Singapore has the lowest corporate tax in the world. No wonder it’s the hottest spot for business owners and entrepreneurs around the world. That said, companies have a lot to consider when thinking about corporate taxes.

While they decide to minimize the burden, they must also understand how corporate tax affects operations. As a Corporate Services Singapore provider, we’ve outlined tips on reducing company tax in Singapore.

Reducing Corporate Tax in Singapore: How Business Can Do It?

Despite Singapore’s lowest tax rate, many companies seek to minimize the tax burden further. They can take the following legal measures to reduce tax obligations:

Tax Exemption Incentives and Schemes

Singapore offers tax exemption incentives and schemes that businesses can benefit from. One of the common ways to reduce tax obligations is by claiming exemptions and deductions. Deductions lower taxable income whereas exemptions exclude certain amounts of income entirely from being taxed.

Singapore’s Corporate Income Tax Rebate in YA 2020 is one of the many such exemptions and deductions available to businesses. The Economic Development Board (EDB) and government have also launched other incentives including:

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

Tax Relief via Exemptions on Foreign-Sourced Income

Any income generated outside Singapore qualifies as foreign-sourced income and it’s taxable. In fact, such income is taxed twice. First, in foreign jurisdiction and later in Singapore, leading to double taxation.

However, the Avoidance of Tax Agreement scheme allows companies to claim benefits. Resident companies in Singapore can obtain tax exemptions on their foreign-sourced income if it falls under any of the following categories:

• Foreign branch profits
• Foreign-sourced dividend
• Foreign-sourced service income

Start-Up Tax Exemptions

Singapore introduced the Tax Exemption Scheme for New Start-Up Companies in YA (Year of Assessment) 2005. It provides support to local businesses and promotes entrepreneurship. The scheme was revised in YA 2020 with the following exemptions for the first three YAs:

• 75% exemption on initial S$100,000 regular chargeable income
• Additional 50% exemption on the second S$100,000 regular chargeable income
• From the 4^th year of assessment, businesses can avail of partial exemptions

There are exemptions to this scheme. Consult with Provisor Corporate Services Pte Ltd to discuss your options. We’re corporate services provider and accounting company helping locals and foreigners set up business Singapore. From helping you open a bank account to registering your company, we have got you covered. Connect with us now!