Unlocking Savings: A Comprehensive Guide to Partial Tax Exemptions for New Companies in Singapore
As a new company in Singapore, navigating the complex world of taxes can be daunting, especially when it comes to understanding the various exemptions and reliefs available. One such exemption is the partial tax exemption scheme, which can help reduce your company’s tax liability and increase your bottom line. In this article, we will provide a comprehensive guide to help you understand the partial tax exemption scheme and how to unlock its benefits for your new company in Singapore.
What is the Partial Tax Exemption Scheme?
The partial tax exemption scheme is a tax incentive introduced by the Singapore government to encourage new companies to set up and operate in the country. Under this scheme, new companies are exempt from paying tax on a portion of their taxable income, which can translate to significant savings. The scheme is designed to promote entrepreneurship, innovation, and job creation in Singapore.
Eligibility Criteria
To be eligible for the partial tax exemption scheme, your company must meet certain criteria, including:
- Be a new company, incorporated in Singapore
- Have at least 30% local shareholding (i.e., at least 30% of the company’s shares must be held by Singaporean citizens or permanent residents)
- Have a minimum annual revenue of SGD 1 million (approximately USD 750,000) in the first three years of operation
How Does the Partial Tax Exemption Scheme Work?
Under the partial tax exemption scheme, new companies are exempt from paying tax on a portion of their taxable income. The exemption is calculated as follows:
- First SGD 100,000 (approximately USD 75,000) of taxable income is fully exempt
- Next SGD 200,000 (approximately USD 150,000) of taxable income is exempt at a rate of 50%
- Any remaining taxable income above SGD 300,000 (approximately USD 225,000) is taxed at a rate of 8.5%
Benefits of the Partial Tax Exemption Scheme
The partial tax exemption scheme offers several benefits to new companies in Singapore, including:
- Reduced tax liability: By exempting a portion of taxable income, the scheme can help reduce your company’s tax liability and increase your bottom line
- Increased cash flow: With reduced taxes, you can retain more cash and direct it towards business growth and expansion
- Incentivizes entrepreneurship: The scheme encourages entrepreneurship and innovation by providing a competitive advantage for new companies in Singapore
Conclusion
The partial tax exemption scheme is an attractive incentive for new companies in Singapore, offering significant tax savings and benefits. By understanding the scheme’s eligibility criteria, how it works, and its benefits, your new company can unlock its potential and thrive in the competitive Singaporean market. If you are considering setting up a new company in Singapore, we recommend consulting with a tax professional to ensure you are taking full advantage of this scheme and other available tax incentives.
FAQs
- Q: Can a company that has already been operating in Singapore apply for the partial tax exemption scheme?
A: No, the scheme is only available to new companies that meet the eligibility criteria. - Q: What is the duration of the partial tax exemption scheme?
A: The scheme is generally available for a period of three years from the company’s date of incorporation. - Q: How do I apply for the partial tax exemption scheme?
A: You can apply for the scheme by submitting a notification to the Inland Revenue Authority of Singapore (IRAS) along with the necessary documentation. - Q: What are the penalties for non-compliance with the partial tax exemption scheme?
A: Non-compliance with the scheme can result in penalties, fines, and even revocation of the scheme’s benefits.
