How Tax Exemptions Work in Singapore?
Singapore tax system is one of the best in the world for entrepreneurs. Learn how to benefit from opening your company and paying its taxes in Singapore.
By the way, you can just hit us up for our accounting services and we'll figure it out for you. Just saying.
What makes Singapore tax system so attractive?
All tax rates in Singapore are simple, transparent and fairly low. For example, the corporate tax rate is 17% flat for both foreign and local entrepreneurs. On top of that, the Singapore government supports startups by giving exemptions for the first three years after incorporation.
What exemptions are there for start-ups?
The Start-Up Tax Exemption (SUTE) provides tax cuts for the first 3 years of operation. Starting from the financial year 2019 the rules translate into the following effective rates:
- 4.25% on the first S$100,000 of normal chargeable income
- 8.5% on the next S$100,000
Here are the detailed rates you’ll pay on your exact income:
| Chargeable income, S$ | Extimated tax, S$ | Effective tax rate |
|---|---|---|
| 100,000 | 4,250 | 4.25% |
| 200,000 | 12,750 | 6.38% |
| 300,000 | 29,750 | 9.92% |
| 400,000 | 46,750 | 11.69% |
| 500,000 | 63,750 | 12.75% |
| 1,000,000 | 148,750 | 14.88% |
| 2,000,000 | 318,750 | 15.94% |
| 3,000,000 | 488,750 | 16.29% |
| 5,000,000 | 828,750 | 16.58% |
| 10,000,000 | 1,678,750 | 16.79% |
After the first 3 assessment years have expired, you can receive a Partial Tax Exemption (PTE). Here are the effective tax rates:
- 4.25% for the first S$10,000 of normal chargeable income
- 8.5% on the next S$190,000
Here's a detailed calculation to estimate your exact tax rate:
| Chargeable income, S$ | Extimated tax, S$ | Effective tax rate |
|---|---|---|
| 10,000 | 425 | 4.25% |
| 200,000 | 16,575 | 8.29% |
| 300,000 | 33,575 | 11.19% |
| 400,000 | 50,575 | 12.64% |
| 500,000 | 67,575 | 13.52% |
| 1,000,000 | 152,575 | 15.26% |
| 2,000,000 | 322,575 | 16.13% |
| 3,000,000 | 492,575 | 16.42% |
| 5,000,000 | 849,575 | 16.99% |
How can I qualify for the start-up tax exemption?
It is available within the first 3 years after you’ve opened a company in Singapore.
- At least one shareholder has to be a person, not a company and hold more than 10%.
- No more than 20 shareholders altogether.
- Investment holding and property development companies cannot apply.
- You have to be a tax resident in Singapore.
What are other taxes on business?
Singapore adopts a one-tier tax system under which income from a Singapore company is only taxed once hence, dividends are tax exempt in the hands of its shareholders. There’s a Goods and Services Tax (GST) on supplies made in Singapore but your company only has to register for it if your turnover grows over S$1,000,000. As a GST-registered company, you have to charge GST on your supply. The upside is you can claim GST suffered on your purchases. If you mainly export your goods abroad, you may apply for an exemption from GST registration.
What other tax-incentives can my company get?
There are several efforts that the government supports.
- Foreign Tax Credit (FTC). If you have already paid elsewhere the tax on the income that is also subject to tax in Singapore, you can claim a credit for it in here. The credit amount is capped at the lower of actual foreign tax and Singapore tax payable.
- Double tax deduction for internationalization (DTDI). You can claim up to S$150,000 per year on eligible expenses for supported market expansion and investment development activities like business trips, market surveys, or participating in fairs abroad.
- Pioneer Certificate Incentive (PC). A tax-relief for up to 15 years is granted to companies approved as ‘pioneers’ in their field. That works if your business is related to R&D, IT, or an underdeveloped industry.
- Development and Expansion Incentive (DEI) offers a concessionary tax rate of 5% or 10% on qualifying income to companies conducting new or expanded activities that contribute to the overall economic benefit for Singapore.
What other tax deductions are there?
- Capital Allowances, such as office equipment or furniture can be claimed.
- You can claim up to S$300,000 of qualifying Renovation & Refurbishment expenses over 3 years.
- There is 250% tax deduction on donations made to approved Institutions of a Public Character.