Singapore is well known for its attractive corporate tax regime, offering competitive rates and generous exemptions that make it a hub for businesses both local and international. In this article, we’ll break down how corporate tax works in Singapore, walk through an example using a tax calculator, and highlight the key tax benefits that companies can tap into.

Overview of Corporate Tax in Singapore

All companies operating in Singapore are taxed at a flat rate of 17% on their chargeable income (i.e., profits after deducting allowable expenses and exemptions). However, thanks to various relief schemes, many companies pay significantly less.

Main Tax Exemption Schemes 

1. Tax Exemption Scheme for New Start-Up Companies

Newly incorporated companies that are Singapore tax residents and meet certain ownership conditions can enjoy major tax breaks for the first three consecutive years of assessment.

The tax exemption scheme for new start-up companies was introduced under Section 43 of the Income Tax Act 1947 in the Year of Assessment (YA) 2005 to support entrepreneurship and to grow our local enterprises.

It was announced in Budget 2018 that the tax exemption under the scheme would be revised with effect from YA 2020, as other support for companies to build their capabilities have been strengthened.

The tax exemptions for qualifying companies for their first 3 consecutive YAs are as follows:

* Normal chargeable income refers to income to be taxed at the prevailing Corporate Income Tax rate of 17%.

This exemption scheme applies to qualifying companies only for their first 3 consecutive YAs. From the fourth YA onwards, companies can enjoy the partial tax exemption. Learn how to determine the first 3 YAs of your company.

The tables below summarise the amount of tax exemption.

Table 1: Tax Exemption on First $200,000 of Chargeable Income (where any of the first 3 YAs falls in or after YA 2020)

The maximum exemption for each YA is $125,000 ($75,000 + $50,000).

Table 2: Tax Exemption on First $300,000 of Chargeable Income (where any of the first 3 YAs falls in YA 2019 and before)

The maximum exemption for each YA is $200,000 ($100,000 + $100,000).

Example: My company qualifies for the tax exemption scheme for new start-up companies and its first 3 YAs are YA 2019, YA 2020 and YA 2021. What is the maximum exemption I can claim under the scheme?

The maximum exemption on normal chargeable income for each YA is as follows:

Note:
The changes to the tax exemption scheme for new start-up companies as announced in Budget 2018 apply only with effect from YA 2020.

Qualifying Conditions for Tax Exemption Scheme for New Start-Up Companies

All new start-up companies are eligible for the tax exemption scheme, except:

• Companies whose principal activity are that of investment holding
• Companies that undertake property development for sale, investment, or both

The new start-up company must also:

1. Be incorporated in Singapore
2. Be a tax resident of Singapore for that YA
3. Have its total share capital beneficially held directly by no more than 20 shareholders throughout the basis period for that YA where:
   1. All the shareholders are individuals; or
   2. At least 1 shareholder is an individual holding at least 10% of the issued ordinary shares of the company

Breakdown:

• 75% exemption on the first S$100,000 of chargeable income.
• 50% exemption on the next S$100,000.

Who qualifies?

• Company is incorporated in Singapore.
• Must be a tax resident in Singapore for the relevant Year of Assessment (YA).
• Has no more than 20 shareholders, with at least one individual holding at least 10% of the shares.

2. Partial Tax Exemption Scheme for Companies

For companies not eligible for New Start-Up Companies (or beyond the initial 3 years), Partial Tax Exemption provides ongoing relief:

• 75% exemption on the first S$10,000 of income.
• 50% exemption on the next S$190,000.

All companies, including companies limited by guarantee, are eligible for partial tax exemption (PTE) under Section 43 of the Income Tax Act 1947, unless they are claiming the tax exemption for new start-up companies.

It was announced in Budget 2018 that the tax exemption under the partial tax exemption scheme would be revised with effect from the Year of Assessment (YA) 2020 as other support for companies to build their capabilities have been strengthened.

The tax exemptions for qualifying companies are as follows:

* Normal chargeable income refers to income to be taxed at the prevailing Corporate Income Tax rate of 17%.

The tables below summarise the amount of tax exemption.

Table 1: Partial Tax Exemption on First $200,000 of Chargeable Income (YA 2020 onwards)

The maximum exemption for each YA is $102,500 ($7,500 + $95,000).

Table 2: Partial Tax Exemption on First $300,000 of Chargeable Income (YA 2019 and before)

The maximum exemption for each YA is $152,500 ($7,500 + $145,000).

Other Tax Benefits in Singapore

Besides Tax Exemption Scheme for New Start-Up and Partial Tax Exemption Scheme, Singapore offers additional tax-saving measures:

• Tax-deductible expenses: Costs like rent, salaries, marketing, and professional services can reduce your taxable income.
• R&D Tax Deductions: Companies investing in innovation may qualify for enhanced deductions under the R&D incentive scheme.
• Industry-specific tax incentives: Available to businesses in sectors like tech, maritime, biotech, and finance.

Singapore’s corporate tax system offers both simplicity and generosity, with a low headline tax rate and multiple exemptions for businesses. With proper planning and use of tools like tax calculators, companies can ensure compliance while maximizing savings.

Whether you’re launching a new venture or managing an established firm, understanding how corporate tax works can help you stay ahead—financially and strategically.