3 Singapore Tax Relief Schemes Helping Businesses Pay Less
Singapore is considered one of the countries with the most business-friendly tax regime in the world, having successfully sealed its spot as a significant financial and economic hub in the Asian region over the past few decades. More and more investors and entrepreneurs are drawn to the country because of its cost-effective incorporation process and transparent legal system.
To bolster entrepreneurship in the country, the Singaporean government provides entrepreneurs with various business incentives. In collaboration with its tax authority, the Inland Revenue Authority of Singapore (IRAS), the government of Singapore has implemented several tax-reduction schemes to encourage businesses to set up in the country.
Read on to discover several major tax reliefs in Singapore that can help businesses reduce their tax bills.
Tax Exemption Scheme (SUTE) for Startups
The tax authority in Singapore introduced the tax exemption scheme (SUTE) in 2005 in order to provide a special tax exemption to startups during their initial three assessment years. The primary objective of this scheme is to support new businesses in their growth and promote greater entrepreneurship in the country.
From 2020, SUTE allows qualified companies to have at least a 75 percent tax exemption on the initial S$100,000 of their chargeable income during the first three consecutive years. For the next S$100,000 of chargeable income, eligible companies may receive a 50 percent tax exemption.
To qualify for SUTE, a business must be Singapore-registered, a tax resident of the country, and have a number of shareholders not exceeding 20.
Double Tax Deduction for International Expansion
The double tax deduction for the international expansion scheme is a tax relief program specifically designed to help Singapore businesses expand overseas. This scheme allows companies to claim a 200 percent tax deduction on qualifying expenses, such as market surveys and feasibility studies, overseas trade offices, overseas trade fairs, and overseas advertising and marketing campaigns.
The expenditure cap for this scheme is at S$150,000. Its eligibility applies to all Singapore incorporated companies that have a primary purpose of providing services and promoting the trade of goods. It essentially supports market expansion and investment development activities abroad.
Business and IPC Partnership Scheme (BIPS)
This scheme grants businesses a 250% corporate tax deduction on the qualifying expenses incurred whenever their employees provide professional services (secondments included) for recognised Institutions of Public Character (IPCs).
IPCs are certain listed charities in Singapore that the government holds to higher standards of regulatory compliance and oversight than other charities, and so can provide tax-deductible receipts for donations made to them.
For an employee of a Singapore-based business to qualify for the BIPS scheme, they need to follow these criteria:
- Not be an owner, a sole proprietor, a partner, or a shareholder who holds directorial positions in the company
- Not be employed in an investment holding company
- Have incurred expenses from voluntary services provided to the IPCs during working hours and on the IPC’s premises, which include the following:
- Not paid for by the IPC
- Not an expense for personal reasons (i.e. caregiving expenses for a family member admitted in an IPC)
- Non-capital expenditure (i.e. one-time donations from the company to an IPC)
The maximum expenditure amount required to quality S$250,000 per business each YA, and S$50,000 per individual IPC for each calendar year. This Scheme is available for services carried out from 1 July 2016 to 31 December 2021.
Given the range of tax incentives and cash grants to assist businesses in their development, it is not surprising to see so many investors and entrepreneurs flock to the country to set up various companies or corporate entities. Its plethora of business support schemes (combined with an efficient legal system and business policies) makes Singapore a welcoming haven for all businesses, big or small.
If you need assistance in taking care of your business taxes, OneStop Professional Services offers a myriad of taxation services to address all your needs. We are a highly trusted audit firm that specialises in accounting, corporate financing, financial outsourcing, company incorporation services, and taxation. With our knowledge of the major tax incentive schemes in the country, we can help you make the right decisions that will lead your business to absolute growth.