With effect from 2010, Singapore corporate income tax rate has further reduced from 18% to 17%, being one of the lowest tax rates in the world. Singapore
Government has declared a new start-up tax exemption and partial tax exemption for newly incorporated and existing companies:
Tax Exemptions for Newly Start-up Companies in Singapore vs Malaysia
(RM 300K x 17%) – (SGD 100k x 4.25% x3)
[(RM 500k – RM 300k) x 17% + (RM 100k x 24%)] – [(SGD 200k – SGD 100k) x 8.5% x 3]]
RM 300k to RM 500k @ 17% ; > RM 500k @ 24%
4.3% tax on first S$100K chargeable income
For a newly incorporated company, the corporate income tax rate is 4.3% on the first S$100k (˜RM300k) of chargeable income for the first 3 years of
8.5% tax on chargeable income of above S$100K up to S$200K
The newly incorporated companies are continued to enjoy for the partial tax exemption which effectively translates to about 8.5% tax rate on chargeable
income of above S$100,000 up to S$200,000 per annum. The chargeable income above S$200,000 will be charged at the normal headline corporate tax rate of
Tax Exemptions for Existing Companies in Singapore vs Malaysia
(RM 30K x 17%) – (SGD 10k x 4.25% x3)
[(RM 500k – RM 30k) x 17% + (RM 100k x 24%)] – [(SGD 200k – SGD 10k) x 8.5% x 3]]
RM 300k to RM 500k @ 17% ; > RM 500k @ 24%
The 4th years of assessment and onwards, the companies pay only 4.25% tax on their first S$10,000 of chargeable Income and 8.5% for the next S$190,000.
The chargeable income above S$200,000 will be charged at the normal headline corporate tax rate of 17%.
2) Engage in TRIANGULAR or TETRAGONAL trade
The companies engaged in international transactions among two or more countries, for instance, the companies purchase goods from e.g. China, and then
sell them to e.g. America or trade domestically, Malaysia. This is when the companies need a lower tax trading company (2) to act as the intermediary to
issue invoice and packing list in order to strengthen their competitive power in the international or local market.
3) Government Incentives
Overview of government incentives
Regional Headquarters (RHQ) Award
Reduced corporate tax rate of 15% on incremental income from qualifying HQ activities.
International Headquarters (IHQ) Award
Reduced corporate tax rates of (0%, 5% or 10%) on qualifying income could be considered in discussion with the Singapore Economic Development Board
Mergers & Acquisitions (M&A) Scheme
The acquiring company is granted the following benefits:
M&A allowance equals to 25% (capped at S$10 million) of the total acquisition value capped at S$40 million per YA.
Stamp duty relief capped at S$80,000 for each financial year. The relief is granted on any contract, agreement or transfer documents pertaining to the
acquisition of the ordinary shares in the target company.
Double Tax Deduction (DTD) on the transaction cost capped at S$100,000 incurred during the share acquisition process.
International Growth Scheme (IGS)
Qualifying Singapore companies will enjoy a concessionary tax rate of 10% for a total of 5 years on their incremental income from approved qualifying
Double Tax Deduction (DTD) for Internationalisation Scheme
Up to 200% tax deduction on qualifying expenditure incurred on qualifying market expansion and investment development activities per YA.
The qualifying expenditures include:
Qualifying salary expenses incurred for employees posted overseas in an overseas entity
Overseas business development trips and missions
Overseas investment study trips and missions
Overseas trade fairs
Local trade fairs approved by IE Singapore or STB
Market Readiness Assistance (MRA) grant
Funding support of 70% of eligible costs with a yearly cap of S$20,000 per company. The eligible costs for marketing activities including overseas
market set-up, business matching, market promotion, and other.
Global Trader Programme
A concessionary corporate tax rate of 5% or 10% for a renewable 3 or 5-year period on qualifying transactions/trades in qualifying commodities, futures
and derivatives (including structured commodity financing).
Manufacturing and services
Tax exemption on income from qualifying activities.
Development & Expansion Incentive (DEI)
Reduced tax rate from 5% to 15% on incremental income from qualifying activities.
Investment Allowance (IA)
Allowance (on top of normal capital allowance) on a percentage of approved fixed capital expenditure.
Integrated Investment Allowance (IIA)
Additional allowance on fixed capital expenditure incurred on qualifying productive equipment placed with an overseas company for an approved
Land Intensification Allowance (LIA)
Initial allowance of 25% and annual allowance of 5% on qualifying capital expenditure incurred for the construction or renovation/extension of a
qualifying building or structure. Annual allowances of 5% are granted until total allowance amounts to 100%of qualifying capital expenditure.
Automation Support Package (under SPRING)
Capability Development Grant (CDG)
Investment Allowance (IA)
Enhanced SME Equipment Loan
Up to S$1 million grant support for the roll-out or scaling-up of automation projects at up to 50% of the qualifying cost.
Qualifying projects may be eligible for an IA of 100% on the amount of approved capital expenditure, net of grants. The approved capital expenditure is
capped at S$10 million per project.
