5 Effective Ways to Reduce Corporate Tax in Singapore

Singapore has emerged as a global hub for businesses thanks to its legislative practices that align with international commerce policies, enticing companies to set up shop on the island. The tropical island not only legally protects the intellectual property of businesses, it also gives further corporate tax rebates to entrepreneurs seeking to launch and grow their operations in the Asia-Pacific region.

However, navigating the intricacies of corporate tax exemptions in Singapore can be challenging, and the tax costs can still significantly impact your bottom line. Here are five practical strategies to make informed decisions about your corporate tax deductions in Singapore.

Tip #1: Take Advantage of Corporate Tax Exemption Schemes in Singapore

Contrary to the common myth that corporate tax in Singapore is exceptionally high, the tax rate in the country is set at a healthy 17% (a lower rate compared to other developed countries). Furthermore, Singapore’s Tax Exemption Scheme (TES) offers significant concessions for startups and qualifying companies incorporated in the country. Introduced in 2005 and revised in 2020, the TES provides a welcome boost to fledgling businesses.

New startups can enjoy hefty corporate tax rebates within their first 3 consecutive Year of Assessment (YA) with a 75% exemption on the first $100,000 of normal chargeable income, followed by a further 50% corporate tax exemption in Singapore on the next $100,000.

While overseas companies and their Singapore branches can’t claim these startup grants, they can still benefit from the partial tax exemption scheme. This scheme offers a 75% exemption on the first $10,000 of normal chargeable income, followed by a further 50% exemption on the next $190,000.

Tip #2: Double Tax Agreements for Corporate Tax Exemptions In Singapore

Operating a business that spans multiple borders may lead to double taxation, especially when your company earns revenue across different countries. However, Singapore’s Avoidance of Double Tax Agreement (DTA) scheme offers a solution for foreign companies with local branches to reduce their corporate tax in Singapore. Under this treaty, companies can avoid paying corporate taxes on foreign income from a treaty country.

Beyond the DTA benefits, companies can also leverage the Double Tax Deduction for Internationalisation Scheme (DTDi) to further reduce their corporate tax burden. Some qualifying expenses for corporate tax rebates under the DTDi include:

• Overseas business development trips/missions
• Overseas investment study trips/missions
• Overseas trade fairs

This programme offers valuable support for companies seeking to expand their international footprint, with the exemption valid for YA from 2019 to 31 December 2025, and capped at $150,000 per YA. By taking advantage of these tax breaks, businesses can free up resources to invest in international marketing and sales initiatives.

Tip #3: Use Digital Tools to File Corporate Tax Rebates

Filing corporate taxes may be complex, but digital tools are one of the many ways to simplify the process. Digital accounting software can hasten corporate tax filing with the following:

• Reduced Time and Error-Free Filing: Digital platforms can streamline the Singapore corporate tax filing process, reducing the time needed to prepare and submit documents. Such platforms translate to indirect cost savings on corporate tax by minimising the resources allocated to tax filing. Additionally, these platforms often include built-in error checks, reducing the risk of mistakes that could lead to penalties and additional tax liabilities.
• Improved Internal Compliance: Digital tax solutions can enhance the quality and efficiency of internal compliance processes. By automating data entry and calculations, these platforms minimise the need for manual revisions and audits, saving valuable time and resources, translating to better internal control over financial data and reducing the risk of non-compliance issues down the line.

Ultimately, the slew of corporate tax exemptions, concessions, and established digital tools are key factors in enticing businesses to build their hub here. Yet, the benefits also create a dilemma, as it becomes difficult to navigate and apply for specific tax rebates that are relevant to different corporate entities.

Instead, businesses can explore external professional services to file their corporate taxes. These services have a wealth of experience in corporate tax filing, letting them manage your corporate tax portfolio in Singapore efficiently and allowing you to divert your company’s resources elsewhere.

Optimise Your Corporate Tax With Professional Experts 

Professional accounting services in Singapore offer another route to optimising your corporate tax filing process. Other than being well-versed with the latest developments on Singapore’s corporate tax rate, leveraging corporate income tax services allows you to identify relevant schemes to maximise your corporate tax rebates, utilise specific deductions to increase your corporate tax exemptions in Singapore, and even negotiate on behalf of your company with IRAS, which is a crucial consideration when looking for services during tax season.