How To Reduce Corporate Tax Bills With These Tax Reliefs

The corporate tax filing deadline is around the corner. The deadline for filing your corporate tax is by 15th December 2020. Do you know that there are some tax reliefs that you can make use of to reduce the tax payable? Here are some of them.

Tax Exemption Scheme For New Companies

If you have just incorporated a new company, your company is eligible for tax reliefs for the first three consecutive years of assessments (YA) where the YA falls in:

Year of Assessment 2020 onwards

• For the first $100,000 of normal chargeable income will get a seventy-five per cent (75%) exemption; and
• The next $100,000 of normal chargeable income will have a further fifty per cent (50%) exemption.

Year of Assessment 2019 and earlier

• The first $100,000 of normal chargeable income will be a full exemption; and
• The next $200,000 of normal chargeable income will get a further fifty per cent (50%) exemption.

Your company must meet the below criteria in order to qualify for tax reliefs:

1. incorporated in Singapore;
2. a tax resident in Singapore for that particular Year of Assessment;
3. throughout the basis period for that Year of Assessment, no more than twenty (20) shareholders beneficially held the total share capital directly where
   1. all shareholders are individuals or;
   2. at least one shareholder is an individual, holds at least ten per cent (10%) of the issued ordinary shares

However, if your company’s principal activity is investment holding or undertaking property developments for either sale or investments, or both, the above tax relief will not be eligible for these companies.

Partial Tax Exemption For Companies

Companies that qualify can enjoy the following tax relief:

Year of Assessment 2020 onwards

• The first $10,000 of normal chargeable income will get a seventy-five per cent (75%) exemption; and
• The next $190,000 of normal chargeable income will enjoy a further fifty per cent (50%) exemption.

Year of Assessment 2019 and earlier

• The first $10,000 of normal chargeable income gets a seventy-five per cent (75%) exemption; and
• The next $290,000 of normal chargeable income gets a further fifty per cent (50%) exemption.

Companies will not be eligible for this partial tax exemption relief if they have already claimed the tax exemption scheme for new companies. Take note that all companies, inclusive of companies limited by guarantee, is eligible for partial tax exemption.

Deduction Of Expenses Incurred Before Commencing Business

One (1) year prior to the first day of its financial year when the company made its business receipt of the first dollar, all the expenses incurred from those business or revenue-generating operations are tax-deductible. The reason for this is simply to assist businesses when they are just starting out. Companies that are subject to tax in accordance with Section 10E of the Income Tax Act will not be eligible.

The Singapore Government and Economic Development Board are constantly promoting a pro-business environment to attract more investments into Singapore to create more opportunities.

If you are unsure what tax reliefs you can be eligible for, do contact your filing agent or accounting professional.

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