In addition to the numerous other reasons that make Singapore an excellent country to incorporate your company — such as a vibrant economy; low-tax policies; world-class infrastructure; efficient public sector; and an efficient legal system — the generous benefits offered to startups by the Singapore government make the country an entrepreneur’s dream. In this article, we will outline some of the Singapore business incentives that may be available to your company.
Types of incentive programs
The Government of Singapore provides a comprehensive package of incentives to businesses whose activities align with the direction in which the state plans to steer economic development. Each incentive program is carefully designed to encourage a specific government policy objective; collectively the incentive programs are designed to make a positive impact on the country’s economy, enhance the development of specific industries, improve the country’s productivity, and promote innovation in Singapore. The main government agencies in Singapore that administer Singapore’s various business support programs are the Economic Development Board, Enterprise Singapore, Inland Revenue Authority, and the Monetary Authority of Singapore.
Currently, there are more than 79 sector-specific incentive programs available to Singapore companies. The benefits range from a S$6 million grant to the tax allowance of up to S$10 million. Some of these are designed for companies with specific attributes that operate in different industries, such as technology, innovation, manufacturing, trading, construction, retail, food and agriculture, logistics, maritime, media, investment, finance, and many others. This list keeps expanding as the government introduces new programs.
The incentives can be offered in a variety of forms:
- Grant. The award is a fixed monetary amount and it is received in the form of a non-repayable fixed grant. Sometimes, the amount is set as a percentage of the company’s qualifying costs (such as investment on new computers or employee training).
- Loan. The company will receive a repayable award under concessional terms. Loan repayment period, interest rate, and credit criteria differ for each program but are generally set very generously.
- Tax allowance. Award recipients receive a tax deduction from their taxable income for qualifying costs. They may also be provided with a concessionary corporate tax rate; or be able to take a tax exemption on qualified income derived from specific activities (such as exports).
- Subsidised fees. Qualified applicants will be able to utilize certain services and tools from pre-approved vendors at subsidised rates.
- Insurance protection. Eligible applicants can receive insurance for specific activities at zero (or a substantially reduced) cost.
- Non-financial support. Qualified startups will be provided with mentorship, contacts, networking opportunities, and expert guidance to support the expansion of the company.
For example, if your company operates in the tech industry, you might be eligible to apply for the following programs:
- Startup SG Tech
- Startup SG Founder
- Startup SG Equity
- Financial Sector Technology and Innovation Program
- Special Situation Fund for Startups
Key factors to keep in mind to qualify for Singapore incentives
Each assistance program has its own set of rigorous requirements. While incorporating a company, it is a good idea to keep these requirements in mind in order to avoid trivial mistakes that may disqualify you later from an incentive program.
Location of company’s core activities
Many incentive programs require that the company’s core business activity be carried out in Singapore. Understanding what constitutes “core business activities” may be confusing for applicants. In general, your company can meet this requirement by doing some or all of the following: board meetings in Singapore; executive team be based in Singapore; key business functions (accounting, operations, etc.) be performed in Singapore; etc. To ensure that your company will meet this requirement, you should consult with your incorporation firm.
Many incentive programs are targeted towards specific industries. Given the sophisticated state of innovation in Singapore, the activities of most companies span multiple industries. For example, a software firm that develops security software for the financial industry is part of the technology, financial services, and internet security industry. By carefully selecting your business activities, mission statement, and marketing strategy you can ensure that you will qualify for the programs that are suitable for you. Also, note that some programs specifically prohibit companies carrying on certain activities. For instance, under the Tax Exemption Scheme for New Start-Up Companies, a company whose principal activity is that of holding investments, or a company that undertakes property development for sale, investment, or both, is not eligible to apply. Once again, advice from your incorporation firm can help you make the right decision.
Most programs require a certain percentage of local shareholding. Some prescribe that a qualified amount of the company’s shareholding should be owned by corporate or individual shareholders. For example, to apply for an Enterprise Development Grant, your company must have a minimum of 30% local shareholding and the Startup SG Founder program requires at least 51% of local shareholding.
