Tax Exemption in Singapore: A Complete Guide for Businesses and Startups
Singapore charges a flat 17% corporate income tax on profits for both resident and non-resident businesses, including startups and established companies.
It sounds fair, especially compared to higher-tax countries. But 17% is still 17%.
If you earn SGD 1,000,000 and your profit is SGD 400,000, you’d pay SGD 68,000 in tax. This is roughly the annual salary of an employee.
But what if we told you there’s a way to slash that tax by up to 75%?
Yes, it’s possible. In this guide, we’ll show you exactly how, covering all the schemes, incentives, and obligations you need to know.
Understanding Corporate Tax in Singapore
As of 2025, Singapore boasts a competitive flat corporate income tax rate of 17%, positioning it as one of the most business-friendly tax jurisdictions globally. This makes the country quite an attractive destination for entrepreneurs, startups, and multinational corporations alike.
Let’s look at the three key features of Singapore’s tax infrastructure:
1. Single-Tier Tax System
One of the defining features of Singapore’s tax framework is its single-tier corporate tax system.
Under this system, corporate profits are taxed only once at the corporate level. Any dividends distributed to shareholders are exempt from further taxation, which eliminates the risk of double taxation and enhances returns for investors.
2. Territorial Basis of Taxation
Singapore follows a territorial basis of taxation, which means that:
Only income earned in Singapore is subject to tax
Foreign-sourced income (such as profits from overseas business operations, dividends, interest, or service income) is generally tax-exempt. This is true unless it is received in Singapore and does not meet specific qualifying conditions for exemption.
This principle encourages Singapore-based companies to expand internationally without facing double taxation, provided they structure their income flows strategically.
3. Tax Authority and Compliance
The Inland Revenue Authority of Singapore (IRAS) is the regulatory body responsible for:
Tax collection and administration
Issuing tax guidance and updates
Facilitating digital tax services and compliance support
All companies operating in Singapore are required to file annual corporate tax returns using the Form C or Form C-S, depending on their eligibility.
You're supposed to report your normal chargeable income, which is what’s left after subtracting eligible business expenses, tax deductions, and exemptions.
Tax Exemption Singapore Schemes
To support businesses at different stages of their growth journey, the Singaporean government offers several tax exemptions and incentive schemes.
Here’s a closer look at the most relevant and impactful ones:
1. Start-up Tax Exemption Scheme (SUTE)
The start-up tax exemption scheme is designed to support newly incorporated companies. It helps them gain a stronger financial footing during their formative years.
To qualify, a company must:
Be incorporated in Singapore
Be a tax resident for the relevant Year of Assessment
Have no more than 20 shareholders, with at least one holding 10% or more of the issued ordinary shares
Not be a property or investment holding company
Image source: ContactOne
Tax benefits (2020 onwards) include:
75% exemption on the first SGD 100,000 of chargeable income
50% exemption on the next SGD 100,000 of chargeable income
This exemption applies for the first three consecutive Years of Assessment after incorporation. It allows startups to significantly reduce their tax obligations and reinvest savings into core business areas like R&D, hiring, or scaling operations.
2. Partial Tax Exemption Scheme (PTE)
For companies that don’t qualify for the SUTE — such as those older than three years or structured differently — the partial tax exemption scheme is available.
Tax benefits (2020 onwards) include:
75% exemption on the first SGD 10,000 of chargeable income
50% exemption on the next SGD 190,000 of chargeable income
This translates to a maximum exemption of SGD102,500 on the first SGD 200,000 of chargeable income. The PTE scheme ensures that all companies — regardless of size or stage — have access to meaningful tax relief to manage operating costs and improve profitability.
3. Foreign-Sourced Income Exemption (FSIE) Scheme
The FSIE scheme is a critical benefit for companies engaged in cross-border business or holding foreign subsidiaries. It allows foreign income to be brought into Singapore without triggering additional tax, under specific conditions.
Qualifying foreign income includes:
Dividends
Branch profits
Service income
To qualify for exemption, all three of the following must be met:
The income was subject to tax in the foreign jurisdiction (known as the “subject to tax” condition)
The highest corporate tax rate of that jurisdiction is at least 15%
The exemption is considered beneficial to the Singapore company
This scheme encourages companies to repatriate foreign profits for reinvestment or distribution, without the fear of double taxation.
4. Pioneer Certificate Incentive and Development and Expansion Incentive
These are incentive schemes aimed at companies that contribute significantly to Singapore’s economic or technological advancement.
Pioneer Certificate Incentive
Offers a reduced tax rate of 5% or 10% on qualifying income for up to 15 years
Targeted at companies undertaking pioneering activities or producing high-value goods/services that are not already being done in Singapore
Development and Expansion Incentive
Offers concessionary tax rates between 5% and 10% for companies that commit to expanding their operations, developing capabilities, or undertaking innovative projects
Companies must meet specific economic contribution criteria (e.g., job creation, skill development, or local spending)
Both incentives are administered by the Economic Development Board and require a formal application, typically supported by a business plan outlining the proposed benefits to the Singapore economy.
Tax Incentives for Businesses
Beyond its attractive tax exemption schemes, Singapore offers a range of strategic tax incentives aimed at promoting growth, innovation, and international expansion. These incentives are designed to ease financial pressures, encourage reinvestment, and enhance competitiveness across various industries.
Here’s a closer look at the major tax incentives available to businesses operating in Singapore:
1. Corporate Income Tax (CIT) Rebate
The corporate income tax rebate is a temporary relief measure introduced during specific Years of Assessment (YA) to help companies cope with rising business costs and economic challenges.
