This is an incentive scheme to encourage individuals to invest in start-up companies to help the companies grow through their management expertise/business networks, etc.
The scheme is available from 1 Mar 2010 to 31 Mar 2020. Investments made on or after 24 Feb 2015 and that are supported by SEEDS Capital under Startup SG Equity will also qualify for the scheme.
This scheme will lapse after 31 Mar 2020 (i.e. you will no longer be able to obtain new approvals or renewal of the "angel investor" status for any period commencing after 31 Mar 2020). However, angel investors will continue to enjoy tax deductions in respect of qualifying investments made during the period of the approved status, subject to existing conditions of the scheme.
Qualifying for AITD
There are different qualifying criteria for the various parties to an angel investment deal. Individuals who are interested must first apply to Enterprise 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 Mar 2010 to 31 Mar 2020.
To enjoy a tax deduction, an 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.
Applicable Years of Assessment
The tax deduction is given for the Year of Assessment relating to the basis period in which the last day of the 2-year period falls.
Amount of tax deduction
The amount of tax deduction for each Year of Assessment is calculated based on 50% of the cost of qualifying investment, subject to a cap of $500,000 of investment costs (i.e. an overall deduction cap of $250,000).
The qualifying deduction will be offset against the individual's total taxable income. Any unutilised deduction in the relevant Year of Assessment will be disregarded.
Example 1: Claiming the maximum deduction
An approved angel investor, Mr A, invested $1,500,000 in a qualifying start-up company in May 2018. If he holds the investment until Jul 2020 (i.e. at least a 2-year holding period), he will be eligible to claim a tax deduction of $250,000 (50% of $500,000 cap) in his Income Tax Return for Year of Assessment 2021.
Example 2: Holding period shorter than 2 years
In Sep 2019, Mr B (an approved angel investor) invests $400,000 in a qualifying start-up company and holds the investment until Jul 2021 (i.e. less than a 2-year holding period). Mr B will not be eligible to claim any tax deduction.
How to claim tax deduction
Please email us the completed Claim for Deduction under Angel Investors Tax Deduction Scheme (PDF, 106KB) and the letter of confirmation issued by Enterprise Singapore.
Taxability of 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 3: Computation of taxable gains
Mr A invested $1,500,000 in a qualifying start-up company in May 2018. He holds the investment until Jul 2020. He claimed a tax deduction of $250,000 (50% of $500,000 cap) in his Income Tax Return for Year of Assessment 2021.
Mr A sells the investment on 31 Jan 2021.
|Cost of investment in May 2018||$1,500,000|
|Amount of deduction allowed in Year of Assessment 2021
(50% x $500,000)
|Proceeds from sale of qualifying investment on 31 Jan 2021||$2,500,000|
|Gain on disposal of investment
[$2,500,000 - ($1,500,000 - $250,000)]