One of the lowest Corporation Tax Rates in the World, Singapore’s chargeable Income Tax Rate of 17% draws business owners from throughout the world to establish or grow their operations there.

Singapore offers Corporation Tax Credits to businesses, which vary depending on the years of assessment (YAs). This rate is 40% of corporate tax due for YA 2018 (capped at S$15,000), and 20% of corporate tax payable for YA 2019 (limited at S$10,000).

In addition to the low Corporate Tax Rates, the Singaporean Government also offers subsidies and other programs that can further lower your Business Tax Burden.

Here, we outline Five Primary Schemes:

1. Start-Up Tax Exemption Scheme (SUTE) and Partial Tax Exemption (PTE)

The Singaporean government established the Start-up Tax Exemption Scheme (SUTE) to promote entrepreneurship and the expansion of regional businesses. The most recent version of SUTE, which was unveiled in Singapore’s 2018 Budget, exempts:

• 75 percent on the first S$100,000 of a start-up’s normal chargeable income

• 50 percent on the next S$100,000 of a start-up’s normal chargeable income

These exemptions are valid for the initial three succeeding YAs and start on or after YA2020. A business in Singapore that has only been incorporated for three years or less is considered a “start-up” under this scheme.

In order for a Singaporean business to be eligible for the SUTE scheme, it must:

• Be incorporated in Singapore.

• Possess Singapore tax residency for the relevant YAs.

• Not possess more than 20 distinct stockholders over the relevant YAs. At least one of these individual shareholders must own 10% or more of the stock of the company.

• Be active in any industry, excluding investment management and real estate development (for sale or for investment).

Businesses in Singapore that don’t qualify for SUTE, such as those in the investment and real estate development industries, have been incorporated in Singapore for more than three years, or have more than 20 shareholders, may still be eligible for the Partial Tax Exemption (PTE) scheme.

Company exemptions from the PTE system include:

• 75 percent on the first S$10,000 of normal chargeable income

• 50 percent on the next S$190,000 of normal chargeable income

2. Business and IPC Partnership Scheme (BIPS)

When their workers volunteer, render professional services, or render services (including secondments) to acknowledged Institutions of Public Character (IPCs), they are eligible for a 25% Singapore corporate tax benefit under the Business and IPC Partnership Scheme (BIPS).

IPCs are exempt organizations or officially recognized charities in Singapore that are eligible to issue tax-deductible receipts for donations. They are subject to stricter governance and regulatory compliance requirements than typical charities.

An employee of a company in Singapore must meet the following criteria in order to be eligible for the BIPS scheme:

• Not a director of the business who is also an owner, sole proprietor, partner, shareholder, or a sole proprietor.

• Not working for a holding company for investments

• Incurring costs as a result of voluntary services rendered to IPCs during working hours and on IPC property, namely:
  • Not paid for by the IPC
  • not an expense for the employee’s personal use (i.e. care giving expenses for a family member admitted in an IPC)
  • Not a capital investment (i.e. a one-time donation from a business to an IPC)

The maximum qualifying spending per company and per individual IPC for each calendar year is S$250,000 and S$50,000, respectively. Applications for the BIPS Scheme are accepted for volunteer work done between July 1, 2016, and December 31, 2021.

3. Pioneer Certificates Incentive (PC) and Development & Expansion Incentive (DEI)

The PC and DEI programs were created to incentivize companies in Singapore to engage in new business ventures and increase their capacity for production.

Companies that have anchored their economic activities in Singapore throughout time and contributed significantly to the nation’s economy are eligible for the PC scheme.

The DEI program, meanwhile, focuses on businesses that have made technology, equipment, and operational improvements that raise the capabilities of particular industries to levels that are globally competitive.

For a period of five years, approved enterprises under the PC scheme are eligible for a Singapore corporation tax rate of 5% on income from qualifying operations.

For a period of five years, approved enterprises under the DEI scheme are qualified for a Singapore corporation tax rate of 10% on income from qualifying operations.

