Singapore Tax Rates

Company Tax Exemption Scheme

The tax exemption scheme for new start-up companies was introduced in Year of Assessment (YA) 2005.

Under this scheme, a newly incorporated company that satisfies the qualifying conditions can claim for full tax exemption on the first $100,000 of normal chargeable income* (excluding Singapore franked dividends) for each of its first three consecutive Yas.

Starting from YA 2008, a further 50% exemption is given on the next $200,000 of the normal chargeable income* (excluding Singapore franked dividends) for each of the first three consecutive Yas.

* Normal chargeable income refers to income to be taxed at the prevailing corporate tax rate

The exempt amount for each YA is summarised as follows:

Year of Assessment Exempt amount for new start-up companies
2005 to 2007 First $100,000 @ 100% = $100,000
2008 onwards First $100,000 @ 100% = $100,000
Next $200,000 @ 50% = $100,000
Total Exempt Amount = S$200,000

If your company does not meet the qualifying conditions under this scheme, your company will be given the partial tax exemption. For details on the partial tax exemption, please refer to Tax Rates and Tax Exemption Schemes.

The qualifying conditions

From Year of Assessment (YA) 2005 to YA 2008

To qualify for the tax exemption for new start-up companies, your company must:

  • be incorporated in Singapore (other than a company limited by guarantee);
  • be a tax resident* in Singapore for that YA; and
  • have its total share capital beneficially held, directly or indirectly, by no more than 20 individuals throughout the basis period relating to that YA.

With effect from YA 2009

To qualify for the tax exemption for new start-up companies, your company must:

  1. be incorporated in Singapore (other than a company limited by guarantee**);
  2. be a tax resident* in Singapore for that YA;
  3. have no more than 20 shareholders throughout the basis period for that YA where:
    • all of the shareholders are individuals beneficially holding the shares in their own names; OR
    • at least one shareholder is an individual beneficially holding at least 10% of the issued ordinary shares of the company.

* A company is resident in Singapore if the control and management of its business is exercised in Singapore.
** With effect from YA 2010, the scheme will be extended to companies limited by guarantee, subject to the same conditions imposed on companies limited by shares.

 

Administrative concessions

Transitional measure

As an administrative concession, a company that had enjoyed the tax exemption scheme for new start-up companies prior to YA 2009 will continue to qualify for the exemption for the remaining tenure of the scheme if the previous set of conditions (i.e. for YA 2005 to 2008) are still met. This is a transitional measure to ensure a smooth transition to the new conditions (for YA 2009 onwards).

For example:

Your company was incorporated on 1 Jul 2006, its first financial year end is 30 Jun and it is the wholly owned subsidiary of another company that has no more than 20 individual shareholders. Having satisfied the previous set of conditions, your company will enjoy the tax exemption for YA 2008, which is the company’s first YA.

Assuming there is no change in the shareholding, under the new set of conditions which comes into effect from YA 2009 onwards, your company will not qualify for the scheme in YA 2009 and YA 2010 as it is not directly held by individual shareholders and it does not have at least one individual shareholder holding at least 10% of it issued ordinary shares during the relevant basis periods.

Nevertheless, as an administrative concession and as long as your company continues to meet the previous set of conditions, it will continue to enjoy the tax exemption scheme for new start-up companies for the next two YAs (i.e. YA 2009 and YA 2010).

For new companies whose first YA is 2009, the new set of conditions will apply.

Claims yet to be submitted under the old conditions

Claim for tax exemption under the scheme for new start-up companies must be made at the point when the Estimated Chargeable Income (ECI) and/ or the Income Tax Return (Form C) are filed. Companies which qualified for the exemption under the old set of conditions but had not made their claim when filing ECI or Form C, must make their clam by writing to IRAS by the following dates:

Year of Assessment Deadline for submission of claim
2005 to 2007 30 Jun 2014
2008 30 Jun 2012

If you need to revise your company’s tax computation as a result of the claim for tax exemption (e.g. deferring capital allowance claim, revising Group Relief claim, please forward a copy of the revised tax computation together with your claim to facilitate our review.

 

The First Year of Assessment

The first YA refers to the YA relating to the basis period during which the company was incorporated.

From the fourth YA onwards, your company will be given partial tax exemption instead of the exempt amount for new start-up companies.

To illustrate, if your company was incorporated on 1 Jul 2006 and your financial year end and the period covered in your first set of accounts are as follows:

No. Financial year end Period covered in first set of accounts Year of Assessment (YA) Basis period
1 30th Jun 1 Jul 2006 to 30 Jun 2007 (= 12 months) 2008 (1st YA) 1 Jul 2006 to 30 Jun 2007
2009 (2nd YA) 1 Jul 2007 to 30 Jun 2008
2010 (3rd YA) 1 Jul 2008 to 30 Jun 2009
2 31st Dec 1 Jul 2006 to 31 Dec 2006 (< 12 months) 2007 (1st YA) 1 Jul 2006 to 31 Dec 2006
2008 (2nd YA) 1 Jan 2007 to 31 Dec 2007
2009 (3rd YA) 1 Jan 2008 to 31 Dec 2008
3 31st Dec 1 Jul 2006 to 31 Dec 2007* (> 12 months) 2007 (1st YA) 1 Jul 2006 to 31 Dec 2006
2008 (2nd YA) 1 Jan 2007 to 31 Dec 2007
2019 (3rd YA) 1 Jan 2008 to 31 Dec 2008

* The first set of accounts covered a period of 18 months. As the basis period for the first YA cannot be more than 12 months, it is necessary to apportion the income for YA 2007 and YA 2008. As such, the first YA will be YA 2007 instead of YA 2008.

The apportionment of income can be based on the number of days for the period from 1 Jul 2006 to 31 Dec 2006 (YA 2007) and the period from 01 Jan 2007 to 31 Dec 2007 (YA 2008).

For details on how to prepare your tax computation, please refer to Preparing tax computation.

What if your company incurs losses or has no income in any of the first three YAs

If during any of the first three YAs, your company incurs losses or it has no income (e.g. business has not commenced), your chargeable income and tax payable will be nil. In this case, since there is no chargeable income, your company cannot enjoy the benefit given under the tax exemption scheme for new start-up companies for that particular YA. However, that particular YA will still be included in determining the first three consecutive Yas.

For example:

Your company`s first three YAs are YA 2007, YA 2008 and YA 2009. It has not commenced trading and has no income in YA 2007 and YA 2008. In this case, your company can only claim for tax exemption for new start-up companies in YA 2009 (assuming your company satisfies all the qualifying conditions and there is chargeable income in YA 2009). YA 2009 is considered your third YA although this is your first claim for tax exemption for new start-up companies. You cannot claim for tax exemption for new start-up companies in YA 2010, which is considered your fourth YA. However, you will be given partial tax exemption in YA 2010.

How to claim for tax exemption for new start-up companies

 

Income Tax Return (Form C)

When filing Form C, you must complete Part IV on page one of the Form C as follows:

  • Fill in “1″ in the first box to indicate “Yes” so as to confirm that your company satisfies all the qualifying conditions; and
  • Fill in your company`s first YA in YYYY format in the relevant boxes.

 

Estimated Chargeable Income (ECI)

For e-Filing

  • Select “Yes” under “The company qualifies for full tax exemption”;
  • Select “Yes” at the pop up message “Exemption Declaration Message”; and
  • Enter the first YA upon incorporation in YYYY format.

For paper filing

You must complete Section A of the ECI Form as follows:

  • Fill in “1″ in the first box to indicate “Yes” so as to confirm that your company satisfies all the qualifying conditions; and
  • Fill in your company`s first YA in YYYY format