Starting a business in Singapore, the tax conditions are very encouraging; an excellent environment was created for entrepreneurship and new company setups. The main tax incentives that the Singapore government offers for young businesses are under the Startup Tax Exemption (SUTE) Scheme.
Under the SUTE scheme, qualifying startups can enjoy full tax exemption on the first SGD 100,000 of chargeable income for the first three consecutive years of assessment. This allows the startup to reinvest its earnings into the business during the crucial initial years of growth. The next SGD 200,000 of chargeable income is then subjected to a tax exemption of 50%, which in simple terms means the startup will pay taxes only on half of this amount.
Following is the eligibility criteria the company should possess for applying to the scheme:
- It should be a Singapore private limited company.
- It has a maximum of 20 shareholders and no less than one of whom is an individual owning at least 10% of the issued shares.
- The company should not be an investment holding company, nor shall it be involved in property development for sale or for investment or for both.
It is worth noting that even as SUTE provides generous benefits for startups, it applies only to the first three years of the company’s operation. Beyond this period, any such startup graduates into the Partial Tax Exemption scheme, where they enjoy reduced tax rates on chargeable income, although less generous than provided under the SUTE.
The existing tax framework in Singapore acts as a boon to entrepreneurs, having several tax benefits during those initial and sometimes make-or-break stages in the development of any venture. Such an incentive helps these companies conserve resources and focus on scaling their operations. One IBC, with its deep expertise, offers tailored consultancy services to help businesses maximize these tax benefits, ensuring they make the most of every incentive available.