With low corporate tax rates, Singapore is a well-known tax haven. Since YA 2010, a company’s chargeable income, whether it be domestic or foreign, is subject to as little as 17% tax.
Singapore is a global hub for entrepreneurs for other reasons besides its skilled accounting services provider and low tax rates. Companies in Singapore have other legal options to reduce their corporate income tax obligations, including through government-introduced programs and grants.
Here are five examples of grants and schemes that assist businesses in further lowering their corporate tax rate. Also you can hire Singapore corporate tax filing service and get advice from them.
- Start-up Exemption Tax
The start-up exemption tax was created to help with the establishment of new businesses in the competitive business sector. This type of tax is imposed during the first three assessment years. The following changes were made to the scheme in 2020:
- 75% on the first $100,000 of a start-up’s taxable income
- 50% on the next $100,000 of a start-up’s taxable income
The following are the requirements to be eligible for Singapore’s start-up tax incentive:
- The company’s registration with ACRA
- Being a Singaporean tax resident
- If your company has more than 20 shareholders, it will no longer be considered as a small or startup (assuming that all of the shareholders are individuals or that at least one individual owns at least 10% of the issued ordinary shares of the company).
- Apart from real estate development and investment holding, the company should operate in any industry.
- Pioneer Certificates Incentive (PC) and Development & Expansion Incentive (DEI)
The objective of these two schemes is to enable companies to grow their operations within Singapore. Businesses can rely on PC and DEI because they offer a concessionary corporate tax rate of 5% or 10%, respectively, on the qualified activities, for those looking to establish regional or global headquarters in Singapore.
It is important for business owners to keep in mind that the PC and the DEI have a 5-year expiration date and that additional extensions will only be granted based on the company’s growth objectives.
The businesses are required to keep detailed records of both qualifying and non-qualifying activities. In these situations, businesses should work with Singaporean accounting firms that offer expert accounting services.
They can be helpful in many ways, such as keeping track of the non-qualifying activities that are crucial when submitting an application for PC and DEI.
The organization must contribute significantly to the Singaporean economy or possess modern capabilities that comply with international standards in order to be eligible for both PC and DEI.
In addition, the organization needs to employ modern technology and have the necessary expertise to deliver reliable and efficient services.
- Regional Headquarters Award (RHA) and International Headquarters Award (IHA)
The Singapore Economic Development Board (EDB) is in charge of overseeing the RHA. The program helps in drawing multinational corporations to establish their regional headquarters in Singapore. For a maximum of three to five years, businesses granted the RHA can benefit from a low corporate tax rate of 15% on the additional revenue from specific qualifying activities. Their ability to maintain and satisfy all requirements for the duration of the award will determine this.
Singaporean companies must meet the following requirements in order to be eligible for the RHA:
The International Headquarters Award (IHA) is also managed by the EDB. Businesses that establish their main office in Singapore are eligible to apply for and receive this award. Due to this, they will be eligible for five to ten percent corporate tax rates in Singapore.
Companies must take the following actions to qualify for this:
- By the end of the third year, there should be approximately ten professionals with a diploma or above and at least seventy-five percent of skilled staff with a high school diploma.
- At the end of the incentive period, a paid-up capital of SGD 200,000 by the end of the first year and SGD 500,000 by the end of the third year.
- By the end of the third year, the first five executive positions will have an average yearly salary of SGD 100,000.
- By the end of the third year, the headquarters must provide three different kinds of services to specific company-owned entities in three other countries besides Singapore.
- By the end of the third year, an additional SGD 2,000,000 in total annual business expenditure in Singapore.
The International Headquarters Award (IHA) is also managed by the EDB. Businesses that establish their main office in Singapore are eligible to apply for and receive this award. They will be eligible for five to ten percent corporate tax rates in Singapore as a result. Companies must take the following actions to qualify for this:
- The organization’s main operations and senior management must be based at the headquarters, which should also have established control protocols and management roles.
- The business needs to be well-known in its sector and strong in terms of market share, assets, capital, and human resources.
- Most of the company’s head office operations will need to relocate to its Singapore office.
- Research & Development (R&D) Expenditure
In Singapore, the R&D expenditure tax inventive scheme is extremely popular as it enables companies to receive tax benefits from their R&D activities.
Most of the businesses are engaged in some capacity in research and development. It is therefore a very helpful tax incentive for businesses.
The program’s qualifying activities include learning new skills, developing more effective goods or procedures, implementing newly acquired technical knowledge in manufacturing facilities, collecting data, and carrying out tests and surveys.
It is an extremely thorough strategy that addresses nearly all R&D-related topics. Certain businesses can even deduct 100% of their taxes from internal research projects.
- DTDi or Double Tax Deduction Scheme Internalisation
Under DTDi, Singaporean businesses can deduct 200 percent of their taxes if they want to expand into foreign markets. This is overseen by Enterprise Singapore, whose goal is to enable entrepreneurs to grow their companies into foreign markets.
According to a breakdown of DTDi, companies can conduct research projects, international trade shows, and business development trips abroad without needing Enterprise Singapore’s approval for the first SGD 150,000.