Establishing a business in Singapore can be an attractive prospect for entrepreneurs and investors alike. The country’s business-friendly environment, skilled workforce, and low-tax regime make it an attractive destination for companies looking to set up shop. One of the key incentives for new companies is the Corporate Tax Exemption for companies in their first three years, also known as the “Start Strong, Save Big” scheme.
This scheme is designed to support new companies in their early years, providing them with a tax break that can help them build a strong foundation for growth. The exemption is applicable to all new companies that are registered in Singapore and meet the eligibility criteria. In this article, we will delve into the details of this scheme, its benefits, and how it can benefit your business.
The Eligibility Criteria
To be eligible for the Corporate Tax Exemption scheme, a company must meet the following criteria:
- The company must be a new entity, incorporated in Singapore
- The company must be engaged in a qualifying business, which includes most types of businesses, including manufacturing, services, and trading
- The company must have an annual turnover of not more than SGD 5 million
- The company must have a minimum paid-up capital of SGD 50,000
If your company meets these criteria, you are eligible to apply for the Corporate Tax Exemption scheme.
The Tax Exemption
Under the scheme, new companies are exempt from paying corporate tax for the first three years of operation. This means that you will not have to pay any income tax on your company’s profits during this period.
The exemption is applicable to the company’s taxable income, which is calculated as the company’s gross profit minus its operating expenses, interest, and other expenses. The exemption is capped at SGD 300,000 per year, meaning that you will not pay tax on profits up to this amount.
After the three-year exemption period, your company will become subject to the standard corporate tax rate of 8.5% on its taxable income.
Benefits of the Scheme
The Corporate Tax Exemption scheme offers several benefits to new companies in Singapore. Here are some of the key advantages:
- Reduced Tax Liability: The exemption allows you to reduce your company’s tax liability, freeing up more funds for investment and growth.
- Increased Cash Flow: By reducing your tax liability, you will have more cash flow available to invest in your business, hire more staff, or expand into new markets.
- Increased Competitiveness: The exemption can help you compete more effectively with established businesses, as you will have more funds available to invest in your business.
- Simplified Tax Compliance: The exemption is a straightforward scheme, with minimal compliance requirements, making it easy to manage your company’s tax affairs.
How to Apply
To apply for the Corporate Tax Exemption scheme, you will need to submit an application to the Inland Revenue Authority of Singapore (IRAS) within three months of your company’s incorporation.
You will need to provide the following documents to support your application:
- A copy of your company’s business plan
- A copy of your company’s articles of incorporation
- A copy of your company’s financial statements for the first year of operation
Once your application is approved, you will need to file your company’s tax returns with the IRAS on an annual basis, and provide any required supporting documentation.
Conclusion
The Corporate Tax Exemption scheme for new companies in Singapore is a valuable incentive that can help you build a strong foundation for your business. By reducing your company’s tax liability, you can increase your cash flow, increase your competitiveness, and simplify your tax compliance requirements. If your company is eligible for the scheme, we recommend applying as soon as possible to take advantage of this valuable incentive.
FAQs
Q: What is the minimum paid-up capital required for eligibility?
A: SGD 50,000.
Q: What is the maximum amount of taxable income that can be exempted?
A: SGD 300,000 per year.
Q: Do I need to file a tax return if my company is exempt from tax?
A: Yes, you will still need to file a tax return with the IRAS on an annual basis, even if your company is exempt from tax.
Q: Can I apply for the scheme if my company is already incorporated?
A: No, the scheme is only applicable to new companies that are incorporated in Singapore.
Q: What happens to my company’s tax status after the three-year exemption period?
A: Your company will become subject to the standard corporate tax rate of 8.5% on its taxable income.
