Things to Know about Tax Incentives for Businesses in Singapore
Singapore is known for providing a wide range of tax incentives to promote different types of businesses in the country.
The Inland Revenue Authority of Singapore (IRAS) is the primary tax authority in Singapore responsible for introducing different tax schemes and incentives for startups, as well as multinational enterprises to encourage more investment in Singapore.
Generally, it is always a good idea to use the professional services of an accounting firm in Singapore to apply for the relevant tax incentives.
Moreover, when you are running a business, you should be familiar with some of the major tax schemes. In this article, you will learn about some of the major Singapore tax incentives useful for different types of companies.
Tax Incentive for Startups
Singapore provides significant tax exemptions to startups to encourage budding entrepreneurs. The tax scheme for startups provides tax exemption to startups for the first three years to ensure startups can establish a strong foundation in the country.
Every type of startup in Singapore can claim this tax exemption except the companies whose main function is to act as investment holding or develop properties for sale and investment. The three requirements that the startups have to meet are:
- The startup must be a registered company in Singapore.
- The registered company must be a tax resident in Singapore.
- The company’s number of shareholders must not be more than 20.
If the startup is eligible for the tax scheme, first 100k is 75% tax exemption and consecutive 100k is 50% tax exemption.
This significant tax incentive facilitates startups in dramatically reducing the cost of operation and running a successful business.
Double Tax Deduction
Singapore companies that want to expand their business in overseas territories can apply for the double tax deduction scheme to claim up to 200% tax deduction on expenses made by an organization through market expansion and development activities.
Organizations that operate with the goal of promoting the trade of goods and services are eligible for this major Singapore tax incentive.
A large-scale organization can claim a double tax deduction on the following qualifying expenses:
- Overseas trade offices and fairs.
- Marketing through approved publications.
- Expenses involved in posting manpower overseas.
- Running marketing campaigns in international territory.
- Market analysis and feasibility studies.
Additional activities qualify for double tax deduction claim as below effective from 17 Feb 2021:
- Virtual trade fair approved by ESG.
- Product/service certification approved by ESG.
- Overseas advertising and promotional campaigns.
- Design of packaging for overseas market.
- Advertising in approval local trade publication.
Moreover, a company can automatically claim a 200% deduction on the first S$150k from YA 2019 to 31 Dec 2025.
Keep in mind that if the expenses are greater than S$150,000, then you might have to seek approval from the relevant tax authorities.
International Shipping Operations
If you are involved in a business that needs international shipping, there is a high chance that you will find a suitable tax incentive related to the maritime industry.
When a business is deriving income from the carriage of passengers, mail, livestock, and other goods in international territories, it can apply for exemption under the international shipping operation tax incentives.
Singapore Tax Incentive for Charitable Work
Companies that encourage charity activities are eligible for a deduction under the Business and IPC Partnership Scheme. This program was launched in the 2016 budget.
The plan was created by the Singapore government in partnership with the Inland Revenue Authority of Singapore (IRAS).
Singapore corporations may claim a tax deduction of up to 250% on salary and expenses paid to their workers under this program if they send their staff to volunteer and provide services to Institutions of Public Character (IPC).
The primary goal of this program is to increase generosity throughout the nation.
Singapore is a highly business-friendly country because it is known for having low tax rates. Moreover, the Singapore tax incentives make it possible for all types of businesses to thrive in the country and eventually expand to become multinational enterprises.
A fair and transparent legal system and tax code make Singapore stand out from various other countries.
However, finding a specific tax scheme applicable to your business can be challenging, so you should rely on a professional accounting firm in Singapore to ensure you are using all the available resources and tax incentives for the success of the business.