Singapore has become known as one of the best investment destinations in the world not just because of the fast growing economy and the friendly economic environment but because of the many tax Incentives for entities operating in that country.
In this article we will examine some of the tax Incentives available to companies Operating. In Singapore which you do well to consider when thinking of establishing a business in there.
Some Tax Incentives For Companies In Singapore
1. Pioneer tax incentive
Corporations manufacturing approved products with high technological content or providing qualifying services may apply for tax exemption for five to 15 years for each qualifying project or activity under the pioneer tax incentive. Corporations may apply for their post-pioneer profits to be taxed at a reduced rate under the Development and Expansion Incentive, as discussed below.
2.Development and Expansion Tax Incentive
Under the Development and Expansion Incentive, corporations engaging in new high-value-added projects, expanding or upgrading their operations, or undertaking incremental activities after their pioneer period may apply for their profits to be taxed at a reduced rate of not less than 5% for an initial period of up to ten years. The total tax relief period for each qualifying project or activity is subject to a maximum of 40 years (inclusive of the post-pioneer relief period previously granted, if applicable
3.Investment allowance Tax Incentive
Under the investment allowance, a tax exemption is granted on an amount of profits based on a specified percentage (of up to 100%) of the capital expenditure incurred for qualifying projects or activities within a period of up to five years (up to eight years for assets acquired on hire-purchase). Investment allowances of 100% of capital expenditure (net of grants) may be granted to businesses seeking to make substantial investment in automation, subject to a cap of SGD 10 million per project.
4. Tax Incentives for internationalisation
The double tax deduction scheme for internationalisation allows companies expanding overseas to claim a double deduction for eligible expenses for specified market expansion and investment development activities. This includes qualifying manpower expenses incurred from 1 July 2015 to 31 December 2025 when Singaporeans or permanent residents of Singapore are deployed to overseas entities.
5. Enterprise Innovation Scheme (EIS) Tax Incentive
For the years of assessment 2024 to 2028, businesses that engage in the following qualifying activities will be allowed a 400% tax deduction for qualifying expenditure:
A) R&D projects conducted in Singapore (capped at SGD 400,000 of qualifying expenditure)
B) IP registration (capped at SGD 400,000 of qualifying expenditure)
C) Acquisition or licensing of IP rights (capped at SGD 400,000 of qualifying expenditure and available only to businesses that generated less than SGD 500 million in revenue in the relevant year of assessment)
D) Employee training (capped at SGD 400,000 of qualifying expenditure)
E) Innovation projects carried out with Polytechnics, the Institute of Technical Education or other qualified partners (capped at SGD 50,000 of qualifying expenditure)
Qualifying businesses may opt to convert the above tax deductions to a cash payout. They would receive, in lieu of the deduction, a non-taxable cash payout of 20% of total qualifying expenditure of up to SGD 100,000 across all qualifying activities, i.e. maximum cash payout of SGD 20,000 per year.
6.Intellectual Property Development Tax Incentive (IDI)
The IDI scheme was introduced to encourage the use and commercialisation of IP arising from R&D activities of the taxpayer. An approved IDI company will be eligible for a reduced tax rate of either 5% or 10% on a percentage of qualifying income derived from the commercialisation of certain IP. The percentage is determined by the modified nexus approach set out in the Action 5 report of the OECD base erosion and profit shifting (BEPS) project. The concessionary tax rate will increase at regular intervals as prescribed in the Income Tax Act.
7. Mergers and acquisitions allowance Tax incentive
The mergers and acquisitions allowance allows a write-off of 25% of the value of qualifying mergers or acquisitions deals executed between1 April 2015 and 31 December 2025. The amount of allowance, to be claimed over five years, is subject to a cap of SGD 5 million (for deals executed between 1 April 2015 and 31 March 2016) or SGD 10 million (for deals executed between April 2016 and 31 December 2025) for all qualifying acquisitions made in the basis period for each year of assessment. This incentive is available to companies that are incorporated, tax resident, and carrying on a business in Singapore. A 200% tax allowance is also granted on transaction costs (capped at SGD 100,000 per year of assessment) incurred on qualifying deals.
8.Financial Sector Incentive (FSI) scheme Tax Incentive
The FSI scheme covers a broad range of financial institutions, including bond intermediaries, derivative traders, fund managers, equity capital market intermediaries, operational headquarters, providers of high-value-added processing services supporting financial activities, providers of trustee and custodian services, and trust management or administration services. Financial institutions that plan to expand their Singapore operations and are prepared to meet various strict qualifying conditions may apply for this incentive.
Under the FSI scheme, income from certain high growth, high-value-added activities, such as services and transactions relating to the bond market, derivatives market, equity market, and credit facilities syndication, may be taxed at 5%, while a broader range of financial activities will qualify for a 13.5% tax rate.
The concessionary tax rates available under the FSI scheme will be revised to either 10% or 13.5% for new awards and renewals of existing awards approved on or after 1 January 2024.
9.Headquarters schemes Tax Incentive
If you have the headquarters of your business in Singapore, then this incentive is for you.
Depending on their level of economic commitments to Singapore, international headquarters can apply for various tax incentives, including tax exemption or concessionary tax rates on qualifying income.
10. Maritime Sector Incentive (MSI) scheme
If your business in Singapore operates in the maritime sector, then you can benefit from this scheme.
The MSI scheme is the umbrella incentive for the maritime sector. Incentives offered include tax exemption for shipping companies and a 10% concessionary tax rate for international freight and logistics operators. Approved ship investment managers are also taxed at 10% on qualifying management-related income. The scheme also includes approved ship investment vehicles, which are tax exempt on their qualifying vessel lease income; approved container investment enterprises, which are taxed at 5% or 10% on qualifying income from container-leasing; and approved container investment management companies, which are taxed at 10% on qualifying management fees.
Qualifying ship operators and lessors under the MSI scheme also enjoy automatic tax exemption on gains from the disposal of vessels, vessels under construction, and new building contracts.
11. Global Trader Programme (GTP) Incentive
International traders are taxed at concessionary rates of 5% or 10% on qualifying income from physical trading, brokering of physical trades, and derivative trading income.
12. Other Tax incentives
Other incentives include tax exemptions for not-for-profit organisations and a concessionary tax rate of 8% for approved aircraft lessors.
13. Income Tax Exemption:
Newly incorporated companies are eligible for a 75% corporate income tax exemption on the first S$100,000 of taxable income for the initial three tax filing years.
14. Low Corporate Income Tax:
Singapore offers a competitive corporate income tax rate at a flat 17%.
For more details on this visit pwc website. Pwc is a reputable international Tax aadvisory and assurance firm.
https://taxsummaries.pwc.com/singapore/corporate/tax-credits-and-incentives
The above information is provided to help you in taking your decision regarding establishing your new business or expanding the already existing one in Singapore.
