The World Bank’s annual Doing Business Report has ranked Singapore as the world’s easiest place to conduct business for nine consecutive years. Key factors considered in the study included the simplified incorporation process, tax registration, permit and licence application as well as the eased process of looking for an appropriate business premise. The majority of these transactions can be facilitated online which makes it all the more makes Singapore company registration and incorporation easier for start-ups.
A main contributing factor in Singapore’s pro-enterprise environment is its competitive corporate tax rate along with a line of tax exemption schemes and tax incentives that are aimed at attracting new businesses and retaining business with substantial activities.
Among these tax schemes is the Tax Exemption Scheme for New Start-ups. This scheme is designed to advocate entrepreneurship, increase Singapore company formation, and promote the growth of Singapore’s local enterprises. The qualified newly incorporated start-ups can get full tax exemption on the first S$100,000 normal chargeable income for its first three (3) consecutive years of assessment.
Who are qualified to apply?
Companies must meet the following criteria to be eligible for the tax exemption scheme:
– If the new start-up is incorporated in Singapore
– If the new start-up is a tax resident in Singapore during that Year of Assessment (YA)
– If the new start-up has shareholders that are not more than twenty (20) all throughout the YA period. Note that all of the shareholders must be individuals directly holding shares under their names or at least one (1) individual shareholder is directly holding at least 10 percent of the company’s issued ordinary shares.
Who are not qualified to apply?
In accordance to the announced Budget 2013, the Tax Exemption scheme no longer applies to these incorporated companies after 25th of February 2013:
– Incorporated companies with a principal activity that is investment holding
– Incorporated companies with a principal activity that is property development for investment, sale or both.
Claiming Tax Exemption
Prior to applying for a tax exemption, it is vital to first and foremost gain a good understanding of the Tax Exemption Scheme for Start-ups and ensure the company’s eligibility. The start-up company must have well-maintained accounting records and timely filed annual returns. In order to claim a new start-up company’s tax exemption, it must accomplish the relevant sections of the income tax return and Estimated Chargeable Income (ECI).