Singapore Tax Benefits & Incentives for New Companies

Start-Up Tax Exemption (SUTE) Scheme

One of the most compelling Singapore tax benefits for new companies is the Start-Up Tax Exemption (SUTE) scheme. This initiative aims to support local entrepreneurship and foster a vibrant startup ecosystem. Qualifying new companies can enjoy substantial tax relief during their first three consecutive Years of Assessment (YAs). This exemption applies to a portion of their normal chargeable income.

Eligibility for SUTE

To qualify for the Start-Up Tax Exemption, a company must meet specific criteria. It must be incorporated in Singapore and be a tax resident in Singapore for the relevant YA. Additionally, the company must not have more than 20 shareholders, and all shareholders must be individuals. The company should also not be an investment holding company or engaged in property development. These conditions ensure the benefits target genuine operating businesses.

How SUTE Works

Under the SUTE scheme, a new company receives a 75% tax exemption on its first S$100,000 of normal chargeable income. It also gets a 50% tax exemption on the next S$100,000 of normal chargeable income. This means a company can save a considerable amount on its corporate taxes during its formative years. This corporate tax incentive provides vital capital for reinvestment and expansion.

Partial Tax Exemption (PTE) Scheme

Beyond the SUTE, all Singaporean companies, including those that do not qualify for SUTE or have passed their first three YAs, can benefit from the Partial Tax Exemption (PTE) scheme. This scheme offers ongoing tax relief, contributing to Singapore’s competitive tax landscape. It ensures that businesses continue to enjoy lower effective tax rates as they grow.

PTE Benefits Explained

The Partial Tax Exemption provides a 75% tax exemption on the first S$10,000 of normal chargeable income. It also grants a 50% tax exemption on the next S$190,000 of normal chargeable income. This applies to all companies, regardless of their age or shareholder structure. This consistent corporate tax incentive makes Singapore an attractive long-term base for businesses.

Low Corporate Tax Rates

Singapore boasts one of the lowest headline corporate tax rates globally, currently at 17%. Combined with the SUTE and PTE schemes, the effective tax rate for many companies is significantly lower. This competitive rate is a cornerstone of Singapore’s appeal as a global business hub. It allows businesses to retain more earnings for growth and innovation.

Other Tax Incentives and Schemes

Singapore also offers various other corporate tax incentives tailored to specific industries or activities. These include schemes for research and development (R&D), internationalization, and productivity improvements. Examples include the Pioneer Certificate Incentive and the Development and Expansion Incentive. Businesses should explore these options to further optimize their tax position. Terra Advisory Services can provide expert guidance on navigating these complex schemes.

Leveraging Singapore tax benefits and corporate tax incentives is a smart strategy for any new company. The Start-Up Tax Exemption and Partial Tax Exemption schemes, coupled with low corporate tax rates, create an exceptionally favorable business environment. Understanding and utilizing these provisions can significantly impact your company’s financial health and growth trajectory. Seek professional advice to ensure full compliance and maximum benefit from these attractive tax policies.

Important Notice: This guide provides a general overview of potential tax benefits and incentives available to new companies in Singapore. Eligibility for these schemes, including the Tax Exemption Scheme for New Start-Up Companies and various grants, depends on specific criteria set by the Inland Revenue Authority of Singapore (IRAS) and other governing bodies. These policies are subject to change and may not apply to all businesses.

The information presented here is for educational purposes only and should not be considered tax or financial advice. Navigating incentive applications requires careful assessment of your company’s qualifications and compliance with ongoing requirements.

Terra Advisory Services specializes in helping businesses identify and secure eligible tax benefits. We recommend consulting with our tax specialists to determine which incentives your company qualifies for and to ensure proper application and compliance.