Companies in the PC and DEI programs must meet the following criteria:

• Employment generated within the business, including seniority, skills, and knowledge

• Business investment benefits the Singaporean economy.

• Capacity expansion in terms of technology, resources, and skill sets beyond what is generally accessible in Singapore

• Intends to grow or maintain commercial operations in Singapore

4. Double Tax Deduction Scheme for Internationalisation (DTDi)

The DTDi scheme, which is run by Enterprise Singapore, intends to support international business growth in Singapore.

The program offers a twofold Singapore business tax credit for eligible costs associated with overseas market expansion and development operations undertaken between 1 April 2012 and 31 March 2020 (subject to specific expenditure caps).

A number of tax deductions covered by the DTDi are automatically granted tax deductions without additional authorisation. These consist of:

• Missions and trips for international business development

• Expeditions and study trips related to international investment

• International trade fairs

• local trade shows authorized by the Singapore Tourism Board or Enterprise Singapore

As stated in Budget 2018, to further promote internationalization, automatic tax reduction for these qualified expenses incurred during YA 2019 to 31 March 2020 is capped at S$150,000 per YA.

All operations outside of these four sectors and actions within these four categories that exceed S$150,000 will need Enterprise Singapore’s prior approval in order to be eligible for the DTDi.

In order to be eligible for the DTDi, a Singaporean company must:

• Live in Singapore. The company’s global headquarters must be in Singapore for certain qualifying operations.

• Have as their main objective encouraging the exchange of products or the rendering of services.

• Have a clear plan in place to expand the company internationally.

5. Regional Headquarters Award (RHA) and International Headquarter Award (IHA)

The Regional Hub Agreement (RHA), which is overseen by the Singapore Economic Development Board (EDB), is designed to entice multinational corporations to establish regional headquarters in Singapore, enhancing Singapore’s position as a regional commercial hub.

Subject to meeting and maintaining all requirements throughout the duration of the award, companies receiving the RHA pay a lower Singapore corporate tax rate of 15% on the incremental income from qualifying operations for 3-5 years.

The following requirements must be met by Singaporean firms in order to be eligible for the RHA:

• By the end of Year 1 S$200,000 and S$500,000 by the end of Year 3 of the incentive period, respectively, of paid-up capital.

• By the conclusion of Year 3, the headquarters services must offer at least three different services to company-owned entities in three nations other than Singapore.

• By the end of Year 3, there should be at least 10 professionals (minimum diploma holders and above) and at least 75% of skilled workers (at least those with a high school diploma).

• By the conclusion of Year 3, the top five executive roles should pay at least $100,000 on average yearly.

• By the end of Year 3, total company expenditures in Singapore would have increased by S$2 million.

The EDB oversees the International Headquarters Award in addition to the RHA (IHA). Therefore, businesses seeking to establish their international headquarters in Singapore are eligible to apply for and receive the award, which entitles them to Singapore corporation tax rates between 5% and 10%.

Any business that wants to apply for the IHA must be locally formed or registered in Singapore and make a commitment to go above and beyond what the RHA requires.

The following are some of the requirements set down by the government for businesses to be able to establish their headquarters in Singapore:

• The business must be well-known in its field or industry, and it must possess significant market share, human resource, asset, and capital capacity;

• The organization’s headquarters should serve as the focal point for the senior management of its key operations and should have well defined management and control procedures;

• The business ought to relocate the majority of its headquarters operations to the Singapore office. These operations could include

• Planning, Brand Management and Marketing Control

• Strategic Business Planning and Development

• New Concepts’ Research, Development, and Test Bedding
  • Administration and General Management
  • Shared Services
  • Intellectual Property Management
  • Technical Support Services
  • Personnel Management and Corporate Training
  • Sourcing, Procurement and Distribution
  • Economic or Investment Research and Analysis
  • Corporate Finance Advisory Services

• Singapore should be the location of the managerial, professional, technical, and support staff that the company hires to conduct the operations of the headquarters.

In contrast to the RHA, this award has even stricter requirements.