Small businesses form the backbone of Singapore’s economy – of the 190,100 enterprises in Singapore in 2015, 99 per cent were small and medium-sized businesses (SMBs). In an increasingly competitive economy, every little bit helps SMBs.
Taxes are one area that can affect a company’s bottom line. However, there are several exemption schemes, tax credits and rebates that offer eligible SMBs significant tax relief.
Here are four ways SMBs can maximise tax benefits in Singapore.
Tax Exemption Scheme for New Startup Companies
If your small business is currently in the startup phase, you could be in luck. Introduced in 2005, the tax exemption scheme for startups encourages entrepreneurship and supports new businesses. Qualifying companies pay no income tax on the first S$100,000 earned, and receive a 50 per cent exemption on the next $200,000. The news gets better – these tax exemptions apply for the first three consecutive years of assessment.
Partial Tax Exemption for Companies
If your company is more than three years old, a partial tax exemption may be available for normal chargeable income of up to S$300,000. Qualifying companies receive a 75 per cent tax exemption on the first S$10,000 of their chargeable income, as well as a further 50 per cent tax exemption on the next S$290,000.
Foreign Tax Credit
If your small business draws a foreign income, you could be hit with a double tax bill – once in the other country, and again when the foreign income is remitted into Singapore. Thankfully, the foreign tax credit provides relief from this considerable tax burden. If your company is a tax resident of Singapore, has already paid or will be paying tax on the income in the foreign jurisdiction, but the income is subject to taxes in Singapore as well, you may be eligible for a tax credit.
Corporate Income Tax Rebate
The corporate income tax rebate has been increased to 50 per cent in 2016 and 2017 to assist SMBs with restructuring so that they can meet the challenges of the current economic climate. Subject to a cap of S$20,000, this compares to a rebate of 30 per cent from 2013 to 2015, capped at S$30,000.
Singapore supports SMBs with a range of tax exemptions and rebates. If your SMB falls into any of the above categories, you may be eligible for significant tax savings that will make a difference to your company’s growth.