Singapore has one of the lowest corporate taxes in the world – currently, the tax rate is 17%. Due to this low rate, as well as other tax incentives, Singapore has become a popular place for foreign investment. A lot of organizations have already expanded their operations to Singapore, and many other enterprises are also looking forward to such expansion.
Here are the top five Singapore tax incentives that will allow you to save even more money on taxes:
1. Start-up Exemption Tax
The purpose of the start-up exemption tax is to allow new companies to establish roots in the competitive business industry. This kind of tax is applicable for the initial three years of assessment. In 2020, the scheme was revised as follow:
- 75% on the first $100,000 of a start-up’s taxable income
- 50% on the next $100,000 of a start-up’s taxable income
The eligibility criteria of the start-up tax incentive in Singapore are as follows:
- Registration of the company with ACRA
- Being a tax-resident of Singapore
- Not having more than 20 shareholders in your company, because then it will not be considered a small or start-up company (provided that all shareholders are individuals; or at least one shareholder is an individual holding at least 10% of the issued ordinary shares of the company)
- The company should be a part of any industry except property development and investment holding
2. Business and IPC Partnership Scheme (BIPS)
Companies can claim up to a 250% tax deduction under BIPS. This tax incentive is given on some specific types of expenditures when they offer the voluntary services of their employees to the Institution of Public Character (IPC).
In Singapore, the IPC is regulated by the Charities Act. It is the responsibility of the IPS to issue tax-deductible receipts for the donations it receives. Accounting firms in Singapore facilitates the organizations in maintaining thorough records and conducting independent accounting procedures that are helpful in meeting the requirements of the Singapore tax incentives.
BIPS eligibility criteria make it very clear that the owners, sole proprietors, partners and stakeholders cannot avail this scheme. Moreover, an employee of an investment holding company is also ineligible for this scheme.
3. Pioneer Certificates Incentive (PC) and Development & Expansion Incentive (DEI)
The purpose of both of these schemes is to facilitate companies in expanding their business operations in Singapore. The organizations that want to establish regional or global headquarters in Singapore can rely on PC and DEI because they offer a concessionary corporate tax rate of 5% or 10%, respectively, on the eligible activities.
However, business owners should remember that both the PC and the DEI are limited to 5 years only, and further extension is only given on the basis of the company’s expansion plans. The companies must maintain thorough records of the qualifying and non-qualifying activities. In such cases, companies should hire accounting firms in Singapore that provide professional accounting services. They can be useful in various ways, like maintaining records of the non-qualifying activities that are important in applying for DEI and PC.
To be eligible for both PC and DEI, the organization must make a considerable contribution to the Singapore economy or have modern capabilities as per the global standards. Furthermore, the company must use new technology and have the required knowledge and skills to provide efficient and reliable services.
4. Double Tax Deduction Scheme Internationalization (DTDi)
Singapore companies that want to expand their business operations in the overseas markets can avail up to a 200% tax deduction under the DTDi scheme. It is managed by the Enterprise Singapore and aims to allow business owners to expand their organizations in international territories.
The breakdown of DTDi states that the companies do not have to take any approval from Enterprise Singapore for the first $150,000 when they are conducting overseas business development trips, research studies and international trade shows.
5. Research & Development (R&D) Expenditure
R&D expenditure tax inventive in Singapore is one of the most popular tax schemes because it allows the companies to get tax breaks of R&D activities. The majority of the companies are involved in R&D in one way or another. Hence, it is a very useful tax incentive for organizations. The qualifying activities of this scheme include acquiring new knowledge skills, creating more efficient products or processes, applying new technical knowledge in production facilities, data collection and conducting surveys and tests.
It is a very thorough scheme that covers almost every aspect of R&D. Some companies are able to claim even a 100% tax deduction on in-house research projects.
In a Nutshell
These are the top five tax incentives in Singapore for different types of organizations in different departments and expansion projects. There are also many other schemes that are available to specific industrial sectors. Business owners who have outsourced their accounting and payroll management to accounting firms in Singapore are able to keep themselves up-to-date about such incentives and avail them if their company is eligible. For more information, feel free to get in touch with us.