With effect from Year of Assessment 2010, a company is taxed at a flat rate of 17% on its chargeable income regardless of whether it is a local or foreign company.
Companies can enjoy the partial tax exemption and tax exemption for new start-up companies.
Partial tax exemption is 75% on the first $10,000, 50% on the next $190,000, for a total of $102,500 on $200,000 dollars. The dollar amounts are chargeable income.
Tax exemption scheme for new start-up companies, where any of the first 3 YAs falls in or after YA 2020, is as follows:
- 75% on the first 100,000
- 50% on the next 100,000
The tax exemption is open to all new companies except these two types of companies:
A company whose principal activity is that of investment holding; and
A company which undertakes property development for sale, for investment, or for both investment and sale.
To qualify for tax exemption for start-ups, eligible companies must satisfy these three qualifying conditions:
The company must be incorporated in Singapore;
The company must be a tax resident in Singapore for that YA;
The company’s total share capital is beneficially held directly by no more than 20 shareholders throughout the basis period for that YA where all of the shareholders are individuals, or at least one shareholder is an individual holding at least 10% of the issued ordinary shares of the company.
To claim the tax exemption, complete the relevant sections of the Estimated Chargeable Income (ECI) and the Corporate Income Tax Return (Form C-S/ C), available from the ACRA website.
Only revenue expenses incurred after your business commences are deductible for tax purposes. Revenue expenses incurred one year before the first day of the financial year in which you earn your first dollar of business receipt will be tax-deductible.
Tax evasion/ fraud is a criminal offence punishable under the law and the Court imposes severe penalties for such offences. Businesses or individuals who engage in abusive tax arrangements such as setting up shell companies to take advantage of the tax exemption scheme for new start-ups, or individuals who assist others with abusive tax arrangements should disclose such abuse immediately. IRAS will treat such disclosure as a mitigating factor when considering the penal charges.
More information on corporate tax rates can be found here: https://www.iras.gov.sg/irashome/Quick-Links/Tax-Rates/Corporate-Tax-Rates/