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Maximizing Your Business Potential: A Guide to Tax Incentives for Companies in Singapore
24/05/2023
As one of the world’s leading business hubs, Singapore offers a favorable environment for entrepreneurs and companies to start and grow their businesses. One of the key advantages of doing business in Singapore is the range of tax incentives available to businesses. From lower tax rates to tax exemptions, there are many ways that companies can benefit from these incentives and improve their bottom line.
In this article, we’ll explore some of the key tax incentives available to businesses in Singapore and how you can take advantage of them to maximize your business potential.
What tax exemption schemes are available for startups?
As a startup in Singapore, taking advantage of tax exemption schemes can help your business to save money and reinvest those funds into growth and development. In this section, we’ll explore some of the tax exemption schemes available specifically for startups in Singapore and how you can qualify for them.
Tax Exemption Scheme for Startups (SUTE)
The Tax Exemption Scheme for Startups (SUTE) is a crucial tax incentive in Singapore that supports the growth of startups and entrepreneurship in the country. Your startup may be eligible for a 75% tax exemption on the first SGD 100,000 of chargeable income and a 50% exemption on the next SGD 100,000.
This incentive only applies to your business’s first three tax years, after which you can apply for the Partial Tax Exemption (PTE). However, to qualify for the SUTE, your startup must be a registered company in Singapore, have no more than 20 shareholders in that assessment year, and be a tax resident for that assessment year.
It is important to note that companies with a principal activity of investment holding, developing property for sale, investment, or both are not eligible for the SUTE.
Partial Tax Exemptions
If your company does not meet the eligibility criteria for the Tax Exemption Scheme for Startups (SUTE), you can still apply for the Partial Tax Exemption (PTE). With the PTE, companies can enjoy a 75% tax exemption on the first SGD 10,000 and an additional 50% exemption on the next SGD 190,000.
This tax incentive is available to all types of companies in Singapore, except for those with a principal activity of investment holding, developing property for sale, investment, or both. By applying for the PTE, eligible companies can still benefit from tax savings and reinvest those funds into their business growth and development.
Productivity and Innovation Credit
Businesses investing in innovation-related activities in Singapore can benefit from the Productivity and Innovation Credit (PIC) scheme. This tax reduction incentive aims to support businesses in improving productivity and efficiency by investing in innovation. All business entities registered in Singapore, including companies, partnerships, sole proprietorships, foreign holding companies, branches and subsidiaries are eligible for the scheme.
The PIC scheme provides a 400% tax deduction, with a maximum of SGD 400,000, for six qualifying activities such as acquiring licenses of IPR, acquisition and leasing of IT and automation equipment, design project investment, employee training, patents, trademarks, plant varieties, and designs registration, and R&D activities. Companies that qualify for the PIC+ scheme can enjoy a maximum of SGD 600,000.
This incentive is designed to promote innovation by SMEs, and to qualify for the scheme, the company’s revenue should not exceed SGD 100 million, and the number of employees should not be more than 200. The PIC scheme is a great opportunity for businesses to invest in innovation while benefiting from tax incentives.
Investment Allowance Incentive
The Investment Allowance incentive is the fourth tax incentive available, providing businesses with a tax exemption of up to 100% on fixed capital expenditure incurred within a five-year period, which can be extended up to eight years for qualifying projects. The investment allowance covers several types of expenditure, such as acquiring patents and know-how, building factories in Singapore, and acquiring new productive equipment.
Qualifying projects under this incentive include:
- Construction projects
- Energy efficiency projects
- Maintenance, repair, and overhaul services for the aircraft industry
- Manufacturing of new products or increasing production of existing products
- Projects that aim to reduce water consumption
- Promotion of the tourism industry
- Provision of specialized engineering or technical services
- Research and development activities
Pioneer Tax Incentive
The Pioneer Tax Incentive is the fifth tax incentive targeted toward businesses involved in high-value-added products or services. This incentive provides a tax exemption of 5 to 15 years for each qualifying project or activity.
To be eligible for this incentive, applicants must meet the following requirements:
- Ability to create employment opportunities for Singaporean citizens
- The proposed business activities must be new and not previously undertaken by any other companies
- Introduction of new skills, expertise, technologies, and know-how that can improve an industry
- Manufacturing projects should commit to developing both soft and hard infrastructure
- The business expenditure must have the potential to create economic spin-offs.
Development and Expansion Incentive
After the Pioneer Tax Incentive expires, businesses can apply for the Development and Expansion Incentive (DEI). This incentive permits businesses involved in new high-value-added projects, undertaking incremental activities or expanding or upgrading their operations to enjoy a tax reduction of not less than 5% of their profits for up to 10 years. The entire tax relief period can extend up to 40 years.
Double Tax Deduction Scheme for Internationalisation
The Double Tax Deduction Scheme for Internationalisation (DTDi) is a tax incentive that benefits companies planning to expand overseas. This scheme supports four key categories of a company’s overseas expansion: market preparation, market exploration, market promotion, and market presence.
Under the DTDi, businesses can enjoy a 200% tax deduction on the first SGD 150,000 of expenses incurred for international expansion and investment development activities. However, any expenses that exceed SGD 150,000 require approval from Enterprise Singapore (ESG).
Qualifying activities include:
- Advertising in approved local trade publications
- Designing packaging for overseas markets
- Attending local trade fairs approved by ESG or Singapore Tourism Board (STB)
- Conducting overseas advertising and promotional campaigns
- Undertaking overseas investment study trips or missions
- Conducting overseas market development trips or missions
- Participating in overseas trade fairs
- Obtaining product or service certification
- Participating in virtual trade fairs
How can Belaws help?
If you have a question about tax incentives in Singapore, please speak directly with one of our experts.
You can also view our Singapore incorporation services here.
This article is for information purposes only and does not constitute legal advice.
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Frequently Asked Questions
How do I register my GST number in Singapore?
You can register your GST number in Singapore by submitting an application online through the Inland Revenue Authority of Singapore (IRAS) website using your SingPass or CorpPass account. Alternatively, you can also submit a hard copy of the application form to the IRAS.
Who needs to register for GST in Singapore?
Businesses that make taxable supplies of goods and services and have an annual turnover of more than S$1 million are required to register for GST in Singapore. However, businesses that have an annual turnover of less than S$1 million may choose to register for GST voluntarily.
When should I register for GST in Singapore?
You should register for GST in Singapore within 30 days of your business exceeding the annual turnover threshold of S$1 million, or if you anticipate that your business will exceed the threshold within the next 12 months.
What does it mean to be GST registered in Singapore?
Being GST registered in Singapore means that your business is registered with the Inland Revenue Authority of Singapore (IRAS) and is authorized to charge GST on taxable goods and services provided to customers. GST-registered businesses can also claim input tax credits on GST paid on business purchases and expenses.
Is GST number the same as business number in Singapore?
No, GST number and business number are not the same in Singapore. A GST number is a unique identification number assigned by the Inland Revenue Authority of Singapore (IRAS) to businesses that are registered for GST. On the other hand, a business number in Singapore generally refers to the Unique Entity Number (UEN) which is a standard identification number used by government agencies to identify businesses.
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