Singapore is a small country with no natural resources. To promote economic growth and development, we have adopted an open economy conducive to foreign investments and international trade since our independence in 1965. This has allowed us to transform from a third world economy into a global business hub over the years, with substantive activities across diverse sectors.
Located at the crossroads between the East and West, Singapore is an attractive location for global businesses to access new and emerging markets in Asia. With our excellent infrastructure, robust and transparent regulatory environment, political stability, skilled workforce, and a stable and efficient tax regime, Singapore has become a trusted hub for many businesses, with manufacturing being the largest sector in our economy. Our Corporate Income Tax system has features which encourage enterprise, growth, and internationalisation.
Start-up Tax Exemption Scheme
Income derived by companies in Singapore is taxed at a flat rate of 17%. The start-up tax exemption scheme provides newly incorporated companies some exemption on their taxable profits in their first three years of operation. Please refer to IRAS’ website for more details on the start-up tax exemption scheme and the qualifying conditions.
Partial Tax Exemption Scheme
The Government recognises that small- and medium-sized enterprises (SMEs) are an important component of a vibrant economy. To help such companies grow and establish themselves, the Government has put in place a partial tax exemption scheme designed to benefit SMEs. For more details on the partial tax exemption scheme, please refer to IRAS’ website.
As companies grow and expand their operations, they may organise themselves as multiple holding companies, subsidiaries and associate companies to manage liabilities. Under Singapore’s group relief system, current year unutilised losses, donations and unabsorbed capital allowances may be transferred to related companies within the group. This reduces the overall tax burden for the whole group. For more details on the group relief system, please refer to the IRAS e-tax guide on group relief.
Merger & Acquisition (“M&A”) Allowance Scheme
The M&A scheme aims to facilitate mergers and acquisitions, with a focus on developing a vibrant and dynamic SME sector. For further details of the M&A scheme and qualifying criteria, please refer to IRAS’ e-tax guide (884 KB) on the M&A scheme.
Double Tax Deduction for Internationalisation Scheme
The Double Tax Deduction for Internationalisation (“DTDi”) scheme provides support to businesses as they venture into international markets. For more details, please refer to IRAS’ website.
Singapore adopts the use of tax incentives as one of the tools to encourage new and high-growth activities. Tax incentives are granted only for qualifying activities and the associated income. Income arising from non-qualifying activities will be taxed at the Corporate Income Tax rate. Read more.
Tax Treatment of Foreign-Sourced Income
In Singapore, taxes are imposed on income earned or accrued in Singapore, as well as foreign-sourced income remitted into Singapore. Companies may qualify for foreign tax credit to offset the taxes payable on remitted foreign-sourced income. As an approach to allowing businesses to claim foreign tax credit in a more administratively efficient manner, the Government has introduced the foreign-sourced income exemption regime (FSIE).
Conditions to be met
Under the FSIE regime, foreign-sourced dividends, branch profits and service income (collectively "specified foreign-sourced income") derived by any person resident in Singapore is exempted from tax if the following conditions are met:
- the specified foreign-sourced income has been subjected to tax in the foreign jurisdiction from which the income is received;
- the headline tax rate of the foreign jurisdiction from which the specified foreign-sourced income is received is at least 15%; and
- the Comptroller is satisfied that the tax exemption would be beneficial to the person resident in Singapore.
What if the conditions are not met?
Where the above conditions are not met, tax exemption may be granted under section 13(12) of the Income Tax Act on foreign-sourced income which falls within the scenarios specified in the IRAS e-tax guide (657 KB) on “Income Tax: Tax Exemption under Section 13(12) for Specified Scenarios, Real Estate Investment Trusts and Qualifying Offshore Infrastructure Project/Asset”.
The application form under Section 13(12) of the Income Tax Act can be found here.
For more information on the FSIE regime, please refer to IRAS’ website.
What is Foreign Tax Credit Pooling?
Foreign Tax Credit Pooling was introduced in 2011 to give businesses greater flexibility on their claims for foreign tax credit.
