Singapore Corporate Income Tax Rates

Corporate Income Tax Rate

Your company is taxed at a flat rate of 17% of its chargeable income. This applies to both local and foreign companies.

Corporate Income Tax Rebates

Corporate Income Tax rebates are given to companies to ease their business costs and to support their restructuring. These rebates are applicable for the Years of Assessment (YAs) 2013 to 2020.

The rebates also apply to income derived by Registered Business Trusts, non-resident companies that are not subject to a final withholding tax and companies that receive income taxed at a concessionary tax rate. They do not apply to income derived by a non-resident company that is subject to final withholding tax.

Your company’s chargeable income declared in its Corporate Income Tax Returns (Estimated Chargeable Income (ECI) and Form C-S/ Form C-S (Lite)/ Form C) should not include the rebate as IRAS will compute and allow it automatically. 

Rebate Percentages & Tax

YA	Corporate Income Tax Rebate	Capped at
2020	25%	$15,000
2019	20%	$10,000
2018	40%	$15,000
2017	50%	$25,000
2016	50%	$20,000
2013 to 2015	30%	$30,000

How The Rebates Are Computed

The rebates are computed on the tax payable after deducting tax set-offs (e.g. foreign tax credit).

Example 1: Company with No Chargeable Income

Tax Computation	$
Chargeable Income	Nil
Tax Payable	Nil

The rebate does not apply as there is no tax to be paid.

Example 2: Company with Income Taxable at 17% in YA 2020

Tax Computation	$
Chargeable Income at 17% (After Exempt Amount)	500,000
Gross Tax Payable ($500,000 x 17%)	85,000
Less: Corporate Income Tax Rebate ($85,000 x 25% = $21,250; capped at $15,000)	(15,000)
Tax Payable	70,000

Example 3: Company with Income Taxable at 17% and Concessionary Rate of 10% in YA 2020

Tax Computation	$
Chargeable Income at 10%	180,000
Chargeable Income at 17% (After Exempt Amount)	500,000
Gross Tax Payable ($180,000 x 10% + $500,000 x 17%)	103,000
Less: Corporate Income Tax Rebate ($103,000 x 25% = $25,750; capped at $15,000)	(15,000)
Tax Payable	88,000

Tax Exemption Schemes

The tax exemption scheme for new start-up companies and partial tax exemption scheme for companies are tax reliefs available to reduce companies’ tax bills.

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

Chargeable Income	% Exempted From Tax	Amount Exempted From Tax
First $100,000	75%	$75,000
Next $100,000	50%	$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)

Chargeable Income	% Exempted From Tax	Amount Exempted From Tax
First $100,000	75%	$100,000
Next $100,000	50%	$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:

YA	Normal Chargeable Income	% Exempted From Tax	Amount Exempted From Tax	Maximum Exemption
2019	First $100,000 Next $200,000	@ 100% @ 50%	$100,000 $100,000	$200,000
2020	First $100,000 Next $100,000	@ 75% @ 50%	$75,000 $50,000	$125,000
2021	First $100,000 Next $100,000	@ 75% @ 50%	$75,000 $50,000	$125,000

View examples (PDF, 57KB) on how to compute the amount of tax exemption under the tax exemption scheme for new start-up companies.

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:
   • All the shareholders are individuals; or
   • At least 1 shareholder is an individual holding at least 10% of the issued ordinary shares of the company

How to Claim Tax Exemption

To claim the tax exemption, complete the relevant sections of the Estimated Chargeable Income (ECI) filing and Form C-S/ Form C-S (Lite)/ Form C.

Abuse of the Tax Exemption Scheme

IRAS takes a serious view of companies that are set up to abuse this scheme and are not incorporated for entrepreneurship and genuine commercial reasons.

IRAS will not hesitate to take action when such abuse is uncovered.

Abuse of the tax exemption scheme includes:

• Allocating the income of an existing profitable going concern to a few shell companies so that the chargeable income of each shell company is within the threshold for tax exemption
• Charging fees/ expenses to an existing profitable going concern by shell companies without any bona fide commercial reasons

The shell companies claim tax exemption on the income they receive from the profitable going concern, while the latter claims tax deduction on the fees/ expenses paid to the shell companies.

These shell companies do not carry out any activities or significant activities and have no or few employees. Their accounts usually show few transactions and low capitalisation (usually at $2).

These forms of arrangement result in an overall net reduction of tax for the profitable going concern and the shell companies.

As at 31 Jan 2021, more than 300 companies have been audited for possible abuse of the tax exemption scheme for new start-up companies. This has resulted in total tax recovery and penalties of more than $25 million.

Tax evasion/ fraud is a criminal offence punishable under the law and the Court imposes severe penalties for such offences. Businesses or individuals who engage in abusive tax arrangements such as setting up of shell companies to take advantage of the tax exemption scheme for new start-up companies or individuals who assist others with abusive tax arrangements should disclose such abuse immediately. IRAS will treat such disclosure as a mitigating factor when considering the penal charges.

