IRAS Tax Incentives For Singapore-Based Companies

Singapore has been actively attracting foreign direct investment (FDI) into the country and encouraging entrepreneurship among its population. Various government agencies have been taking initiatives in their respective fields that incentivise business owners to take action. In particular, the Inland Revenue Authority of Singapore (IRAS), the nation’s tax authority, has been instrumental in sweetening the deal for companies contemplating expansion into Singapore, as well as people intending to go into business.

Singapore already has one of the lowest corporate tax rates in the world. Standing at 17%, companies can devote more of their profits toward their operations and grow themselves. This compares well with the tax rates of other countries like United Kingdom (20%), United States (40%) and Australia (30%). In fact, the Singapore corporate tax rate has been falling steadily over the past decade. From 20% in 2005, it fell to 18% in 2008, then to 17% in 2010. The low tax rate has not only successfully attracted many multinational companies to set up base in Singapore but also encouraged many people to enter the business world, safe in the knowledge that they do not pay overly high taxes.

In addition to the low corporate tax rate, IRAS, as the tax agency is commonly known, has in place a set of tax incentives that make Singapore an even more attractive place to do business in. Under the Tax Exemption Scheme For New Start-Up Companies, newly-incorporated companies enjoy full exemption on the first $100,000 normal chargeable income, and another 50% exemption on the next $200,000 normal chargeable income, for the first three years of operation. This scheme is applicable to all companies that are not involved in investment holding and not developing properties for sale, investment or both. IRAS recognises that the startup phase of any business is the most crucial stage, and that giving businesses a hand in paying their taxes will help reduce their financial burden.

Another scheme worth noting is known as the Corporate Income Tax Rebate. As the name implies, this rebate aims to help businesses defray the rising cost of doing business. The rebate level was previously set at 30%, however, in response to the challenging business environment, the government enhanced the scheme in 2016. Valid for the Years of Assessments 2016 and 2017, all companies enjoy a 50% rebate on the payable corporate tax. The rebate will be capped at $20,000 per Year of Assessment. It is hoped that by helping companies reduce their corporate tax burden, they will be able to restructure and improve their finances.

Apart from tax incentives, IRAS has other schemes that aid employers in one way or another in doing business. For example, to allow companies to cope with rising labour costs, IRAS now co-funds 40% of wage increases given to Singaporean citizen employees earning up to $4,000. Even though it is a temporary measure, the Wage Credit Scheme (WCS) nonetheless helps companies in times of need. A popular grant that is given to companies is the Productivity and Innovation Credit (PIC) Scheme. Intended to help defray their operating costs, the government pays companies 40% of qualifying expenses. An interesting tax incentive that is targeted at bigger companies is the Mergers & Acquisitions (M&A) Scheme. In a bid to encourage companies to grow via mergers and acquisitions, the government has raised the cap for qualifying M&A deals from $20M to $40M. In addition to providing a 25% tax allowance on such deals, stamp duty relief is also given.

The above is but a short list of incentives and grants given by the Singapore government to encourage the growth of businesses. The government is going all out to not only woo foreign companies but also to get its people to go into business. It is up to them to respond and make the right choice.

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