The tax exemption scheme for new start-up companies was introduced to support entrepreneurship and help our local enterprises grow.
Tax Exemption for New Companies
Singapore offers a tax exemption scheme for new start-up companies. The scheme provides a full exemption on the first S$100,000 of normal chargeable income, and a further 50% exemption on the next S$100,000 of normal chargeable income. This exemption is applicable to the startup for its first 3 consecutive assessment years.
To be eligible for the tax exemption scheme, the startup must meet the following conditions:
It must be incorporated in Singapore.
It must be a new company, i.e. it must have been incorporated within the last 3 years.
It must be engaged in a qualifying business activity.
It must have a paid-up capital of at least S$100,000.
It must not be a subsidiary of another company.
The qualifying business activities for the tax exemption scheme are:
Research and development
Information and communications technology
Services to other businesses
The tax exemption scheme is a significant incentive for new start-ups in Singapore. It can help to reduce the financial burden of starting a new business, and it can give startups a competitive edge in the market.
Here are some additional details about the tax exemption scheme for new start-up companies in Singapore:
The normal chargeable income is the income of the company that is subject to tax. It is calculated after deducting all allowable expenses.
The tax exemption is applied to the normal chargeable income, not the gross income of the company.
The tax exemption is only available for the first 3 consecutive assessment years of the company.
The company must file a Form C-S with the Inland Revenue Authority of Singapore (IRAS) to claim the tax exemption.
The company must meet all the qualifying conditions for the tax exemption scheme in order to claim the exemption.
If you are considering starting a new business in Singapore, the tax exemption scheme for new start-up companies is a great way to reduce your financial burden and give your business a competitive edge. I recommend that you speak to a tax advisor to learn more about the scheme and to see if you are eligible.
Qualifying companies will be given the following tax exemption for the first three consecutive YAs:
75% exemption on the first $100,000 of normal chargeable income*; and A further 50% exemption on the next $100,000 of normal chargeable income*.
*Normal chargeable income refers to income to be taxed at the prevailing at the prevailing corporate tax rate.
Qualifying Conditions for New Companies
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:
i. all of the shareholders are individuals; or ii. at least one shareholder is an individual holding at least 10% of the issued ordinary shares of the company.
How Bestar can Help
Bestar can help with the Tax Exemption for New Companies in the following ways:
Provide guidance on the eligibility criteria: Bestar can help you understand the eligibility criteria for the Tax Exemption for New Companies. This includes the requirements for the company's business activities, its location, and its ownership structure.
Prepare the necessary documentation: Bestar can help you prepare the necessary documentation to apply for the Tax Exemption for New Companies. This includes the company's incorporation certificate, its financial statements, and its board of directors' resolution.
File the application: Bestar can file the application for the Tax Exemption for New Companies on your behalf. This will ensure that the application is submitted correctly and on time.
Provide ongoing support: Bestar can provide ongoing support to help you navigate the tax exemption process. This includes answering your questions, providing updates on your application, and helping you to comply with the requirements of the scheme.
In addition to the Tax Exemption for New Companies, Bestar can also help you with a variety of other tax-related matters, such as:
Corporate tax planning: Bestar can help you develop a corporate tax planning strategy to minimize your company's tax liability.
GST registration: Bestar can help you register your company for GST and comply with the GST regulations.
Payroll tax: Bestar can help you calculate and remit payroll tax for your employees.
Tax audits: Bestar can represent you during tax audits and help you to defend your company's tax position.
If you are a new company in Singapore, Bestar can be a valuable resource to help you with the Tax Exemption for New Companies and other tax-related matters. Contact Bestar today to learn more about how they can help you.