Top Tax Incentives for Businesses in Singapore for Explosive Growth

Singapore is known for its entrepreneur-friendly environment, driven by strong pro-business policies, an efficient legal framework, and strategic geographic location. What really sets it apart, is its powerful array of tax incentives designed to help businesses succeed. Whether you're a tech startup, a manufacturing company, or an international enterprise, Singapore’s tax relief schemes can significantly improve cash flow, allowing businesses to reinvest and grow.

Whether you're a tech-driven startup or a global enterprise, Singapore’s pro-business tax policies provide the perfect boost to take your operations to the next level. In this blog, we will walk you through some of the most impactful tax incentives available in Singapore for 2024, including tax relief, tax rebates, and industry-specific tax exemptions. These incentives are key to unlocking your company's potential for explosive growth.

Velarys, provide expert taxation services to help businesses maximize these incentives. Let’s dive into the top tax relief options businesses can take advantage of in 2024.

Corporate Income Tax Rebate: Helping Businesses Thrive

The Corporate Income Tax Rebate offers a straightforward way for businesses to reduce their tax burden. Eligible companies can claim a rebate of up to 50% of their corporate income tax, capped at S$40,000. This rebate is automatically applied when businesses file their corporate tax returns, meaning no complex applications are required.

Purpose: The rebate aims to reduce the financial burden on companies during challenging times, allowing them to maintain cash flow and focus on growth.

Eligibility: Most companies registered in Singapore are eligible, though the government may adjust eligibility criteria based on economic conditions.

Rebate Percentage and Cap: The percentage and ceiling on the discount may also change from year to year. The level of rebates is usually decided by the government based on the economic condition of the time and the target policy of the government. For example:

• In some times, the grant may be contingent upon corporations payable by firms who have benefited from it in the previous year. With respect to this, the share of tax actually payable may be a fraction or may become a significant part; for example, it may be 34%, 50%, or more.
• At the same time, the government may decide to stop the 100% rebate after a certain threshold has been reached by the applicant company. The allowance is commonly set as a nominal monetary limit, e. g. , S$10, 000, S$20, 000 or several times more.

Application Process: No need for extra paperwork—this rebate is automatically applied when businesses file their tax returns with the Inland Revenue Authority of Singapore (IRAS).

Velarys helps you understand and optimize your tax filings to ensure you get the full benefits of this rebate, ensuring your business has more capital to reinvest in growth.

Start-Up Tax Exemption (SUTE): Fueling Entrepreneurial Growth

For new businesses, the Start-Up Tax Exemption (SUTE) Scheme offers a crucial financial break. Under this scheme, eligible startups can enjoy up to 75% tax exemption on their first S$100,000 of chargeable income for the first three years, followed by 50% exemption on the next S$100,000.‍

Purpose: The SUTE Scheme encourages entrepreneurship by reducing the financial barriers that new companies often face.‍

Eligibility: To qualify, startups must be incorporated in Singapore, have no more than 20 shareholders, and meet specific ownership criteria.‍

Benefits:

• Reduced tax liability: Allows startups to save significant amounts during their formative years.
• Improved cash flow: Enables businesses to reinvest funds into growth and innovation.
• Global competitiveness: Encourages new companies to grow within Singapore’s dynamic entrepreneurial ecosystem.‍

‍Tax Exemptions: Under the SUTE Scheme, eligible start-up companies can enjoy tax exemptions on a percentage of their initial assessable profits for the first three consecutive Years of Assessment (YA) after their incorporation:

• The first $100,000 of normal chargeable income levied for the first three years of Assessment will be excluded, i. e. , a 75% exemption will be applied for each year.
• Also, we propose another 50% on the succeeding S$100,000 of the first three normally taxable incomes for each of the following YA or Youths' Year of Assessment.
• This will be a huge relief for start-ups that are eligible as they can be eligible for productivity and innovation tax benefits. These benefits will mean that they can potentially enjoy an exemption from payment of up to $300,000 on their normal chargeable income in each of the first three years.

Our team will help guide your startup through the SUTE application process, ensuring you fully leverage this scheme to manage cash flow effectively.

Productivity and Innovation Credit (PIC): Encouraging R&D and Automation

If your business is focused on innovation and increasing productivity, the Productivity and Innovation Credit (PIC) Scheme is a must. This incentive offers tax deductions or cash payouts for investments in areas like research and development (R&D), automation, and employee training.

Purpose: The PIC Scheme promotes the adoption of productivity-boosting technologies and processes.‍

Eligible Activities:‍‍

• ‍R&D: Deduct expenses for research efforts that improve products or services.

• Automation: Claim tax benefits on investments in automation technologies such as robotics or enterprise software.
• Employee training: Receive payouts for training costs to upskill your workforce.

