BSL Bulletin

Singapore offers many attractive benefits to set up businesses and operations in its shores. We are currently ranked second in 2017 by World Bank in the Ease of Doing Business as well as our Singapore Changi Airport has been ranked number one globally for the past 6 years.

It has one of the lowest corporate tax rates in the region at 17%. It offers many tax incentives and cash grants in particular to small and medium sized businesses. One of its incentives is the Start Up Tax Exemption Scheme.

Start Up Tax Exemption scheme for newly set up companies

To enable local businesses and startups to grow and establish a base in Singapore, the Start Up Tax Exemption Scheme (“SUTES”) was introduced in year of assessment 2005.

Under SUTES, a newly incorporated company that meets qualifying conditions enjoys the following tax exemptions during the first three years of assessment.

YA 2020 onwards

• 75% tax exemption on the first S$100,000 chargeable income that is subject to prevailing corporate tax rate
• 50% further tax exemption on the next S$100,000 chargeable income that is subject to prevailing corporate tax rate

This provides a maximum tax exemption amounting to S$125,000 in each of the first three years of assessments.

YA 2019 and before

• 100% tax exemption on the first S$100,000 chargeable income that is subject to prevailing corporate tax rate
• 50% further tax exemption on the next S$200,000 chargeable income that is subject to prevailing corporate tax rate

This provides a maximum tax exemption amounting to S$200,000 in each of the first three years of assessments.

SUTES is applicable to all startup companies in Singapore. However, SUTES will not be applicable to companies whose principal activities comprise investment holding or that of developing properties for sale, investment or both. The SUTES is not applicable to such companies on the basis that investment holding companies derive passive income and property investment companies are specifically set up for property businesses.

Furthermore, to be eligible the company must be:

• incorporated in Singapore,
• tax resident for that year of assessment in Singapore, and
• the number of shareholders of the company must not exceed 20 in that year of assessment where: all the shareholders are individuals or at least 10% of the ordinary shares are held by an individual.

The intent of SUTES is to promote the spirit of entrepreneurship so that the local businesses can move to the next level. The government wants to give a leg up to new startups by reducing their cost of operations by providing the tax exemption in setting up as a company.

Even after the first three years of assessments, the following partial tax exemption will be applicable.

From YA 2020

• 75% tax exemption on the first S$10,000 chargeable income
• 50% further tax exemption on the next S$190,000 chargeable income

This will provide a maximum tax exemption amounting to S$102,500 on the first $200,000 chargeable income.

YA 2019 and before

• 75% tax exemption on the first S$10,000 chargeable income
• 50% further tax exemption on the next S$290,000 chargeable income

This will provide a maximum tax exemption amounting to S$152,500 on the first $300,000 chargeable income.

One tier tax system

Another benefit of setting up as a company in Singapore is that the after tax profits that are distributed as dividends to the shareholders are tax exempt in the hands of the shareholders regardless whether they are paid to local or foreign shareholders. In other words, the tax is paid only once at the corporate level. The one tier dividend received by the shareholder from the Singapore company is tax exempt in the hands of the shareholders.

Productivity Solutions Grant

For local businesses particularly in the retail, food, logistics, precision engineering, wholesale and landscaping industries, the Productivity Solutions Grant (“PSG”) will allow sector specific solutions in terms of digital customer relationship management and human resource management systems, etc. PSG will provide up to 70% funding support. For example, for food or restaurant operators looking to automate their ordering and payment systems, can apply for PSG cash grant to improve their productivity and reduce the reliance on manpower through digitalization of their work processes.

With this in mind the Government has set aside $110m as initial funding to cater for PSG to needful businesses.

Expanding overseas

Singapore also encourages companies to expand overseas. With this intent a Singapore company is allowed to claim 200% tax deduction on qualifying expenses incurred on overseas expansion up to a cap of S$100,000. The qualifying expenses include:

• Market surveys and feasibility studies.
• Overseas trade offices.
• Overseas trade fairs.
• Advertising in approved local trade publications.
• Manpower expenses for Singaporeans posted overseas.
• Overseas advertising and promotional campaigns.

The above are some of the benefits that have been highlighted in the article. There are many more. Singapore offers a stable government, great infrastructure and a very efficient and easy to do business environment.