In recent years (e.g., YA 2018-2020), the rebate was provided at rates ranging from 20% to 50% of tax payable, capped at S$15,000-S$20,000 per company.
While not always available annually, the CIT rebate is typically announced during the Singapore budget as a targeted relief during challenging economic periods (e.g., post-COVID recovery).
2. Double Tax Deduction (DTD) for Internationalization Scheme
Managed by Enterprise Singapore (ESG), the DTD for Internationalization scheme supports Singapore-based companies in expanding overseas.
Qualifying expenditures include:
Overseas business development trips and trade fairs
Participation in international marketing or promotional campaigns
Market research and feasibility studies
Setting up overseas offices
Companies can claim a 200% tax deduction on qualifying expenses, subject to approval for larger-scale activities.
Automatic DTD (no prior approval needed) applies to certain expenses, up to a specified expenditure cap (e.g., S$150,000 annually).
3. Research and Development (R&D) Tax Incentive
To promote innovation and technological advancement, Singapore offers enhanced tax deductions for qualifying R&D activities conducted in the country.
Under the Enterprise Innovation Scheme, companies can claim up to 400% tax deduction on the first SGD 400,000 of qualifying R&D expenditure. This includes staff costs, consumables, and outsourced R&D.
Types of R&D supported include:
Product innovation
Process improvement
Development of new technologies or prototypes
4. Intellectual Property Development Incentive (IDI)
Singapore actively supports the creation, ownership, and commercialization of intellectual property (IP) through the IDI scheme, managed by the Economic Development Board.
Key features:
Offers a concessionary tax rate (as low as 5% or 10%) on qualifying income derived from IP rights
Applicable to income from patents, copyrights, trademarks, and proprietary know-how that is developed and used in Singapore
Companies must meet qualifying economic commitments, such as local headcount or investment levels
5. Investment Allowance
In addition to the above, Singapore offers an Investment Allowance for businesses making significant capital investments.
This provides an additional tax allowance on top of normal capital allowances, up to 100% of approved capital expenditure.
It's applicable for projects involving automation, equipment acquisition, or energy efficiency improvements, and requires approval from the Economic Development Board.
Company Deferral and Carry-Back Schemes
Singapore also offers deferral and carry-back schemes. Here’s what they mean:
1. Company Tax Deferral Scheme
This scheme allows eligible businesses to defer income tax payments for up to 12 months. Using this scheme, you can improve short-term liquidity and redirect funds toward essential operational needs, investment opportunities, or even crisis management.
2. Carry-Back Relief Scheme
This scheme lets companies use current-year losses and allowances to reduce the taxable income from the previous year. This, in turn, helps businesses recover part of their previous tax payments, reducing their current tax burden.
Key features:
Up to S$100,000 of qualifying deductions can be carried back
Applies to the immediate preceding year of assessment
How To Claim Tax Exemptions and Incentives in Singapore
To claim a tax exemption or incentive, businesses must meet specific eligibility criteria and follow the correct application process.
Below is a step-by-step guide on how to effectively claim tax exemptions and business incentives in Singapore:
1. Assess Eligibility for Tax Schemes
Before applying, companies should evaluate whether they qualify for the specific tax exemption or incentive. This involves reviewing the criteria set by IRAS or other governing bodies, such as Enterprise Singapore or the Economic Development Board.
Common eligibility factors include:
Business structure and incorporation status
Type of income (e.g., local vs. foreign-sourced)
Nature of business activities (e.g., R&D, IP development, international expansion)
Company size, annual revenue, or shareholding structure
2. Prepare and Submit Required Documentation
To substantiate your tax exemption or incentive claim, you must prepare and submit the necessary supporting documents. These may include:
Audited or unaudited financial statements
Corporate tax filings (Form C/C-S)
Detailed breakdown of qualifying expenses (e.g., R&D costs, overseas market expansion spending)
Approval letters (for schemes that require prior approval)
Some schemes, such as the Double Tax Deduction for Internationalization, allow automatic claims up to a limit, while others require pre-application and approval.
3. Ensure Compliance
Make sure your operations align with Singapore's tax laws and regulations to avoid penalties and fines. Engaging a tax consultant or accountant can help ensure compliance and optimize claims.
Impact of Tax Exemptions on Business Growth
Here’s how tax exemptions can contribute to your business’s success:
1. Reduced Tax Burden Boosts Cash Flow
Lower corporate taxes allow businesses to retain more of their earnings. This improved cash flow can be redirected into core areas such as operations, marketing, technology upgrades, and talent acquisition — important elements for scaling up.
2. Incentivizing Research, Development, and Innovation
Tax incentives for R&D encourage businesses to innovate. Companies investing in new technologies, products, or processes benefit from deductions and grants. This could ultimately enhance the competitive edge in local and global markets.
3. Driving Economic Growth
By stimulating entrepreneurship and attracting foreign capital, tax exemptions play a helpful role in job creation and economic development. They strengthen Singapore’s position as a resilient business ecosystem.
Don’t Pay More Tax Than You Need to With Piloto Asia
Singapore’s tax system is designed to support business growth through generous exemptions and incentives.
Whether you’re a startup or an established company, understanding and leveraging these schemes can significantly reduce your tax burden and free up capital for growth.
Need help navigating the process? Piloto Asia offers expert tax planning and compliance services to help you unlock every benefit available, so you don't pay even a penny more than what's required. Book a free consultation now!