Benefits:

• Enhanced productivity: Supports innovation, making businesses more competitive.
• Cost savings: Reduces expenses on key growth areas like automation and staff development.

Tax Deductions and Cash Payouts
‍Under the PIC Scheme, businesses can claim tax deductions or cash payouts for their investments in the following areas:

1. Research and Development (R&D): Organizations may deduct research and development (R&D) expenses as tax credit or cash payments for labor costs, equipment and materials purchasing and outsourcing R&D projects.
2. Automation: Companies are eligible for tax deductions or cash subsidies for any investments they make in automation technologies, like robotics, computer-automated devices, and enterprise software.
3. Employee Training: Businesses can claim tax deductions or cash refunds for their expenses during employee training, including tuition fees, training materials, and salaries paid to employees during training.
4. Intellectual Property (IP) Registration: Businesses are eligible for tax deductions or cash payouts from the government for expenditures made during the intellectual property (IP) registration process, which includes patents, trademarks, and copyrights.
5. Acquisition of Intellectual Property Rights: Businesses can claim tax deductions or cash payments for the acquisition of intellectual property rights, including licenses or purchase of patents, trademarks, or copyrights.

Development and Expansion Incentive (DEI)

The Development and Expansion Incentive (DEI) offers reduced tax rates on incremental income earned from high-value-added activities. This incentive is aimed at businesses that contribute significantly to Singapore's economic diversification, particularly in sectors such as advanced manufacturing and technology.

Purpose: The DEI is designed to attract and retain investments in key industries that drive economic growth.

Benefits:

• Tax reductions: Companies benefit from lower tax rates on additional income generated through their high-value activities.
• Growth focus: Encourages businesses to expand operations in strategic sectors.
• Increased competitiveness: Supports industries that are critical to Singapore’s economic resilience.

Tax Relief Period and Extension
‍Enterprises that are certified under the DEI can benefit from a reduced income tax rate on the added income within the initial relief period of up to 10 years. This extension can last for up to five years in a row, 20 years being consequently the longest possible period for which its duration is determined. The extension will be conditional upon companies proving that they are ready to implement further expansion plans during the incentive period.

Double Tax Deduction for Internationalization (DTDi): Expanding Overseas

For businesses eyeing global markets, the Double Tax Deduction for Internationalization (DTDi) is a game-changer. Companies can claim tax deductions on both local and overseas expenses related to expansion.

Purpose: The DTDi incentivizes businesses to explore international markets by making global expansion more financially viable.

Eligible Expenses:

• Overseas business trips: Deduct expenses related to airfare, accommodation, and meals.
• Setting up overseas offices: Claim deductions for costs incurred in establishing a foreign presence, such as rental expenses and office setup.
• Market research: Deduct costs related to researching foreign markets to assess business potential.

Benefits:

• Encourages international growth: Supports businesses looking to expand beyond Singapore’s borders.
• Reduces expansion costs: Makes foreign market entry more accessible by reducing associated costs.

Pioneer Tax Incentive: Attracting High-Value Investments

Designed to attract businesses involved in high-value manufacturing and cutting-edge technologies, the Pioneer Tax Incentive offers tax exemptions for up to 15 years. This incentive targets industries that have the potential to generate significant economic value and drive innovation.

Qualifying Criteria: The incentive is reserved for businesses engaged in high-value manufacturing or services that contribute to Singapore’s economic development.

1. High-Value-Added Activities: The company should allocate funds for the run of high-value-add production process or top value-add services. The main purpose is to enhance Singapore’s economic growth, and the strategy should be aligned to the goals of the country.
2. Technological Innovation: The company should focus on involving most recent technologies, addressing original solutions or brand new procedures that are able to be re-invented in any industry with a purpose to change this industry or create a new market which is new to the customers.
3. Significant Economic Contribution: The business’s ability to make a huge economic change that can be evidenced by creation of high-value employment, increasing exports, or driving technological advancements is what should be highlighted by the business.

Benefits for Businesses
‍By providing a tax exemption for qualifying activities, the Pioneer Tax Incentive offers several benefits to businesses:

1. Reduced Tax Burden: The tax relief provision allows companies to reinvest their profits into further research, development, and expansion which in turn increases their competitive level and growth potential.
2. Competitive Advantage: With the incentive, businesses enjoy the advantage of choosing Singapore as a stronghold in their industries and play a leading role in attracting more investments and talents.
3. Opportunity for Innovation: The incentive encourages businesses to invest in innovative and cutting-edge technologies, fostering a culture of innovation which eventually creates innovation culture in the country. And this holds together positions Singapore as a technological center in the long run.
4. Talent Attraction: The tax incentive, when combined with the business-friendly climate of the nation, may help businesses bring in highly competent talent, thereby strengthening their capabilities more.

