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Singapore has two exemptions that work on the first part of a company's profit. The start-up exemption covers the first three years of assessment, with up to S$125,000 exempt. The partial tax exemption is the one that follows, with up to S$102,500 exempt. IRAS runs both. Checked .
What are the two schemes?
| Start-up exemption | Partial tax exemption | |
|---|---|---|
| Who | Qualifying new companies | All companies, including companies limited by guarantee, unless on the start-up scheme |
| How long | First 3 consecutive years of assessment | Each year after, or when the start-up scheme does not apply |
| First band | 75% of the first S$100,000, S$75,000 exempt | 75% of the first S$10,000, S$7,500 exempt |
| Second band | 50% of the next S$100,000, S$50,000 exempt | 50% of the next S$190,000, S$95,000 exempt |
| Maximum per year | S$125,000 | S$102,500 |
The percentages work on normal chargeable income, which is income taxed at the 17% rate. The overall rates are on Singapore company tax rates.
Who qualifies for the start-up exemption?
IRAS lists these conditions. The company must:
- Be incorporated in Singapore.
- Be a tax resident of Singapore for that year of assessment. See tax residency.
- Have its total share capital held by no more than 20 shareholders throughout the basis period. Either every shareholder is an individual, or at least one individual holds 10% or more of the issued ordinary shares.
- Not be an investment holding company or a property developer for sale or investment.
IRAS warns that it acts against abuse. Examples are splitting an existing business's income across shell companies and charging them fees without commercial reasons.
How much tax does each scheme save?
Take a company with S$200,000 of chargeable income, before any rebate. The tax at 17% is shown after each exemption.
| Scheme | Exempt amount | Taxed at 17% | Tax |
|---|---|---|---|
| Start-up exemption | S$125,000 | S$75,000 | S$12,750 |
| Partial tax exemption | S$102,500 | S$97,500 | S$16,575 |
The start-up exemption leaves less tax to pay in that example. The sums are ours, worked on IRAS's tables, so treat them as an illustration. Your own result depends on your chargeable income, any losses and reliefs.
What happens in year four?
IRAS ends the start-up exemption after the first three years of assessment and the company can claim the partial tax exemption from the fourth year. To work out which are your first three years, use the IRAS page on how to determine them. A company that does not qualify, for example because it has a corporate shareholder, goes straight to the partial scheme.
How do you claim?
Claim in two places, the Estimated Chargeable Income (ECI) filing and the corporate income tax return. See ECI and Form C-S for how those work. There is no separate application. Keep your share register and the shareholder details, because IRAS may ask for them.
Does the rebate change this?
The corporate income tax rebate is a separate relief. For the current year of assessment IRAS grants 50% of tax payable, with a S$2,000 cash grant for some active companies and a combined cap of S$40,000. It applies after your exemption is taken into account. IRAS changes it by Budget, so check the year you are filing for.
Is the exemption a loss reliever?
No. It reduces taxable profit that exists. If a company has a loss, there is no taxable profit to exempt. Ask a tax agent how losses are treated in your case.
The next page links to tax agents who file the ECI and return, and you can ask them to check which exemption applies.
Sources
- Corporate income tax rate, rebates and exemption schemes from IRAS, used for both schemes, the conditions, the tables and the rebate.
- Corporate income tax rates from IRAS, used for the 17% rate and the worked amounts.