Other programs require that the company be incorporated as a private limited company and cannot be a subsidiary (i.e., all shareholders must be individuals). Some programs are not available if your Singapore company is incorporated as a branch office or partnership. Again, review your proposed business structure with your corporate services firm.
Another quite common requirement to think about is whether your company is considered a tax resident of Singapore. If the company is “controlled and managed” in Singapore it should be treated as a Singapore tax resident. Usually, this requirement can be met by conducting the company’s board meetings in Singapore in the year of assessment.
Company’s input in Singapore’s economy
Nearly all incentive programs are aimed at advancing local industries or developing higher value-added products and services. Thus, one of the defining requirements to apply for a program is whether your company’s business activities align with the objectives of the particular program. In order to qualify for some programs, your company must show a significant input in the development of an industry that results in clear economic benefits (e.g. spin-offs, local employment, intellectual property development, etc.) to Singapore.
Applicants that carry out substantial business activities in Singapore and commit to certain minimum levels of local business spending (which can be reflected in the company’s annual sales turnover) and employment growth (such as targets for a minimum number of employees to be employed in Singapore), are often looked on favorably.
Use of Singapore as headquarters to pursue regional growth, introduction of leading-edge skills for the local workforce, and contribution to the growth of research and development, fostering and building innovation capabilities are other positive factors.
Place of incorporation
Nearly all of the support programs are available only to Singapore-incorporated companies. Some of the incentive programs are available to well-established firms (that meet minimum annual revenue targets) with a good track record, while others are intended only for newly incorporated startups.
Incorporating a company in Singapore is quite easy and quick, as the Government encourages foreigners to open a business in Singapore. Singapore offers 100% foreign shareholding and you can easily manage your company from overseas. Contact our team if you are interested in incorporating your new venture in Singapore.
Consider an entrepreneur who plans to launch a tech startup in Singapore. One of the incentive programs the entrepreneur can utilize is the Tax Exemption Scheme for New Start-Up Companies. To qualify, the startup needs to meet the following qualifying criteria:
- It must be incorporated in Singapore;
- It is to be treated as a Singapore tax-resident for the particular year of assessment;
- Its total share capital must be beneficially held directly by no more than 20 shareholders, with all of the shareholders being individuals or at least one shareholder being an individual holding at least 10% of the ordinary shares issued by the company throughout the basis period for the relevant year of assessment.
If approved, a company will receive a tax exemption of 75% on the first S$100,000 of chargeable income and a tax exemption of 50% on the next S$100,000 of chargeable income, for the first three years. After the tax exemption under the program, the remaining chargeable income will be taxed at the applicable corporate tax rate, capped at 17%.
Let’s assume the company generates S$100k in annual profits and continues to generate S$200k in the subsequent two years. With the tax exemption, the startup will pay S$29,750 in taxes for the first three years, instead of S$85,000. In total, the startup’s tax savings for the first three years would amount to S$55,250.
Given the vast number of incentives programs available, determining which incentive program(s) your company qualifies for can be a tedious task. Furthermore, the application process can be time-consuming and complex; a minor mistake can delay or disqualify you. On the other hand, a successful application can result in very significant benefits for you. Therefore, a careful strategy for exploring the incentive programs is essential.
Instead of wasting your time with a trial and error approach; consider using our matchME™ with Incentives” service. Our team will assess your specific situation and recommend the programs that are suitable for you. If you so decide, we can then also apply on your behalf for the programs that you find interesting. Contact us for more information.
Headquartered in Singapore, CorporateServices.com, empowers global entrepreneurs with information and tools necessary to discover Singapore as a destination for launching or relocating their startup venture and offers a complete range of company incorporation, immigration, accounting, tax filing, and compliance services in Singapore. The company combines a cutting-edge online platform with an experienced team of industry veterans to offer high-quality and affordable services to its customers. Contact Us if you need assistance with setting up a new Singapore company or if you would like to transfer the administration of your existing company to us.
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