CORPORATE INCOME TAX EXEMPTION EXEMPTION MECHANISM IN SINGAPORE

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Among the taxes in Singapore, besides personal income tax, corporate income tax is one of the most concerning tax.

In Singapore, the corporate income tax rate is 17%, applicable to both domestic and foreign businesses. In fact, the income taxes a business has to pay in Singapore is much less than 17%. The reason is that in Singapore, companies can use a variety of incentive programs and mechanisms to legally reduce income tax.

Among them, businesses often apply the following two typical Schemes:

1. Tax Exemption Scheme for New Start-Up Companies

Under this program, newly eligible companies will receive the following tax exemption for the first three consecutive tax years. The tax exemptions for qualifying companies for the first 3 consecutive tax years are as follows (applicable from 2020 onwards):

  • 75% exemption on the first $100.000 of normal chargeable income, and;
  • A further 50% exemption on the next $100.000 of normal chargeable income.

Income TaxesTax rates
0 – 100.0004,25%
100.001 – 200.0008,5%
Over 200.00017%

You will be eligible for this program if you meet the following criteria

  • Company incorporated in Singapore
  • You are a tax resident of Singapore for that tax year
  • The company has a total share capital held directly by no more than 20 shareholders during the base period for that tax year, where:
    • All shareholders are individuals; or
    • There is at least 1 individual shareholder holding at least 10% of the issued ordinary shares of the company

In addition, companies operating in the investment industry (Investment Holding) or companies that undertake property development for sale, investment, or both are not eligible to benefit from this program.

To claim the tax exemption, you need to complete the relevant sections of your Estimated Chargeable Income (ECI) file and Form C-S / Form C-S (Lite) / Form C

2. Partial Tax Exemption Scheme for Companies

All companies are eligible for partial tax exemption (PTE), unless they are claiming the tax exemption for new start-up companies.

  • 75% exemption on the first $10,000 of normal chargeable income; 
  • 50% exemption on the next $190,000 of normal chargeable income.

Income TaxesTax rates
0 – 100.0004,25%
100.001 – 200.0008,5%
Over 200.00017%

Auth. Alice Mac

Read more:

What do accountants in Singapore need to do after a financial year end?

Audit exemption conditions in Singapore

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