What conditions must be met?
To claim Foreign Tax Credit Pooling, the following conditions must be met:
- income tax is paid on the income in the foreign jurisdiction from which the income is derived;
- the headline tax rate of the foreign jurisdiction from which the income is received is at least 15% at the time the foreign income is received in Singapore; and
- there is Singapore income tax payable on the foreign income and the taxpayer is entitled to claim for foreign tax credit under the Income Tax Act.
Please refer to IRAS' website for more details on the Foreign Tax Credit Pooling system.
Tax incentive schemes are legislated and reviewed regularly to ensure they remain relevant.
Tax incentives are administered by Singapore’s economic agencies. The incentives are granted for a limited period to businesses that conduct substantive activities or have substantive business plans to establish or expand their operations in Singapore, for income arising from qualifying activities.
Incentive recipients are:
- required to significantly contribute to the deepening of activities and/or creation of new capabilities and high-value skilled employment in Singapore; and
- subject to regular reviews of their economic contributions for the qualifying activities.
An incentive recipient needs to meet the committed contributions to continue enjoying its incentive award.
Tax Deduction for Donations
With effect from 1 January 2005, double tax deductions will be granted for all cash donations to Institutions of a Public Character (IPCs) or the Singapore Government, and certain in-kind donations to approved beneficiaries, whether or not they involve naming opportunities. Prior to 1 Jan 2005, donations with naming opportunities would only be granted a single tax deduction. The extension of the double tax deductions to include donations with naming opportunities is meant to encourage more donors to come forward, to give larger donations, and to cultivate lasting relationships with the beneficiaries they have lent their names to.
The table below further elaborates on the types of donations that will be granted double tax deduction. Other forms of in-kind donations that do not fall under the list will not be awarded double tax deduction.
|Donation Scheme||Eligible Recipient||Eligible Donor|
|Cash donations||Approved IPCs and the Singapore Government||All donors|
|Gift of shares listed on the Singapore Exchange (SGX) or of units in unit trusts traded in Singapore||Approved IPCs||Individual donors only|
|Gifts of computer hardware, software and peripherals||Approved IPCs and prescribed educational, research or other institutions in Singapore||Corporate donors only|
|Gifts of artefacts||Approved museums (by the National Heritage Board)||All donors|
|Donation of public sculptures||The National Heritage Board or approved recipients||All donors|
|Gifts of parcels of land or buildings||Approved IPCs||All donors|
In addition, do note that only the following donations with “naming opportunities” will be granted double tax deduction:
donations to name IPCs, IPC facilities, events or programmes,
donations to name facilities of approved beneficiaries (including artefacts and public sculptures) under any of the other approved donation programmes,
donations under any of the approved donation programme where the IPC or approved beneficiary acknowledges the donation by including the donor's name or logo in the IPC's collaterals (e.g. banners, publications, advertisements).
Double tax deduction will not be given in cases where the donor is essentially advertising at the IPC facility, event or programme. Such forms of advertisement include, but are not limited to, the display of the donor's own banners, products, or other collaterals at the IPC facility, event or programme. Such advertisements might be more appropriately regarded as advertising expenses.
Revision for Donation Scheme on Gifts of Computer Hardware, Software and Peripherals
Tax deduction scheme for donation of computer hardware, software and peripherals will be withdrawn with effect from 21 February 2017. A company that donates computers to a prescribed educational, research or other institution in Singapore and IPC on or after 21 February 2017 would not be eligible for any tax deduction.
Enhancement to deductions on donations
For donations made during the period from 1 January 2009 to 31 December 2015, the tax deduction was enhanced to 250%.
In conjunction with SG50, the Government increased the tax deduction from 250% to 300%, for donations made from 1 January 2015 to 31 December 2015 only.
Tax deduction for donations made from 1 January 2016 to 31 December 2021 will be at 250%. All existing criteria to qualify for tax deduction remain unchanged.