Five Perfect Schemes to Save Corporate Income Tax in Singapore

Schemes to Save Corporate Income Tax in Singapore? – Amir Articles

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The corporate tax rate in Singapore on chargeable income is at 17 Percent. You must read this guide if planning to Save Corporate Income Tax in Singapore.

Introduction

The corporate tax rate in Singapore on chargeable income is at 17 Percent. This chargeable income is known as the lowest tax rate in the world. It is also a primary reason many business owners from different countries and nationalities come to Singapore to establish or expand their enterprises.

All the Businesses established in Singapore always benefit from the corporate tax rebates of the country. The corporate tax rebates also differ for Years of Assessment (YAs). Different years have a different impact on corporate tax.

·         For YA 2018: The rate is 40% of corporate tax payable, covered at S$15,000.

·         For YA 2019: This year, the rate is 20% of corporate tax payable cover at S$10,000.

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There are specific arrangements and allowances for the Singapore Government’s low corporate tax rates, which further reduces the Singapore corporate tax rates. The answer “How to save on corporate income tax in Singapore” is simple and can be described in five central schemes. Timcole (timcole.com.sg) can assist you with more information on how to save on your company income tax.

Following are the Five central schemes: 

1. Inauguration of the Tax Exemption Scheme (SUTE) and Partial Tax Exemption (PTE):

The Singapore Government has taken a step by starting up the Tax Exemption Scheme (SUTE) to boost entrepreneurship and help local enterprises’ growth. Singapore’s 2018 Budget announced scheme exempts under the prior iteration of the Tax Exemption Scheme as:

  • For start-up’s regular chargeable income, it is 75% on the first S$100,000.
  • For the next S$100,000 of a start-up’s regular chargeable income, it is 50 percent.

These exemptions apply during the first three consecutive years. However, after YA2020, incorporating any start-up business in Singapore is for only three years.

The following are the way for acquiring eligibility for a scheme:

  • Be incorporated in Singapore.
  • For the applicable YAs, be a tax-resident in Singapore.
  • Throughout the applicable YAs, it is crucial not to have more than 20 individual shareholders. 
  • Be in any industry, excluding from investment holding and property development.

Any company incorporated for over three years in Singapore has more than 20 persons’ shareholders or is even in the business of investment that does not qualify for the tax exemption schemes.  

However, these companies can still qualify for the Partial Tax Exemption (PTE) scheme.

 Under the PTE scheme, they relieve the companies for expected chargeable income:

  • 75% on the first S$10,000.
  • 50% percent on the next S$190,000 chargeable income

2. (BIPS): Business and IPC Partnership Scheme

This scheme of BIPS (Business and IPC Partnership Scheme) offers an approximate 250% Singapore corporate tax reduction if you have qualifying expenses. The qualifying includes certain situations like when their employees volunteer, offer many professional services, and provide different services, including secondments. It will help in the recognition also in the Institutions of Public Character (IPCs).

IPCs also offer many exemptions or registration of charities in Singapore. After the exemptions, there are also tax-deductible receipts for donation.

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To know if any charity has an IPC status, follow this article:

There are specific qualifications for an employee of a business to meet in Singapore are:

  • The employee must not be an owner, a sole proprietor, and not even a partner or a shareholder who explicitly holds a managerial position.
  • He or She must not be an employee in any investment holding company.
  • Sustaining expenses from all the voluntary services provided by the IPC partnership scheme during working hours. These premises mainly are:

o   Unpaid for by the IPC Partnership Scheme.

o   No any personal expenditure for the employee for deductions of IPC

o   Precisely, no capital expenditure

For each YA, the qualifying spending plugged at almost S$250,000 per business.

The BIPS Scheme applies for all the voluntary services conducted from 1st July 2016 to 31st December 2021.

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

The prime reason for setting up the PC and DEI schemes is to encourage businesses in Singapore. This scheme is one of the industry-specific tax incentives may help conduct new business activities and then work in the expansion of production capabilities.

The PC scheme applies to all those companies who have attached the economic activities in Singapore. The economic activities in the company also bring significant benefits to Singapore’s economy.

The DEI scheme focuses on all the companies that have capitalized on technology, equipment, and operational activities. Those companies with the PC scheme’s approval and the company’s rate on income derived from qualifying activities for a consecutive five years are qualified for a 5% Singapore corporate tax. As for DEI, companies.

Standards for companies in the PC and DEI schemes are:

  • Employment in the company,
  • Business expenditures which are profiting Singapore economy,
  • Capacity growth in technology
  • Sustaining business activities in Singapore

4. (DTDI): Double Tax Deduction Scheme for Internationalisation

The DTDI schemes have one aim that is to encourage any businesses in Singapore to magnify internationally. For qualifying expenses sustained from 1st April 2012 to 31st March 2020, the DTDI scheme offers double Singapore corporate tax deduction if any business expands internationally.

Following are the tax deductions under this scheme:

  • Overseas Business Development Trips,
  • Overseas Investment Study,
  • Overseas Trade Fairs,
  • Local Trade Fairs

As announced in Budget 2018, all those qualifying expenditures incurred during YA 2010 to March 2020 will be an automatic tax relief at S$150,000.

5. (RHA): Regional Headquarters Award | (IHA): International Headquarter Award

To encourage global companies to set up their operations in Singapore, RHA is there to help. All those companies who fall under this scheme experience reducing the Singapore corporate tax rate of 15%.  

The following are the criteria to qualify for the RHA:

  • By the end of Year 1, the paid-up capital must reach S$200,000, and by the end of year three, it should be at S$500,000.
  • 75% of skilled employment and ten professionals should be part of the company.
  • For the top five executive positions, average salaries must reach up to S$100,000 annually.

Following are the Singapore Government’s conditions for companies to establish their headquarters in Singapore:

  • The company must be from the sector of operation.
  • The headquarters of the company should be the organization’s hub.
  • The company must have the bulk of departments of operations in the Singapore office.
  • All the staff in the Singapore office must be from Singapore.

If any company falls in RHA’s criteria, they will have corporate tax rates from 5% to 10%.

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