

 

Tax incentives in the form of complete exemptions or deductions are useful in promoting a healthy business environment. Let’s discuss some of the major Singapore tax incentives:

 

Tax Exemption for Startups

The Start-Up Tax Exemption (SUTE) is one of the most popular tax incentives in Singapore. 

 

It is meant to support budding entrepreneurs in fulfilling their dream of establishing and growing a startup. Businesses can get up to a 75% tax exemption on the first SGD 100,000 of chargeable income and a 50% tax exemption on the next SGD 100,000. 

 

It is important to note that SUTE is only applicable to the first three tax years of operating a startup. After the third year, the organization can apply for other tax incentives or Partial Tax Exemption (PTE). An accounting firm in Singapore can greatly help you in this regard. 

Productivity and Innovation Credit

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The Productivity and Innovation Credit (PIC) scheme is a tax incentive scheme meant to facilitate business owners who invest in activities that deal with innovation. 

 

The primary goal of this scheme is to support businesses that are continually innovating and increasing their operational efficiency.

 

Tax Incentive for the eCommerce Industry

The global eCommerce industry has been rapidly growing over the last few years. The government of Singapore has introduced several tax incentives for the ecommerce industry to turn Singapore into an eCommerce hub. 

 

eCommerce companies can obtain a flat tax reduction of 10% for a period of up to 5 years on the income generated from an ecommerce business. This income can be generated from transactions both within and outside of Singapore. 

Allowance Incentive

Another popular Singapore tax incentive is the investment allowance incentive. 

 

It allows businesses to get the maximum tax incentive of up to 100% on fixed capital expenses incurred on a qualifying project for a period of 5 years. This period can be extended to a maximum of 8 years. 

 

A wide range of projects are covered under the investment allowance incentive scheme. Some of such projects are:

  • Construction projects
  • Energy efficiency projects
  • Maintenance and repair services for the aircraft industry
  • Projects related to the tourism industry
  • Engineering or technical services

Many other types of projects are also covered under this scheme. Therefore, it is recommended that companies rely on experts and professional accounting firms in Singapore to ensure they can apply for the relevant tax incentives. 

Fund Management

Singapore tax incentives also cover the fund management industry. An offshore fund managed by a Singapore-based fund manager is exempt from the tax as long as the offshore fund is a qualifying fund. The extent of this incentive is dependent on the type of fund. 

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Development and Expansion Incentive

Business growth is integral to the success of any country. Therefore, Singapore offers the Development and Expansion Incentive (DEI) to help them expand and improve their operational efficiency. 

 

Generally, businesses involved in high-value-added projects that are expanding or taking up incremental activities can qualify for this incentive. 

 

The exact tax incentive can be at a reduced rate of less than 5% of the profits for the duration of 10 years. The total period of this tax relief is up to a total of 40 years. 

 

Tax Exemption for Onshore Funds

Singapore Resident Fund Scheme was introduced in 2006 to extend the tax incentives available for offshore funds to onshore funds as well. In order to qualify for this scheme, the following conditions have to be met:

  • A company must be behind the fund vehicle
  • The fund must be formed and operated in Singapore with its administrative powers in Singapore
  • The fund must be approved by MAS

 

This particular tax incentive has given a massive boost to the Singapore fund management industry. It gives an additional benefit to Singapore’s large treaty network and makes Singapore more attractive to international investors.

 

All in all

Overall, the government of Singapore provides a wide range of tax incentives to support businesses in growing and establishing strong roots.

 

In addition to the low corporate income tax rate, these Singapore tax incentives are highly useful for all kinds of businesses.

 

By relying on a professional accounting firm in Singapore, it becomes easier for businesses to identify relevant tax incentives and determine their eligibility for them.

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