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Singapore’s corporate tax rate on chargeable income at 17 percent - is one of the lowest in the world, attracting business owners from various countries to set up or expand their businesses in Singapore.
Businesses in Singapore benefit from Singapore corporate tax rebates, which differs for Years of Assessment (YAs). For YA 2018, this rate is 40% of corporate tax payable (capped at S$15,000) and for YA2019 it is at 20% of corporate tax payable (capped at S$10,000). In addition to the low corporate tax rates, there are schemes and grants offered by the Singapore government that can help reduce your Singapore corporate tax rates even further. We describe five main schemes here:
The Start-up Tax Exemption Scheme (SUTE) was set up by the Singapore government to encourage entrepreneurship and the growth of local enterprises. Under the most recent iteration of SUTE announced in the Singapore’s 2018 Budget, the scheme exempts:
These exemptions apply for the first three consecutive YAs and takes effect on or after YA2020. A ‘start-up’ under this scheme is defined as a business in Singapore incorporated for no more than 3 years.
To qualify for the SUTE scheme, a business in Singapore needs to:
Businesses in Singapore that do not qualify for SUTE, namely companies that are incorporated for more than 3 years in Singapore, have more than 20 shareholders, or are in the investment and property development industries - can still qualify for the Partial Tax Exemption (PTE) scheme. Under the PTE scheme, companies are exempted:
The Business and IPC Partnership Scheme (BIPS) grants a 250% Singapore corporate tax deduction on qualifying expenses incurred when their employees volunteer, provide professional services, or provide services (including secondments) to recognized Institutions of Public Character (IPCs).
IPCs are exempt or registered charities in Singapore that can issue tax-deductible receipts for donations made to them. They are held to higher standards of regulatory compliance and governance than regular charities. Find out here if a particular charity has IPC status.
For an employee of a business in Singapore to qualify for the BIPS scheme, he or she needs to be:
The qualifying expenditure is capped at S$250,000 per business each YA, and at S$50,000 per individual IPC for each calendar year. The BIPS Scheme can be applied for voluntary services conducted from 1 July 2016 to 31 December 2021.
Click here for more information on BIPS.
The PC and DEI schemes were set up to encourage businesses in Singapore to conduct new business activities and expand production capabilities.
The PC scheme applies to companies who have anchored economic activities in Singapore over time, bringing significant benefits to the country’s economy.
Meanwhile, the DEI scheme focuses on companies who have invested in technology, equipment and operational upgrades, which advances the capabilities of specific industries to globally competitive levels.
Approved companies under the PC scheme are eligible for a 5 percent Singapore corporate tax rate on income derived from qualifying activities for a period of 5 years.
Meanwhile, approved companies under the DEI scheme are eligible for a 10 percent Singapore corporate tax rate on income derived from qualifying activities for a period of 5 years.
Criteria for companies in the PC and DEI schemes include:
Administered by Enterprise Singapore, the DTDi scheme aims to encourage businesses in Singapore to expand internationally. The scheme provides double Singapore corporate tax deduction for qualifying expenses incurred from 1 April 2012 to 31 March 2020 (subject to certain expenditure cap) on international market expansion and development activities.
Several tax deductions under the DTDi are automatically awarded tax deductions without the need for further approval. These include:
Automatic tax relief for these qualifying expenditure incurred during YA 2019 to 31 March 2020 are capped at S$150,000 per YA, as announced in Budget 2018 to further encourage internationalisation. Activities within these four categories that exceed S$150,000, as well as all activities outside these four areas, will require Enterprise Singapore’s prior approval to be eligible for the DTDi.
To qualify for the DTDi, a business in Singapore needs to:
The RHA is administered by the Singapore Economic Development Board (EDB) to encourage global companies to base their regional operations in Singapore, thus advancing Singapore’s status as a regional business hub.
Companies awarded the RHA pay a reduced Singapore corporate tax rate of 15% on the incremental income from qualifying activities for 3-5 years, subject to satisfying and maintaining all prescribed conditions throughout the period of the award.
In order to qualify for the RHA, businesses in Singapore need to satisfy the following criteria:
Besides the RHA, the EDB also administers the International Headquarters Award (IHA). Enterprises looking to establish their International Headquarters in Singapore, may therefore apply for and benefit from the award, which qualifies them for Singapore corporate tax rates of 5% to 10%.
Any company looking to apply for the IHA must be incorporated or registered locally in Singapore, and must commit to exceed the minimum requirements of the RHA.
Among others, the conditions laid out by the government for companies to be able to establish their headquarters in Singapore are as follows:
1) The company must be recognised within the industry or sector of operation, have extensive capacity with regard to human resource, assets, capital and market share;
2) The headquarters should be the organisation's hub for the senior management of principal operations with well-defined management and control procedures;
3) The company should be moving the bulk of their headquarter operations into the Singapore office. These operations may consist of
However, this award has an even more stringent criteria as compared to the RHA.
Visit EDB’s website for more information about RHA and IHA.
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