Under SPRING’s Local Enterprise Finance Scheme (LEFS), the government’s risk-share with participating financial institutions will be increased from 50%
to 70% for qualifying projects undertaken by SMEs. The LEFS will also be expanded to cover equipment loan for non-SMEs at 50% risk-share with participating
financial institutions. Local SMEs can apply for equipment and factory loans of up to S$15 million.
Financial and Treasury
Finance & Treasury Centre (FTC)
Reduced corporate tax rate of 8% on income derived from qualifying services/ activities. Withholding tax exemption on interest payments on loans from
banks and approved network companies for FTC activities.
Financial Sector Incentive (FSI)
Reduced tax rate of 5% for qualifying Enhanced Tier financial activities and 12% or 10% for Standard Tier financial activities.
Research and Development (R&D) and intellectual property (IP) management
Research Incentive Scheme for Companies (RISC)
Co-funding to encourage and assist businesses to set up R&D centres in Singapore and develop in-house R&D capabilities in strategic areas of
Supportable project costs include expenditure in the following:
Manpower cost (30% to 50% support)
Equipment, materials, consumables and software (30% support)
Singapore-based professional services (30% to 50% support)
IPRs, e.g. licensing, royalties, technology acquisition (30% support)
Initiatives in New Technology (INTECH)
Co-funding to support manpower development in the application of new technologies, industrial R&D and professional know-how. 30% support for qualifying
items for either trainee OR training cost, subjected to various sub-caps.
Approved Foreign Loan Incentive (AFL)
Reduced withholding tax of 0%, 5% or 10% on interest payments on loans taken to purchase productive equipment.
Approved royalties incentive (ARI)
Reduced or nil withholding tax rate on approved royalties, fees or contributions to research and development costs made to a non-tax resident.
Writing-down allowances for IP acquisition (S19B)
Automatic 5/10/15-year write-down if legal and economic ownership of IP are acquired. EDB’s approval is required if only economic ownership of IP rights
Maritime, shipping and logistics
Maritime Sector Incentive (MSI) – Singapore Registry of Ships (MSI-SRS) and Approved International Shipping (MSI-AIS)
Tax exemption on qualifying shipping income from operating Singapore and foreign-flagged ships, provision of specified ship management services, and
income from foreign exchange and risk management activities which are carried out in connection with or incidental to the operations of ships for 5 or 10
MSI – Shipping Related Support Services (MSI-SSS) Award
Concessionary tax rate of 10% on the incremental income derived from the provision of the following qualifying approved shipping-related support
services for a 5-year renewable period:
Forward freight agreement (FFA) trading;
Freight forwarding and logistics services; and
Corporate services rendered to qualifying approved related parties who are carrying on business of shipping – related activities.
MSI – Maritime Leasing (MSI-ML) Award
Tax concessions for up to 5 years on qualifying leasing or management income.
Maritime Innovation & Technology (MINT) Fund
To promotes and encourages upstream research, product and solution development relevant to the maritime industry in Singapore.
Co-funding up to 50% of total project costs consisting of manpower, equipment, material, professional services, IP and other ancillary costs.
4) TAX EXEMPTION on Dividend declared from Singapore
Dividend declared out of the profit derived from Singapore Company and received in Malaysia is exempted from tax(3).
5) AUDIT EXEMPTION of a Singapore Company
A company incorporated on or after 1 July 2015, if a private company that fulfils at least two of the following three quantitative criteria in each of
the immediate past two financial years is exempted from audit (4) : (a) Total annual revenue of not more than SGD 10 million; (b) Total assets of not more
than SGD 10 million; (c) Number of employee of not more than 50.
a) It is incorporated in Singapore and a tax resident of Singapore for that Year of Assessment. b) It has no more than 20
shareholders throughout the basis period relating to that Year of Assessment and all its shareholders are individuals throughout the basis period relating
to that Year of Assessment; or there is at least one individual shareholder with a minimum of 10% shareholding. c) Its principal activity is not related to
(i) investment holding, or (ii) property developer for sales, investment, or both.
To consider a company as resident in Singapore, the control and management of the business must be exercised in Singapore.
Though the term “control and management” is not clearly defined by authorities, a generally accepted consensus is that it refers to the policy level
decision making at the level of Board of Directors and not the day-to-day decision making and operations.
Section 127 (1) – Exemptions from tax. Any income specified in Part 1 of Schedule 6 shall be exempt from tax. Part 1 Schedule 6,
para 28 (1), Income of any person, other than a resident company carrying on the business of banking, insurance or sea or air transport, for the basis year
of assessment derived from sources outside Malaysia and received in Malaysia Part 1 schedule 6, para 28(1), exempt income of any person derive from sources
outside Malaysia and received in Malaysia (See also exception).
Existing safeguards will however be retained, such as requiring all companies to keep proper accounting records, and empowering
shareholders with at least 5% voting rights to require a company to prepare audited accounts.