Tax Exemption Period: Eligible businesses can enjoy a full tax exemption on profits from approved projects or activities, qualifying businesses can receive a tax exemption for a period of 5 to 15 years for each approved project or activity. The duration of the tax exemption is determined based on factors such as the level of economic contribution, technological advancement, and strategic importance of the business activity to Singapore's economic development.

Our consultants can help position your company to qualify for this incentive, guiding you through the application process to secure long-term tax relief.

Industry-Specific Tax Incentives: Targeted Benefits

Singapore provides industry-specific rebates for key sectors like finance, shipping, R&D, and e-commerce.

• Financial Services: The Financial Sector Incentive (FSI) offers 10% to 20% tax reductions for banks, insurance companies, and asset management firms.
• Shipping: The Shipbuilding and Shiprepair Tax Incentive (SSTI) provides tax relief for shipbuilding activities.
• R&D: Companies involved in research can benefit from 100% to 300% tax deductions on qualifying R&D expenditures under the R&D Tax Incentive.
• E-commerce Tax Incentive (ETI): This incentive allows e-commerce companies to enjoy tax relief of up to 20% on their employment income, helping to boost the country's e-commerce sector.
• Digital Solutions for Business (DSB): Incentives under this program include a 10% to 20% tax breaks on qualifying income for firms engaged in developing and providing digital solutions like software development, data analytics and cybersecurity services.

Tax Exemptions: Under the SUTE Scheme, eligible start-up companies can enjoy tax exemptions on a percentage of their initial assessable profits for the first three consecutive Years of Assessment (YA) after their incorporation:

• The first $100,000 of normal chargeable income levied for the first three years of Assessment will be excluded, i. e. , a 75% exemption will be applied for each year.
• Also, we propose another 50% on the succeeding S$100,000 of the first three normally taxable incomes for each of the following YA or Youths' Year of Assessment.

This will be a huge relief for start-ups that are eligible as they can be eligible for productivity and innovation tax benefits. These benefits will mean that they can potentially enjoy an exemption from payment of up to $300,000 on their normal chargeable income in each of the first three years.

Application Process: In order to have tax deductions under SUTE Scheme, the qualifying start-ups must submit a corporate tax return to the IRAS and they must specifically mention about their eligibility for the tax exemptions.

Benefits for Start-ups: The SUTE Scheme provides several benefits for start-ups:

• Reduced Tax Liability: There is an opportunity for a startup to reduce tax liabilities during the first years of company activity significantly, and then spend more financial resources on business expansions and development.
• Cash Flow Management: Through the decrease of overheads, start-ups may enhance their cash flow position, hence, available funds can be used to either extend their operations, recruit more talent, or invest in research and development.
• Competitive Advantage: We can see as we long as tax exemptions are being offered under the SUTE scheme it indeed enhance Singapore competitiveness as a dedicated place for start-ups which ultimately attract entrepreneur from different regions around the globe as well as nurture a versatile ecosystem of innovation and entrepreneur all together.

Other Industries

• Biomedical Sciences (BMS): This incentive allows for a 10% to 20% tax cutting on the qualified incomes of biomedical science companies to promote the overall development of the biomedical sciences industry of Singapore.
• Clean Energy (CE): The program introduces a tax incentive of 10% to 20% on eligible income for companies working in the clean energy space encouraging investments in renewable energy and sustainable technologies.

Velarys expert knowledge ensures that companies in these sectors fully benefit from their respective tax rebates in 2024, improving their competitive edge.

Application and Approval Process

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‍To enjoy these industry-specific tax incentives, businesses need to meet qualifying criteria and case apply to relevant government agencies like Inland Revenue Authority of Singapore (IRAS) or Economic Development Board (EDB). The process of the application entails submitting detailed information about the business operations, investment plans, and the possible economic and technological contribution to Singapore. Upon approval of the business, there will be the tax incentives for specific period depending on the terms and conditions that will be set by the authorities.

All in all, the tax incentives are very important in business development and expansion across the nation. As a result, this fosters a dynamic ecosystem for innovation, entrepreneurship, and internationalization. Through the deployment of these subsidies, firms will maximize competitiveness, spur sustainable economic growth and contribute to Singapore remaining the global business center it is.

Conclusion

Singapore’s tax incentives are a critical factor in its status as a global business hub. These incentives not only reduce tax burdens but also promote growth, innovation, and international expansion. ‍At Velarys, we are dedicated to helping businesses navigate these tax relief opportunities, from R&D tax credits to investment allowances. Our tailored tax advisory services ensure that your company can maximize these incentives, enabling you to focus on scaling your business and achieving long-term success.

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