Get In Touch!
IRAS Tax Incentives

IRAS tax incentives for companies based in Singapore

Singapore has always encouraged its citizens to become entrepreneurs, and at the same time been active in attracting foreign business to the island state through foreign direct investments (FDI). Business…

Singapore has always encouraged its citizens to become entrepreneurs, and at the same time been active in attracting foreign business to the island state through foreign direct investments (FDI). Business owners are provided incentives via various initiatives started by a number national agencies in their respective fields, to take the plunge. Of interest is the Inland Revenue Authority of Singapore or the IRAS, which has played a vital role in making it more enticing for corporations considering the option of expanding to Singapore as well as people starting a new business.

Low Corporate Tax Rates

The country is among those with the lowest corporate tax rates globally at a record 17 percent. Many organisations can now place more focus on improving the business and making more profits to expand and grow. In comparison with other nations, Singapore is among those that offer the better rates. These other countries include the US, whose rate stands at 40 percent. In the UK, for instance, the rate is around 20 percent. Australia seems to be on a different level, standing at 30 percent.

The corporate tax rate in Singapore has been going down for the past ten years. In 2005, it fell from 20% to around 18% three years later. It further reduced to 17% in 2010. The reduced tax rate has managed to attract multiple MNCs to pitch camp in Singapore. The low tax rate has also led many entrepreneurs to start businesses in the country.

Lucrative Policies and Grants

Apart from the reduced tax brackets, the IRAS has set up a series of tax incentives to ensure that Singapore attracts more businesses.

Some of the guidelines include the Tax Exemption Scheme For New Start-Up Companies. New start-ups are exempted on the initial S$100,000 normal chargeable revenue. The firms also only pay half on their next S$200,000 on their normal chargeable revenue. All this is valid for the initial three years of running the business. The agency appreciates that all new businesses undergo this critical phase before gaining stability. It is for this reason that the companies are given a helping hand on their taxes to ease the burden. This scheme applies to all organisations that do not engage in investment operations and are not working to develop any form of property to be sold.

Another plan set up to improve business conditions in Singapore is the corporate tax rebate, which helps business owners defray increasing operation costs. The rebate was initially placed at 30 percent, but in order to address challenges arising from the market conditions. The government improved the policy in the year 2016. For the Years of Assessments (YA) 2016 and 2017, all corporations get a 50 percent rebate on all corporate tax. The rebate is capped at S$20,000 per YA. In assisting firms by cutting down the corporate tax load, they are better placed to improve their liquidity.

Aside from tax incentives, the Singapore tax agency has other policies to help companies in various ways. For instance, the IRAS shares 40 percent of the pay increases allocated to Singapore citizens who earn up to S$4,000. Although it is not a long-term measure, the Wage Credit Scheme (WCS) has helped many firms to deal with increasing cost of labour.

Another grant issued to businesses is the Productivity and Innovation Credit (PIC) scheme. It defrays businesses operation costs as the state offsets 40 percent of the qualifying expenses for companies.

Another tax incentive of interest is the Mergers & Acquisitions (M&A) scheme catered to the larger corporations, easing the way for them to expand through acquisitions and mergers. The state has increased the ceiling to qualify for this policy from S$20 million to S$40 million. It promises a 25 percent levy reduction on some transactions as well as relief on stamp duty.

The grants and incentives issued by the Singapore government are meant to support business growth in Singapore. It aims to liven up the local business scene as well as attract foreign investments. In such a business-friendly environment, it is now on the entrepreneurs and corporations to make the obvious choice.

For more information on company incorporation services and accounting & tax services, please contact us or book your appointment online.

Table of Contents