What is the tax exemption for company incorporated in Singapore?
Singapore is known for ‘Ease of Doing Business.’ Affordable tax rates are one of its USPs. They have optimised the tax filing process to be simple. In many instances, tax exemption for company enables it to keep effective tax paid to between 8.5-9.5 per cent.
Singapore Corporate Income Tax
Singapore is a rare example where corporate tax rates have gone down. A company incorporated in Singapore can save you money by claiming various types of tax exemptions available to it.
Singapore corporate tax is a single-tier flat-rate territorial system. It means once a company has paid its tax, it can disburse tax-free dividends to its shareholders. Singapore charges no tax on capital gains or inheritance. And there are no restrictions on sending these profits out of the country.
Tax Exemption for Company Incorporated in Singapore
At 17%, Singapore’s flat company income tax rate is affordable. It attracts tax-conscious business owners for their company incorporation in Singapore.
However, it is much more than a monetary value. It reflects the pro-investor attitude of Singaporeans and the willingness to eliminate the red tape.
Here is a list of corporate income tax exemption for company incorporated in Singapore.
1 (SUTE) Startup Tax Exemption Scheme
Startup companies in Singapore fulfilling the SUTE criterion can claim a 75% tax exemption on their chargeable income for the first three years of operation. It helps them keep overheads down.
Your Startup needs to:
- Be registered in Singapore
- Be a tax resident of Singapore for the Year of Assessment (YA)
- Have a maximum of 20 individual shareholders
- Have no corporate shareholders
- At least an individual shareholder owns 10% or more of the issued ordinary shares
Startups can claim (2020 onwards):
- 75% of tax exemption on their First $100,000 chargeable revenue
- 50% of tax exemption on their Next $100,000 chargeable revenue
2 Corporate Income Tax (CIT) Rebate
Corporate Income Tax rebate applies for 2013 to 2020 YAs. You can claim a CIT rebate to help your company keep its business costs down and to finance its restructuring. Even locally registered non-tax resident businesses (not subject to a final withholding tax), business trusts, and companies paying concessionary tax rates can claim it.
You can claim:
- 75% tax rebate on their first $10,000 taxable income
- 50% tax rebate on their next $190,000 taxable income
3 Partial Tax Exemption
Existing Singaporean companies can claim a Partial Tax Exemption (PTE). Startups benefiting under SUTE can also claim PTE after 3 years if they meet the criteria.
Your existing company can claim (2020 onwards):
- 75% tax exemption on its first $10,000 of normal chargeable income;
- 50% tax exemption on its next $190,000 of normal chargeable income
4 Foreign Sourced Income Exemption Scheme
Foreign income remitted to and received in Singapore is taxable. A local tax resident company can claim tax relief if it is also taxed in a foreign jurisdiction.
You can claim:
- Tax exemption or reduction in tax if there is an Avoidance of Double Taxation Agreement between the said jurisdiction & Singapore
- Tax exemption under Section 13(8) of the Income Tax Act 1947 for dividends, branch profits and service income of foreign origin
- Foreign Tax Credit (FTC) for the taxes paid against the tax payable in Singapore on the same income
5 Development and Expansion Incentive (DEI)
Under the Development and Expansion Incentive (DEI) scheme, the government encourages companies that are good for the Singaporean economy. For their wider-scaled economic activities, they are rewarded with a concessionary tax rate of 5% – 10% tax break for a maximum of 40 years.
6 Pioneer Certificate Incentive (PC)
The government supports and motivates companies through the Pioneer Certificate Incentive (PC) scheme. It helps them grow capabilities and initiate new or expanded economic activities.
These companies are tagged or approved as pioneers to indicate they have advanced expertise in their fields. They enjoy a reduced tax rate of 5% for up to 5 years.
Due Date for Singapore Corporate Income Tax Filing
In Singapore, the corporate tax filing deadline is 30 November. You must e-file your company’s Form C-S/ Form C-S (Lite)/ Form C for the YA 2022.
Business owners love to receive tax exemption for company. It leads to lower overhead costs for them. It leaves money in their hands to spend on product development, marketing campaign or market research and surveys.
Singapore taxation authorities have reduced the complexities and deliberately kept the system simple. It helps companies in complying with the rules.
In addition to the affordable taxes, Singapore is also known for its infrastructure and sea and air connectivity with the outside world. These factors lure entrepreneurs for their company formation in Singapore.
Singapore has signed 70+ Double Taxation Avoidance (DTA) and other local and international treaties. These have greatly simplified cross-border trade for business owners. Even when they get double taxed, they can claim tax exemption for company.
SBS Consulting Pte Ltd is an experienced provider of services company incorporation in Singapore. Talk to us at +65-6536 0036 or message us at email@example.com to know to learn about affordable company incorporation in Singapore.