Singapore has earned its place as one of the world’s most attractive hubs for business. With its stable government, skilled workforce, and robust legal system, it consistently ranks high on ease-of-doing-business indices. But perhaps one of the most compelling reasons companies choose to set up shop here is the competitive corporate tax regime – particularly the Singapore corporate tax exemption schemes that significantly reduce tax burdens for eligible businesses.
In this guide, we explore everything you need to know about Singapore’s corporate tax exemptions – what they are, who qualifies, how much you can save, and how to make the most of them. Whether you're a start-up founder or running a well-established enterprise, understanding these exemptions is key to improving your company’s financial efficiency.
Understanding Singapore’s Corporate Income Tax Framework
Before diving into the exemption schemes, let’s review the fundamentals of the corporate tax system in Singapore:
- Flat Corporate Tax Rate: Singapore’s corporate income tax rate stands at 17% – among the lowest globally.
- Territorial Tax System: Only income earned in Singapore or received in Singapore from foreign sources is taxable.
- No Capital Gains Tax: Capital gains – such as proceeds from the sale of assets or shares – are generally non-taxable.
- Single-Tier Tax System: Corporate profits are taxed at the company level. Dividends distributed to shareholders are tax-exempt.
These features, coupled with exemption schemes, create a powerful incentive for businesses to incorporate and operate in Singapore.
1. Tax Exemption Scheme for New Start-Up Companies
To encourage entrepreneurship, the Inland Revenue Authority of Singapore (IRAS) introduced the Start-Up Tax Exemption (SUTE) Scheme in YA 2005. This scheme offers substantial tax relief to qualifying newly incorporated companies.
Eligibility Criteria
To qualify for the scheme, your company must:
- Be incorporated in Singapore
- Be a tax resident in Singapore for the relevant YA
- Have no more than 20 shareholders, with at least one holding 10% or more of issued ordinary shares
Excluded businesses include:
- Investment holding companies (passive income from dividends, interest, etc.)
- Property development companies that build and sell real estate
Tax Exemption Benefits (YA 2020 onwards)
New start-ups can enjoy the following exemptions on normal chargeable income for their first three YAs:
| Chargeable Income | Exemption Level | Exempted Amount |
|---|---|---|
| First S$100,000 | 75% exemption | S$75,000 |
| Next S$100,000 | 50% exemption | S$50,000 |
| Total | S$125,000 |
Note: This is not automatic. You must still file your taxes properly to enjoy these benefits.
Important Notes
- You can only claim the exemption for the first three consecutive YAs.
- Even if your company is dormant or records zero income in a YA, it still counts towards the three-year period.
2. Partial Tax Exemption (PTE) Scheme
For companies that have outgrown the start-up phase or do not qualify for the SUTE scheme, Singapore offers the Partial Tax Exemption (PTE) Scheme.
Who Qualifies?
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.
PTE Benefits (YA 2020 onwards)
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*; andA further 50% exemption on the next $190,000 of normal chargeable income*. | 75% exemption on the first $10,000 of normal chargeable income*; andA further 50% exemption on the next $290,000 of normal chargeable income*. |
* 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)
| Chargeable Income | % Exempted From Tax | Amount Exempted From Tax |
|---|---|---|
| First $10,000 | 75% | $7,500 |
| Next $190,000 | 50% | $95,000 |
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)
| Chargeable Income | % Exempted From Tax | Amount Exempted From Tax |
|---|---|---|
| First $10,000 | 75% | $7,500 |
| Next $290,000 | 50% | $145,000 |
The maximum exemption for each YA is $152,500 ($7,500 + $145,000).
Refer to the IRAS' example computation of the amount of tax exemption under the partial tax exemption scheme.
3. Corporate Income Tax (CIT) Rebate
In certain YAs, the government provides Corporate Income Tax Rebates as a form of temporary relief – especially useful during economic downturns.
Key Details for YA 2024 and 2025
- 50% CIT rebate, capped at S$40,000
- Less CIT Rebate Cash Grant of S$2,000, if eligible
- Applies to tax payable after exemptions and set-offs but before tax deducted at source
Example: Company With S$75,000 Chargeable Income
| Tax Computation | S$ |
|---|---|
| Chargeable Income at 17% (After Exempt Amount) | 75,000 |
| Gross Tax Payable ($75,000 x 17%) | 12,750 |
| Less: Tax Set-Off | (750) |
| Tax Payable before CIT Rebate | 12,000 |
| Less: CIT Rebate $12,000 x 50% = $6,000 (capped at $40,000) | (6,000) |
| Net Tax Payable | 6,000 |
These rebates are especially valuable for SMEs managing tight budgets or facing rising operational costs.
4. How to Claim Your Corporate Tax Exemptions
Claiming these tax exemptions is a straightforward process, but accuracy is critical. Here’s what you need to do:
Step 1: File Estimated Chargeable Income (ECI)
To claim the tax exemption, complete the relevant sections of the Estimated Chargeable Income (ECI) filing.
Your company has to file ECI within 3 months from the end of your financial year unless:
- Your company qualifies for the ECI filing waiver; or
- Your company is specifically not required to file ECI.
Step 2: Submit the Right Tax Return
Use the correct form: Form C-S/ Form C-S (Lite)/ Form C
- Form C-S (for qualifying small companies)
- Form C-S (Lite) (simplified version for even smaller companies)
- Form C (for all others)
Step 3: Maintain Proper Records
Keep thorough records, including:
- Income and expense statements
- Source documents (invoices, receipts, contracts)
- Shareholder and directorship information
6. Common Mistakes to Avoid
Many companies miss out on full tax benefits due to avoidable errors. Here are key pitfalls to watch:
- Not filing on time: Late submissions result in fines and loss of exemptions
- Incorrect classification: Misreporting business activity or income type can lead to disqualification
- Relying solely on manual processes: Errors from spreadsheets or outdated software can impact your tax position
If you're unsure about compliance, it's wise to consult a corporate service provider or automate your filings through platforms.
7. Why Singapore's Corporate Tax System Stands Out
Here’s a quick recap of why businesses thrive under Singapore’s tax regime:
| Feature | Benefit |
|---|---|
| Flat 17% tax rate | Low, predictable costs |
| Start-up tax exemptions | Reduced tax burden in early years |
| Partial tax exemptions | Long-term corporate relief |
| Rebates and grants | Boost resilience and recovery |
| Transparent compliance process | Easy to follow and tech-friendly |
| Territorial tax | Avoid tax on overseas gains |
| No capital gains tax | Encourages reinvestment |
These measures, combined with strong government support, make Singapore a prime location for regional headquarters, digital start-ups, and global expansion strategies.
Final Thoughts: Making the Most of Your Tax Benefits
Whether you're a local entrepreneur just getting started or a growing company scaling your operations, Singapore’s corporate tax exemptions are powerful tools to help you thrive. But like all tools, they need to be used correctly.
Understanding eligibility rules, filing requirements, and deadlines is essential. And with the right systems and support in place, you can maximise tax savings while focusing on what matters most—growing your business.
To simplify your tax and payroll processes, consider partnering with a tax consultant to ensure compliance, reduce errors, and stay ahead of regulatory changes.
