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About the Tax Exemption Scheme for New Start-up Companies

The tax exemption scheme for new start-up companies was introduced in Year of Assessment (YA) 2005 to support entrepreneurship and help our local enterprises grow.


Under this scheme, a newly incorporated company that meets the qualifying conditions can claim for full tax exemption on the first $100,000 of normal chargeable income* for each of its first three consecutive YAs.

From YA 2008, a further 50% exemption is given on the next $200,000 of the normal chargeable income* for each of the first three consecutive YAs.

* Normal chargeable income refers to income to be taxed at the prevailing corporate tax rate (excluding Singapore franked dividends).

The exempt amount for each YA is as follows:

Year of Assessment Exempt amount for new start-up companies
2008 onwards First $100,000 @ 100% = $100,000
Next $200,000 @ 50%   = $100,000
Total $300,000                  $200,000
2005 to 2007 First $100,000 @ 100% = $100,000

Companies that do not qualify for this scheme will still be eligible for partial tax exemption.  For details on partial tax exemption, please refer to Tax Rates and Tax Exemption Schemes.

Companies not eligible for the Tax Exemption scheme New! 

As announced in Budget 2013, the Tax Exemption scheme does not apply to the following companies incorporated after 25 Feb 2013:

  • A company whose principal activity is that of investment holding; and
  • A company whose principal activity is that of developing properties for sale, for investment, or for both investment and sale.

Investment holding companies derive only passive incomes such as dividend and interest income, while the real estate industry typically incorporates a new company for each new property development.  The start-up tax exemption for encouraging entrepreneurship is not intended for such companies.  These companies will be given partial tax exemption.

Abuse of the Tax Exemption scheme

IRAS has observed some companies set up not for entrepreneurship and genuine commercial reasons but rather to take advantage of the tax exemption scheme.  IRAS will take actions against such abuses.

Please refer to Abuse of Tax Exemption Scheme for New Companies for more details.

Qualifying Conditions

With effect from Year of Assessment (YA) 2010

If your company is not excluded from the Tax Exemption scheme, it can enjoy the tax exemption if it meets the following qualifying conditions:

  1. incorporated in Singapore (including a company limited by guarantee**);
  2. a tax resident* in Singapore for that YA; and
  3. has no more than 20 shareholders throughout the basis period for that YA where: 

  • all of the shareholders are individuals beneficially and directly holding the shares in their own names; or

  • at least one shareholder is an individual beneficially and directly holding at least 10% of the issued ordinary shares of the company.

Please refer to FAQ 7  for the qualifying conditions applicable to YA 2005 to YA 2009.

* A company is resident in Singapore if the control and management of its business is exercised in Singapore.

** Companies limited by guarantee must have members where: 
    - all of whom are individuals throughout the basis period for that YA; or
    - at least one of whom is an individual throughout the basis period for that YA, and the contribution of that individual under the memorandum of association of the company to the assets of the company in the event of it being wound up, amounts to at least 10% of the total contributions of the members of the company throughout the basis period for that YA.

How to determine your first Year of Assessment

The first YA refers to the YA relating to the basis period in which the company was incorporated.

From the fourth YA onwards, your company will be given partial tax exemption instead of the exempt amount for new start-up companies.

To illustrate, if your company was incorporated on 1 Jul 2012 and your financial year end and the period covered in your first set of accounts are as follows:

No. Financial year end Period covered in first set of accounts Year of Assessment (YA) Basis period
1 30th Jun 1 Jul 2012 to 30 Jun 2013
(= 12 months)
2014 (1st YA) 1 Jul 2012 to 30 Jun 2013
2015 (2nd YA) 1 Jul 2013 to 30 Jun 2014
2016 (3rd YA) 1 Jul 2014 to 30 Jun 2015
2 31st Dec 1 Jul 2012 to 31 Dec 2012
(< 12 months)
2013 (1st YA) 1 Jul 2012 to 31 Dec 2012
2014 (2nd YA) 1 Jan 2013 to 31 Dec 2013
2015 (3rd YA) 1 Jan 2014 to 31 Dec 2014
3 31st Dec 1 Jul 2012 to 31 Dec 2013*
(> 12 months)
2013 (1st YA) 1 Jul 2012 to 31 Dec 2012
2014 (2nd YA ) 1 Jan 2013 to 31 Dec 2013
2015 (3rd YA) 1 Jan 2014 to 31 Dec 2014
* The first set of accounts covers a period of 18 months. The company's profit/losses must be attributed and declared under two YAs (i.e. YA 2013 and YA 2014). This is because, in general, the basis period for each YA should not exceed 12 months. As such, the first YA is YA 2013 instead of YA 2014.

Time apportionment basis may be used if the company is not able to directly identify its income and expenses to the two periods.

For details on how to prepare your tax computation, please refer to Preparing tax computation.

How to claim Tax Exemption

Please complete the relevant sections of the Estimated Chargeable Income (ECI) form and income tax return to claim the tax exemption for new start-up companies.

For more details on filing ECI and the income tax return, please refer to Filing Estimated Chargeable Income (ECI) and Filing Income Tax Form (Form C/ Form C-S).

Frequently Asked Questions (FAQs)

For more details, please refer to our FAQs .

 

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Last Updated on 12 December 2013


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