3 Tax Policies That Make Singapore An Apt Hub For Businesses
Singapore is a world-renowned business hub. As a matter of fact, it is considered one of the best countries to start a business in Asia. Mainly because of its low taxes and numerous incentive programmes, Singapore has become a tax haven for many entrepreneurs and investors inside and outside the country. For foreigners, notably, Singapore offers incredible opportunities for business.
The establishment and incorporation of a company in Singapore seem inviting for many foreign entrepreneurs and investors, primarily thanks to the country’s beneficial tax policies. Here are some of the best tax policies that foreigners can benefit from when they establish their company in Singapore;
1. Progressive tax rates
Singapore has progressive tax rates, where Singaporean residents enjoy progressive personal tax rates ranging from 0 to 22 per cent. Essentially, this means that every resident’s tax rate is proportional to their annual income. So, for individuals who earn less than S$160,000 every year, their tax rates span from 0 to 15 per cent.
On the other hand, for those who earn at least S$160,000 to over S$320,000 annually, their tax rate is expected to be around 18 to 22 per cent. Similarly, for foreigners or non-residents working in Singapore, the range of their tax rate is between 15 to 22 per cent. In essence, having a progressive tax rate is a good thing since it enables people to improve their real spending power without burdening their income.
2. Tax incentives
Singapore has multiple tax incentives to provide financial support to foreign investors. These tax incentives are one reason why many foreigners are convinced to start a business or invest in the country. Here are some of the best tax incentives foreigners can enjoy in Singapore;
- Investment allowance incentive
The Economic Development Board regulates this incentive, allowing businesses to benefit from a tax exemption on fixed capital expenditure, which is 100 per cent. Fixed capital expenditure refers to any expenses obtained by a business to financially support qualifying projects within a period of 5 to 8 years.
The maximum financial support the government agency can offer has a ceiling amount of S$10 million. Some of the qualified projects include research and development, construction, tourism promotion, and energy efficiency. To date, the investment allowance incentives are only granted to businesses until this year (2023).
- Wage credit scheme
As part of the support package of the Singapore government, the wage credit scheme allows governing agencies to co-fund the rise in wages for Singaporean employees who earn a salary of S$4,000 per month. From 2021, the government has been giving 15 per cent of the gross increases in wages for employees who earn up to S$5,000.
- Industry-specific incentives
Besides universal schemes, the Singapore government provides industry-specific incentives to sufficiently address varying business needs. The government agencies that have the responsibility to enact these incentives include the Economic Development Board, Enterprise Singapore, the Monetary Authority of Singapore, and the Inland Revenue Authority of Singapore. The offerings of these agencies differ based on the needs of the specific industries they tend to.
3. Tax exemptions
While Singapore promotes a 17 per cent corporate tax rate as a standard, the government authorises partial tax exemptions for the first chargeable incomes of qualified businesses in the amount of S$200,000. The partial tax exemptions scheme enables businesses to receive a 75 per cent tax exemption for their first chargeable income in the amount of S$10,000. Another 50 per cent may then be applied as tax exemption to the subsequent chargeable income of S$190,000.
For startups, specifically, Singapore has this so-called ‘startup tax exemption scheme’ whose objective is to support budding entrepreneurs and their enterprises in the country. As of 2020, eligible startup companies can enjoy a tax exemption of 75 per cent for their chargeable income of S$100,000 during the first three successive years of transacting business. After this, they can enjoy a 50 per cent tax exemption for their following chargeable income of S$100,000.
Ultimately, there are many reasons why Singapore is a great place to start a business. Aside from having low taxes and progressive tax rates, the Singapore government also offers several tax incentives and exemptions that convince many foreign entrepreneurs and investors to try their business luck in the country. So, if you are planning to start a business this year, you should definitely consider having it in one of the most excellent business hubs in the world – Singapore!
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