Singapore has a reputation as a business-friendly country. It offers companies a competitive corporate tax rate, tax reliefs, tax incentives, and tax rebates. These measures fall under the jurisdiction of the Inland Revenue Authority of Singapore (IRAS) and are designed to encourage economic growth and development in the country.
The incentives and rebates offered by the IRAS can help businesses save money and make it easier for them to compete internationally. If you are looking to incorporate in Singapore, incentives like these could help you reduce your tax burden and give your businesses a jumpstart as you get established and start generating profits. When applying for the various types of relief offered for businesses operating in Singapore remember to:
- Carefully review the eligibility requirements
- Determine what steps you need to take to claim it.
- Be aware of deadlines for claiming tax reliefs and incentives.
Additionally, we recommend speaking with a tax professional or contacting the IRAS if you have difficulties or questions when applying for any of these incentives. Consulting with a tax professional helps you not only to understand the rules and requirements for the incentives you are currently applying to, but they can also help to ensure that you are taking advantage of any additional tax breaks you qualify for. Below are four types of incentives Singapore offers to new companies.
- Startup Tax Exemption Scheme (SUTE)
SUTE allows qualifying companies to receive an exemption of 75% toward the first SGD$100,000 of taxable income and 50% on their next SGD$100,000 after that. This exemption is only available during the first three consecutive years. If your company has been incorporated for more than three years you may instead be able eligible to receive exemptions under Singapore’s Partial Tax Exemption (PTE). This incentive offers an exemption to qualifying businesses of 75% on the first $SGD10,000 and 50% on the next SGD$190,000 after that.
Both SUTE and PTE can make a significant difference to businesses just starting out. The IRAS website provides a thorough breakdown of what businesses qualify for these incentives, how they can apply, and what benefits they can expect.
- Productivity and Innovation Credit
The Productivity and Innovation Credit (PIC) scheme provides tax deductions and cash payouts for businesses that invest in productivity-enhancing activities such as training, research and development, and automation. A 400% tax deduction (or allowance) is granted to these businesses: for every SGD$1 spent on eligible activities, the business can claim a SGD$4 credit against their tax liability. Examples of qualifying expenditures include: the purchase of equipment, training, and research and development (R&D) activities. The PIC scheme will be available until YA 2025.
- Sector-specific Incentives
Several tax incentives are offered by the government to encourage businesses to invest in specific sectors, for example, research and development, healthcare, and financial services. There are also incentives designed to encourage businesses to adopt certain practices, or to locate their operations in certain areas of the country. These types of incentives can include tax deductions, exemptions, or allowances for companies that meet certain criteria.
The Development and Expansion Incentive (DEI) is one example of a tax incentive that encourages businesses to expand operations in Singapore. The DEI provides a partial exemption of corporate income tax for companies that have made significant investments expanding their operations here.
Examples of sector-specific incentives include he Energy Efficiency Fund for businesses that adopt energy-efficient technologies, or the Experience Step-Up Fund (ESF) for businesses promoting tourism in Singapore.
- Tax Deductions
Deductions for eligible expenses is one of the most straightforward ways to save on taxes. In Singapore, businesses can claim tax deductions for a wide range of expenses, including:
- Rental of business premises
- Utilities and other property-related expenses
- Business travel and entertainment expenses
- Professional fees and subscriptions
- Research and development costs
To claim tax deductions, businesses must keep detailed records of their eligible expenses, including receipts and invoices. Review the list of eligible expenses regularly to make sure you don’t miss out on any deductions.
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When taking advantage of tax reliefs and incentives, it is also important to ensure that your business complies with its tax obligations in Singapore.
- File tax returns, be accurate and timely
- Make tax payments on time
- Maintain accurate and up-to-date records of your transactions.
Failure to meet these obligations can result in penalties and fines, so stay informed and seek advice if necessary.
Finally, it is important to note that tax reliefs and incentives in Singapore are subject to change and may be reviewed periodically. Businesses should check with the Inland Revenue Authority of Singapore (IRAS) or a tax professional to determine their eligibility for these tax breaks and to stay up to date on any changes.
Tax reliefs and incentives in Singapore can be a valuable resource for businesses. By understanding the various tax breaks available and staying informed about any updates to Singapore’s tax laws and incentives, you can take advantage of these opportunities and you’re your business a competitive edge in the global market.