Angel Investors Tax Deduction Scheme (AITD)
This is an incentive scheme to encourage individuals to invest in start-up companies and help the companies grow through their management expertise / business networks etc.
The scheme is available from 1 Mar 2010 to 31 Mar 2020.The investments made on or after 24 Feb 2015 and supported by SPRING Start-up Enterprise Development Scheme (SEEDS) and Business Angel Scheme (BAS) can also qualify for the scheme. New!
Qualifying for deduction
There are different qualifying criteria for the various parties to an angel investment deal. Individuals who are interested must first apply to SPRING Singapore which administers the scheme, to be approved as an angel investor.
The tax incentive is for approved angel investors who invest in qualifying start-up companies between 1 March 2010 to 31 March 2020.
Tax deduction for angel investors (individuals)
To enjoy a tax deduction, approved angel investor must:
- invest at least $100,000 of qualifying investment in a qualifying start-up company within 12 months from the date of his/her first investment in that company; and
- hold such investment for a continuous period of 2 years from the date of last qualifying investment.
The tax deduction is given for the Year of Assessment (YA) relating to the basis period in which the last day of the 2-year period falls. (See Example 1) The amount of tax deduction for each YA is based on 50% of the cost of qualifying investment, subject to a cap of $500,000 of investment costs i.e. deduction cap of $250,000.
The qualifying deduction will be offset against the individual’s total taxable income. Any unutilized deduction in any YA will be disregarded.
An approved angel investor, Mr A, invested $1,500,000 in a qualifying start-up company in May 2010. If he holds the investment until July 2012 (i.e. at least 2-year holding period), he can claim a tax deduction of $250,000 (50% of $500,000 cap) in his tax return for YA 2013.
In September 2013, say, Mr B (an approved angel investor) invests $400,000 in a qualifying start-up company and holds the investment until July 2015 (i.e. less than 2-year holding period). Mr B cannot claim any tax deduction.
How to claim the tax deduction
Please complete and sign Claim for Deduction under Angel Investors Tax Deduction Scheme . (48KB)
You may fax the completed form and the letter of confirmation, issued by SPRING Singapore, to us at 6351 3636 or send via post to:
The Comptroller of Income Tax, IRAS
55 Newton Road
Gains on disposal of investment
Any gains on disposal of the qualifying investment may be subject to tax in the individual’s name depending on his/her circumstances. Factors such as the volume and frequency of transactions, the interval between the purchase and sales, the manner of financing the purchase and whether he/she is actively involved in trading in a systematic manner with a view of seeking profit would be taken into consideration.
Example on computation of taxable gains
Using example 1, say, Mr A sells the investment on 31 Jan 2013
| Cost of investment in May 2010
Amount of deduction allowed in YA 2013
(50% X $500,000)
| Proceeds from sale of qualifying investment on 31 Jan 2013
Gain on disposal of investment
[$2,500,000 – ($1,500,000 - $250,000)]