Tax Incentives Which Exist in Singapore
Pioneer Tax Incentive
This incentive may be claimed by companies that are part of the manufacturing industry. The companies which are manufacturing approved products or provide approved services may claim the incentive. Such companies can apply for the tax incentive for a duration lasting anywhere between five and 15 years for each qualifying project under this tax incentive. The corporations which benefit from this tax incentive may also apply for post-pioneer profits to be
taxed at a lower rate through the Development and Expansion Incentive. To qualify for this tax incentive, applicants must be creating employment opportunities for Singaporeans, by creating or introducing new skills and expertise in the country, can expand business operations and create economic benefits, and commit to developing all manner of infrastructure during any manufacturing projects.
Development and Expansion Incentive
The Development and Expansion Incentive is only available to companies whose eligibility for the Pioneer Tax Incentive has expired. This tax incentive is intended to be used by businesses involved in business activities that add a high degree of value such as involvement in manufacturing projects. The tax incentive reduces the amount of tax to be paid by an amount of between 5% and 10%. The period over which a business may claim this tax lasts for 40 years.
Corporate Income Tax Rebate
The Corporate Income Tax (CIT) rebate was started in Singapore in 2013. The details of this rebate will differ from year to year and will be mentioned in the Singaporean government’s budget for each particular year. The rebate can be enjoyed by individual taxpayers as well as companies. The primary reasonthe government introduced this rebate is to increase the level of ease of doing business in Singapore to restructure the economy of Singapore to assist in economic growth as well as help in the restructuring effort. In 2020, the rate of the rebate has been set at 25% and the amount which may be claimed has been capped at S$15,000.
Tax Exemption for New Startups
The Singaporean tax authorities also provide a special tax exemption for new businesses and startups in the country within their first three assessment years. This is one of the ways the Singapore’s government increase the level of investment and entrepreneurship within the country. This scheme is available to companies in any industry except for those which are involved in the development of properties for sale. It provides a 75% exemption on the first S$100,000 of normal chargeable income that has been earned as well as a subsequent 50% exemption on the next S$190,000 of normal chargeable income earned. However, the startup must satisfy all of the following criteria before it may be deemed eligible for the tax exemption: it must be registered in Singapore, the company must be a tax resident for that assessment year, and the shareholders of the company must not number more than 20 during the relevant assessment year period. This exemption allows entrepreneurs who are interested in starting a company in Singapore to save a notable amount of tax money; this benefit has been provided to them by the country’s generous tax system and authorities which have done much to contribute towards entrepreneurship in Singapore.
Wage Credit Scheme
Employers and creditors alike benefit from the Wage Credit Scheme. Under the scheme, the government of Singapore will co-fund wages of employees who have received up to a 15% wage increase and earn up to a S$5,000 gross monthly salary. Eligible employees are those who have also received Central Provident Fund (CPF) contributions from a single employer for at least the calendar months during the preceding year, have been on the current employer’s payroll for at least three calendar months in the qualifying year, and must not also be the business owner of the entity in question.
The Singaporean government through its tax collection authority IRAS is constantly reviewing the country’s taxation policies including incentives and rebates. Singapore not only offers its taxpayers some of the world’s lowest tax rates; it also provides various exemptions, rebates, and incentives of which any investor or entrepreneur based in Singapore may make use. Thus, it is only to be expected that Singapore has become one of the world’s leading destinations for the establishment of a company. The advantages of operating a Singapore company are truly numerous, and among the most important of these advantages are the associated tax benefits.
Should you require any feedback or assistance with any matter related to taxation in Singapore, do not hesitate to contact us at Paul Hype Page & Co. Our tax experts understand a great deal about taxation in Singapore and will therefore be able to inform you about the latest developments regarding the taxation of companies in Singapore. We will also provide you with information about how you might be able to reduce your tax burden as the owner of a Singapore company.