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Tax Exemption Schemes For Startup Companies In Singapore

The Singapore government grants certain tax exemptions to startup companies in the country as its support for entrepreneurship. This tax relief is was introduced in the Year of Assessment (YA) 2005 to fuel entrepreneurial growth in the city-state, as well as to encourage small entrepreneurs to build their businesses.

Companies that are able to comply with the conditions the government has set forth are entitled to a full tax exemption on its first $100,000 normal chargeable income for each of its first three consecutive YAs. A company’s normal chargeable income is the taxable income at the prevailing corporate tax rate.

Beginning YA 2008, Singapore has also enforced a further 50-percent exemption on the next $200,000 normal chargeable income for the companies’ first three consecutive YAs.

Starting YA 2009, the following conditions need to be met by new startup companies to qualify for the exemption: first, they need to have been incorporated in Singapore and be a tax resident in the country. Being a tax resident means the operations and management of the said company is conducted in Singapore. Qualified companies need to have a maximum of 20 stockholders for the said YA, all of whom are directly or beneficially holding shares under their own names.

In the event that a company sustains losses or is not able to generate income within the first three YAs (probably due to the business not having commenced during the specified period), your tax payable and chargeable income will be interpreted as nil. Likewise, your company will not be able to enjoy the exemptions for those YAs since they will still be included in determining the inclusive periods for your entitlement.

New startup companies may claim their entitlement by filling up the appropriate fields under their Income Tax Return (Form C) and the Estimated Chargeable Income (ECI).