Singapore has been consistently ranked as one of the most business-friendly economies year after year by World Bank. Many factors have contributed to Singapore’s competitive edge: easy access to capital, strategic location, excellent infrastructure, ease of doing business etc. And one prominent factor is Singapore’s tax-friendliness.
In Singapore, income accrued in or derived from Singapore and income received in Singapore from overseas are taxable. IRAS assesses the amount of tax based on the income earned by the company in the preceding financial year. In other words, the income earned in the financial year 20X8 will be taxed in 20X9, which is referred to as Year of Assessment (YA) 20X9.
With effect from 2010, all companies are taxed at a flat rate of 17% on its chargeable income i.e. taxable revenues less tax-allowable expenses. In addition to the competitive tax rate, Singapore government offers incentives, subsidies and schemes which lower the effective tax payable further.
Here are some of the tax schemes available to lower the tax payable:
I) Tax Exemption Scheme for New Start-Up Companies
To promote entrepreneurship and support the growth of local enterprises, this scheme was introduced in YA 2005. This is available to all new companies except investment holding companies and companies engaged in development of properties.
To be eligible for this scheme, companies must satisfy the following qualifying conditions:
- Incorporated in Singapore;
- Tax resident in Singapore for that YA;
- Have no more than 20 shareholders throughout the basis period for that YA where:
- all of the shareholders are individuals; or
- at least one shareholder is an individual holding at least 10% of the issued ordinary shares of the company.
Qualifying companies can enjoy 75% exemption on the first $100,000 chargeable income and a further 50% exemption on the next $100,000 chargeable income for the first three consecutive YAs.
II) Partial Tax Exemption for Companies (PTE)
From the fourth YA onwards, companies can enjoy the partial tax exemption.
All companies can enjoy PTE, unless they have already claimed the Tax Exemption Scheme for New Start-Up Companies. Qualifying companies can enjoy:
- 75% tax exemption on the first $10,000 of chargeable income; and
- A further 50% tax exemption on the next $190,000 of chargeable income.
III) Corporate Income Tax Rebate
All companies (including Registered Business Trusts, non-resident companies that are not subjected to final withholding tax and companies with income taxed at a concessionary tax rate) are granted corporate income tax rebates year on year.