6 Ways To Lower Your Corporate Taxes In Singapore Legally

  • Post category:Singapore

Corporate taxes may impact a company’s capacity to hire more employees and make operational investments. Corporate tax considerations are a major deciding factor in Singapore company registration. In Singapore, the corporate tax rate is 17%.

Singapore is a desirable tax haven for businesses globally due to its low corporate tax rate and tax policies that help lower the total amount of corporate taxes due.

6 Ways to Lower Your Corporate Taxes in Singapore Legally

6 WAYS TO LOWER YOUR CORPORATE TAXES IN SINGAPORE LEGALLY

EXEMPTION ON FOREIGN INCOME

Given Singapore’s business-friendly environment, which attracts many international companies, these companies must be aware of the country’s policies regarding income sourced from abroad.

Any income earned outside of Singapore is usually subject to two taxes: one in the foreign nation where the business is based, and the other in Singapore.

To help businesses avoid paying double taxes, Singapore has implemented the Avoidance of Double Tax Agreement (DTA) scheme. Businesses that fall under the categories of foreign-sourced dividends, foreign-sourced service income, or foreign branch profits are eligible for a tax exemption on foreign-sourced companies.

TAX EXEMPTION SCHEMES AND INCENTIVES

You can take advantage of a relevant incentive or scheme in Singapore that exempts corporate income tax, which can further lower your corporate taxes.

Taking advantage of deductions and exemptions is the most popular method of lowering corporation taxes. Deductions reduce taxable income, and certain types of income are entirely exempt from taxes under exemptions.

Singapore has implemented several tax exemptions and deductions over the years, such as the Corporate Income Tax Rebate in YA 2020.

The Economic Development Board (EDB) and the government of Singapore have introduced several incentives and exemptions. Here are a few of the most common ones: 

  • Investment Allowances
  • International Headquarters Incentive
  • Research and Development Incentive
  • Foreign Branch Profits Remission Scheme
  • Double Tax Deduction for Internationalisation Scheme (DTDi)
  • Pioneer Certificate Incentive
  • Development and Expansion Incentive

TAX INCENTIVES FOR STARTUPS

Most private businesses have effective financial and accounting procedures in place. The financial management of a public company and a private company differs greatly.

A public business is supposed to have thorough financial reporting protocols and a strong accounting system. The company can rely on a reputable audit firm in Singapore to handle the accounting and auditing procedures even if it lacks an internal team.

Additionally, the company will have guidance from experienced auditors and accountants regarding the various disclosures required during the SPAC process of going public.

A private company can ultimately thrive as a public company if it already has strong accounting procedures.

CONTRIBUTING TO YOUR EMPLOYEES’ MEDISAVE

Employers can lower their corporate taxes by participating in the Additional MediSave Contributions Scheme (AMCS).

Companies participating in this program may contribute up to S$2,730 annually per employee toward MediSave. Employers may also be eligible for applicable tax benefits, and employees’ contributions are tax-free.

For instance, businesses may be eligible for the Portable Medical Benefits Scheme (PMBS), which allows them to deduct up to 2% of an employee’s pay from taxes rather than just 1%.

THE PRODUCTIVITY AND INNOVATION CREDIT (PIC) SCHEME

Businesses can still receive cash payouts or tax deductions for qualifying activities carried out in any of the prior qualifying Years of Assessment, even though the PIC scheme expired in 2018. If your business previously used this program to upgrade equipment and processes or invest in innovation, you may still be qualified for cash payouts or tax deductions.

CLAIM ALL DEDUCTIBLE BUSINESS EXPENSES

You can deduct all costs associated with running your business, including rent, advertising, and salary. Make sure you keep thorough records of these costs so you can deduct them from your revenue as a business. To determine which expenses are deductible, you must become familiar with the standards established by the Inland Revenue Authority of Singapore (IRAS).

Reach out to us at Relin Consultants – Leading Global Business Set Up Partners for further assistance.

FAQs

What are Singapore’s corporate tax laws?

Companies in Singapore are subject to a flat 17% tax on their income. For the first three years of their business, newly incorporated companies are exempt from paying some taxes on their taxable profits due to the start-up tax exemption scheme.

How can high earners in Singapore lower their taxes?

Increasing the amount in your CPF accounts is one of the simplest ways to lower your taxes. Medisave, your Supplementary Retirement Scheme (SRS) account, your Medisave Special Account (SA) if you’re under 55, and your Retirement Account (RA) if you’re over 55 are all examples of CPF accounts.

How can foreigners in Singapore save taxes?

You may deduct donations to authorized charities, tax breaks for providing for your spouse and children, course fees for authorized courses, and other expenses to reduce your tax liability. Additionally, you can use the Supplementary Retirement Scheme to save for your retirement and receive a tax deduction voluntarily.

Are there any specific tax incentives available for startups in Singapore?

For the first three assessment years, startups are granted a special tax exemption by the Singaporean tax authority. This program’s primary goal is to encourage entrepreneurship and assist new businesses in expanding and establishing themselves in the nation.