Singapore Tax Exemptions 101: How New Companies Can Save on Corporate Taxation
Singapore is one of the most business-friendly countries in the world, with a low and stable corporate tax rate of 8.5%. However, new companies can take advantage of various tax exemptions to further reduce their tax liability. In this article, we will explore the different tax exemptions available to new companies in Singapore and how they can benefit from them.
What are Tax Exemptions?
Tax exemptions are special provisions in the tax laws that allow certain types of income or transactions to be exempt from taxation. In the case of new companies in Singapore, tax exemptions can help reduce their tax liability and increase their profitability.
Types of Tax Exemptions Available to New Companies in Singapore
There are several types of tax exemptions available to new companies in Singapore, including:
- New Start-up Tax Exemption: This exemption is available to new companies that have a tax residency in Singapore and have not been previously taxed in Singapore. The exemption allows companies to exempt 75% of their first S$100,000 of taxable income, and 50% of their taxable income above S$100,000.
- Qualifying Debt Financing Exemption: This exemption is available to companies that have borrowed debt financing from approved financial institutions. The exemption allows companies to exempt interest income from the debt financing from taxation.
- Qualifying Foreign-sourced Income Exemption: This exemption is available to companies that have received foreign-sourced income, such as dividends, interest, and royalties. The exemption allows companies to exempt the foreign-sourced income from taxation.
- Research and Development (R&D) Tax Exemption: This exemption is available to companies that have conducted R&D activities in Singapore. The exemption allows companies to exempt 100% of their R&D expenses from taxation.
How to Claim Tax Exemptions
To claim tax exemptions, new companies in Singapore must first register for a tax account with the Inland Revenue Authority of Singapore (IRAS). They must then submit their tax return and claim the exemptions they are eligible for.
Companies must also keep accurate records of their income and expenses, as well as any documents related to their tax exemptions. This includes records of their debt financing, foreign-sourced income, and R&D expenses.
Benefits of Tax Exemptions
Tax exemptions can provide significant benefits to new companies in Singapore, including:
- Reduced Tax Liability: Tax exemptions can help reduce a company’s tax liability, allowing it to retain more of its profits and invest in its business.
- Increased Profitability: By reducing a company’s tax liability, tax exemptions can increase its profitability and competitiveness in the market.
- Improved Cash Flow: Tax exemptions can help improve a company’s cash flow by reducing its tax liability and allowing it to retain more of its profits.
Conclusion
Tax exemptions can be a valuable tool for new companies in Singapore, helping them to reduce their tax liability and increase their profitability. By understanding the different types of tax exemptions available and how to claim them, new companies can take advantage of these benefits and achieve long-term success in the market.
FAQs
Q: What is the new start-up tax exemption?
A: The new start-up tax exemption is a tax exemption available to new companies that have a tax residency in Singapore and have not been previously taxed in Singapore. The exemption allows companies to exempt 75% of their first S$100,000 of taxable income, and 50% of their taxable income above S$100,000.
Q: How do I claim the new start-up tax exemption?
A: To claim the new start-up tax exemption, companies must register for a tax account with the IRAS and submit their tax return. They must also keep accurate records of their income and expenses, as well as any documents related to their tax exemption.
Q: What is the qualifying debt financing exemption?
A: The qualifying debt financing exemption is a tax exemption available to companies that have borrowed debt financing from approved financial institutions. The exemption allows companies to exempt interest income from the debt financing from taxation.
Q: How do I claim the qualifying debt financing exemption?
A: To claim the qualifying debt financing exemption, companies must register for a tax account with the IRAS and submit their tax return. They must also keep accurate records of their debt financing and interest income.
Q: What is the qualifying foreign-sourced income exemption?
A: The qualifying foreign-sourced income exemption is a tax exemption available to companies that have received foreign-sourced income, such as dividends, interest, and royalties. The exemption allows companies to exempt the foreign-sourced income from taxation.
Q: How do I claim the qualifying foreign-sourced income exemption?
A: To claim the qualifying foreign-sourced income exemption, companies must register for a tax account with the IRAS and submit their tax return. They must also keep accurate records of their foreign-sourced income and any documents related to their tax exemption.
Q: What is the R&D tax exemption?
A: The R&D tax exemption is a tax exemption available to companies that have conducted R&D activities in Singapore. The exemption allows companies to exempt 100% of their R&D expenses from taxation.
Q: How do I claim the R&D tax exemption?
A: To claim the R&D tax exemption, companies must register for a tax account with the IRAS and submit their tax return. They must also keep accurate records of their R&D expenses and any documents related to their tax exemption.