Partial Tax Exemption Scheme for Companies

All companies, including companies limited by guarantee, are eligible for partial tax exemption (PTE), 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:

YA 2020 onwards	YA 2019 and before
– 75% exemption on the first $10,000 of normal chargeable income*; and – A further 50% exemption on the next $190,000 of normal chargeable income*.	– 75% exemption on the first $10,000 of normal chargeable income*; and – A further 50% exemption on the next $290,000 of normal chargeable income*.

The tables below summarize the amount of tax exemption.

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

Chargeable Income	% Exempted From Tax	Amount Exempted From Tax
First $10,000	75%	$7,500
Next $190,000	50%	$95,000

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

Chargeable Income	% Exempted From Tax	Amount Exempted From Tax
First $10,000	75%	$7,500
Next $290,000	50%	$145,000

FAQs

1. Why are investment holding companies and companies who undertake property development not eligible for the tax exemption scheme for new start-up companies?
   Investment holding companies derive only passive incomes such as dividend and interest income, while the real estate industry typically incorporates a new company for each new property development.
   
   The purpose of the start-up tax exemption is to encourage entrepreneurship, and hence not intended for such companies. However, these companies are eligible for the partial tax exemption.
   
   
2. How do companies limited by guarantee meet the condition on share capital for the tax exemption scheme for new start-up companies?
   For companies limited by guarantee, the mentioned condition will apply to their membership instead. Such companies must have members who meet either of the following conditions:
   
   • All of whom are individuals throughout the basis period for that Year of Assessment (YA)
   • At least one of whom is an individual throughout the basis period for that YA, and the contribution of that individual under the memorandum of association of the company to the assets of the company in the event of it being wound up amounts to at least 10% of the total contributions of the members of the company throughout the basis period for that YA
     
     
3. If my company does not claim the tax exemption for new start-up companies in any of the first 3 YAs, can I continue to claim the tax exemption in subsequent YAs?
   No. The tax exemption is available only for the first 3 consecutive YAs. If your company incurs losses or has no income (e.g. business has not commenced) during any of the first 3 YAs, the tax exemption scheme for new start-up companies is not applicable to your company for that particular YA as your chargeable income and tax payable are nil. However, that particular YA is still included in determining the first 3 consecutive YAs that your company is eligible for the tax exemption for new start-up companies.
   
   Example:
   Your company’s first 3 YAs are YA 2019, YA 2020 and YA 2021. It has no income in YAs 2019 and 2020. It started its operations in 2020 and has taxable income in YA 2021.
   
   Your company can claim the tax exemption for new start-up companies in YA 2021 if it meets all the qualifying conditions. However, YA 2021 is your company’s third YA, although this is its first claim for the tax exemption for new start-up companies.
   
   Your company cannot claim the tax exemption for new start-up companies in YA 2022 as it is the fourth YA. From YA 2022, your company is eligible for the partial tax exemption.
   
   
4. Can my company defer the claim for unutilised tax losses brought forward to maximise the benefit given under the tax exemption scheme for new start-up companies?
   No. The company must first set-off the unutilised tax losses brought forward against the current year adjusted profit, unless it does not meet the qualifying conditions for set-off*.* If it does not meet the qualifying conditions for set-off, the unutilised losses will be disregarded and will not be available for set-off against current or future profits.
   
   Example:
   Your company has tax losses of $150,000 in YA 2020 and has an adjusted profit of $100,000 in YA 2021. It qualifies for the tax exemption scheme for new start-up companies in YA 2021.The company must first set-off the unutilised tax losses of $150,000 brought forward from YA 2020 against the adjusted profit of $100,000 in YA 2021, assuming it meets the qualifying conditions for set-off.
   
   This results in unutilised losses of $50,000 ($150,000 – $100,000) to be carried forward to set-off against profits of subsequent YAs, subject to meeting the qualifying conditions. The tax exemption scheme for new start-up companies is therefore not applicable to the company for YA 2021 since the company’s chargeable income and tax payable for YA 2021 are nil.
   
   
5. Can my company defer the claim for capital allowance to maximise the benefit given under the tax exemption scheme for new start-up companies?
   Yes. Your company can defer the claim for capital allowance. Learn more about deferring capital allowance claims.
   
   
6. My company’s chargeable income for YA 2021 is less than $200,000. As such, my company is unable to enjoy the maximum amount of tax exemption for new start-up companies. Can the ‘unutilised’ exempt amount for YA 2021 be carried forward to subsequent YAs?
   No. The tax exemption is allowed on a per YA basis. You cannot carry forward any ‘unutilised’ amount to YA 2022 or any other subsequent YAs.
   
   
7. I have converted my sole-proprietor or partnership business into a company. Is my company eligible for the tax exemption scheme for new start-up companies?
   Yes. Your company is eligible for the tax exemption scheme for new companies for its first 3 consecutive YAs if it meets all the qualifying conditions.
   
   
8. Can a foreign company or its Singapore branch claim the tax exemption for new start-up companies?
   No. A foreign company or its Singapore branch cannot claim the tax exemption for new start-up companies as they are not incorporated in Singapore.
   
   However, a foreign company or its Singapore branch is eligible for the partial tax exemption on its normal chargeable income.
   

For more information on Singapore tax rates, visit Meyzer360’s tax page or contact us here.