New to the Game? A Guide to Singapore’s Corporate Tax Exemptions and Reliefs for Startups and Entrepreneurs
Singapore, a global financial hub, has been a popular destination for startups and entrepreneurs to set up their businesses. The country offers a range of benefits, including a favorable corporate tax regime, to attract foreign investors and entrepreneurs. In this article, we will guide you through the various corporate tax exemptions and reliefs available to startups and entrepreneurs in Singapore.
What is a Startup in Singapore?
In Singapore, a startup is defined as a business entity that is less than three years old and has an annual revenue of less than SGD 1 million. Startups can be either a sole proprietorship, partnership, limited liability partnership (LLP), or a private limited company (Pte Ltd).
Corporate Tax Rates in Singapore
The standard corporate tax rate in Singapore is 8.5%. However, startups and small and medium-sized enterprises (SMEs) can enjoy a lower tax rate of 5% on their first SGD 100,000 of normalized profit. This is known as the “Small and Medium Enterprise (SME) Tax Exemption.”
Small and Medium Enterprise (SME) Tax Exemption
The SME Tax Exemption provides a tax exemption of 100% on the first SGD 100,000 of normalized profit for SMEs. This exemption is available for the first three consecutive years of assessment, provided the company meets certain conditions, such as:
- The company is incorporated in Singapore.
- The company is not a housing developer or a hotel.
- The company has a maximum share capital of SGD 4 million.
Startup SG Equity Investment Scheme
The Startup SG Equity Investment Scheme is a tax exemption scheme that provides tax relief to startups that receive investments from venture capital funds, angel investors, or family offices. The scheme aims to encourage startups to raise funds from these sources and grow their businesses.
- The scheme provides a tax exemption of 100% on the capital gain arising from the disposal of shares in the startup.
- The scheme is available for startups that have a minimum of 50% of their shares held by the investor.
Research and Development (R&D) Tax Relief
The R&D Tax Relief provides a tax deduction of 250% of the qualifying R&D expenditure incurred by the company. This relief is available for companies that incur R&D expenditure on activities such as:
- Research and development projects.
- Experimental development projects.
- Design and development of new products or processes.
Conclusion
Singapore offers a range of corporate tax exemptions and reliefs to startups and entrepreneurs, including the SME Tax Exemption, Startup SG Equity Investment Scheme, and R&D Tax Relief. These schemes are designed to encourage entrepreneurship, innovation, and growth in the country. By understanding these schemes, startups and entrepreneurs can plan their tax strategy and make the most of these benefits.
FAQs
Q: Who is considered a startup in Singapore?
A: A startup in Singapore is defined as a business entity that is less than three years old and has an annual revenue of less than SGD 1 million.
Q: What is the standard corporate tax rate in Singapore?
A: The standard corporate tax rate in Singapore is 8.5%.
Q: How does the SME Tax Exemption work?
A: The SME Tax Exemption provides a tax exemption of 100% on the first SGD 100,000 of normalized profit for SMEs. This exemption is available for the first three consecutive years of assessment, provided the company meets certain conditions.
Q: What is the Startup SG Equity Investment Scheme?
A: The Startup SG Equity Investment Scheme is a tax exemption scheme that provides tax relief to startups that receive investments from venture capital funds, angel investors, or family offices.
Q: How does the R&D Tax Relief work?
A: The R&D Tax Relief provides a tax deduction of 250% of the qualifying R&D expenditure incurred by the company.
