Undoubtedly, everyone wishes to know how to save tax in Singapore. Whether personal or corporate tax, any reduction will surely be appreciated by an individual or a company. Therefore, it’s helpful to know that Singapore has various tax relief schemes that individuals and businesses can leverage to save money.
How to Save Tax in Singapore as an Individual Taxpayer
There are a multitude of ways on how to save tax in Singapore as an individual. For individual taxpayers, tax relief is as follows:
- A ceiling of SGD 5,500 for personally paid courses that is related to current employment
- 250% deduction on tax for donation to a charity listed as an Institute of a Public Character in Singapore
- Total tax relief of S$14,000/assessment year for the taxpayer and parents simply topping up each CPF Special Account
- SGD 3,500 to SGD 5,000 NSMan of the Singapore Armed Forces tax relief, plus SGD 750 tax relief for the taxpayer’s parents and spouse for the assessment year
- 7% of life insurance policy value for those with a total contribution below SGD 5,000 for required employee CPF and self-employed or voluntary Medisave accounts
- Tax-deductible business outlays, such as advertising, accounting fees, CPF contributions, foreign worker and skills development levies, among many others
- Rental expenses deduction is equal to 15% of gross rental income
How to Save Tax in Singapore as a Corporate Taxpayer
Since Singapore supports free enterprise and encourages local businesses, the city-state offers income tax exemptions for qualifying firms. So, the best way to start learning how to save tax in Singapore is to determine which category the company can qualify for, if any.
In general, though, local and foreign companies carrying out commercial activities in Singapore are subject to tax on their income accrued in or derived from Singapore or received in Singapore from outside Singapore. The same is true for their foreign-sourced income once remitted or believed to be remitted to the city-state.
Moreover, non-residents are bound by tax withheld on certain kinds of income. Examples include technical service charges, interest, royalties, and rental of a mobile property when deemed to occur in Singapore. Now, let us look at how companies can save on their corporate tax in Singapore.
How to Save Tax in Singapore: New Start-Up Tax Exemption
Under the 2018 budget of Singapore, the scheme frees:
- 75% on the initial SGD 100,000 of the regular chargeable income
- 50% on the following SGD 100,000 of the regular chargeable income
These exemptions apply only for the initial three consecutive assessment years starting in YA 2020. In Singapore, a start-up is a company incorporated in the city-state for three years or less. The Singapore business needs to meet the following requirements to qualify:
- Incorporated in the city-state
- A tax-resident in the city-state for the said assessment years
- Have only 20 individual stockholders or less throughout the said assessment years. Among them, one or more holds at least ten percent of the shares of the company
- Does not belong to the industry of property development and investment holding representing investment or sale
How to Save Tax in Singapore: Partial Tax Exemption
All companies, including companies limited by guarantee, are eligible for this scheme instead. Under this scheme, companies are exempted as follows:
- 75% on the initial SGD 10,000 of their regular chargeable income
- 50% on the following SGD 190,000 of their regular chargeable income
How to Save Tax in Singapore: Pioneer Certificates (PC) Incentive
This incentive encourages Singapore businesses to engage in new business activities and expand manufacturing capabilities. It applies to firms who have secured economic activities within Singapore for some time, bringing substantial gains to the economy.
In addition, PC-approved companies are qualified to enjoy a five percent Singapore tax rate on corporate income drawn from qualifying events for five years.
How to Save Tax in Singapore: Development And Expansion (DEI) Incentive
This incentive focuses on firms that have capitalized on equipment, technology, and operational improvements that advance their capabilities in specific industries towards meeting globally competitive ranks. DEI-approved companies are qualified to enjoy a ten percent Singapore tax rate on corporate income drawn from qualifying events for five years. Just like the PC scheme, DEI’s criteria for businesses include:
- Employment produced in the firm, including seniority and skills or expertise
- Singapore’s economy profits from its business expenditure
- Capacity growth within technology, facilities or assets, and skill-sets are more innovative than what is typically obtainable in Singapore
- Plans to sustain or grow business activities within Singapore
How to Save Tax in Singapore: Double Tax Deduction For Internationalization (DTDI)
This scheme, managed by Enterprise Singapore, aims to inspire Singapore businesses to expand globally. It offers a double tax deduction for Singapore corporations planning to spread their business overseas. The tax deduction is on the qualifying outlays from April 1, 2012, to December 31, 2025, covering global investment development undertakings and market expansion.
How to Save Tax in Singapore: Research And Development Tax Measures (R&D)
This tax deduction is granted to boost pervasive research and development in Singapore and build innovative capabilities for people and companies. SMEs or Small and Medium Enterprises comprised the bulk of beneficiaries at 85% of claims.