Tax Incentives for Businesses in Singapore

Companies setting up in Singapore are eligible for various fiscal and non-fiscal incentives.

Contributing Advisor

David Stepat

Country Director

Applicants must fulfill rigorous requirements, which include committing to certain levels of investments, introducing leading-edge skills, and technology, as well as contributing to the growth of research and development and innovation capabilities.

Given the diverse tax incentives made available, foreign investors should consult registered local advisors to determine which incentives will be applicable to them and their sector. 

Progressive Wage Credit Scheme

The Progressive Wage Credit Scheme (PWCS) aims to help employers adjust to mandatory increases for lower-wage workers. 

Under the scheme, employees can receive support for gross monthly wage increases up to S$2,500 (US$1,844) from 2022 to 2026, as well as support for gross monthly wage increases above S$2,500 (US$1,844) and up to S$3,000 (US$2,213) from 2022 to 2024. Eligible wage increases will be cofounded for a period of two years. Eligible employers do not need to apply and will be informed by the Inland Revenue Authority of Singapore (IRAS) of any payouts.

Industry-specific tax incentives

There are four main government agencies that can administer business and tax incentives for Singaporean entities in specific domains. These are:

• Singapore Economic Development Board (EDB) – which is responsible for developing and executing strategies that facilitate investment into the country’s industries;
• Inland Revenue Authority of Singapore (IRAS) – the tax regulatory authority in the country;
• Enterprise Singapore (ESG) – which aids Singaporean companies expand worldwide and promotes local exports; and
• Monetary Authority of Singapore (MAS) – the central bank and financial services authority.

A full list of industry-specific incentives can be found on the individual websites of these agencies. The industries eligible for tax incentives are:

• Financial services;
• Banks;
• Fund management;
• Tourism;
• Shipping and maritime;
• Global trading industries;
• Insurance;
• Processing services;
• Research and development;
• Headquarter activities;
• Legal firms;
• E-commerce; and
• Event organization.

Incentives for start-up

Startup SG Tech

The Startup SG Tech grant helps to fast-track the development of technology startups, aimed at supporting the Proof-of-Concept (POC) and Proof-of-Value (POV) for commercialization of innovative technologies.

The grant cap for POC will remain at S$250,000 (US$185,000) and POV at S$500,000 (US$371,000). Qualifying projects must:

• Clearly demonstrate how science/technology is applied;
• Be of a breakthrough level of innovation;
• Be commercially viable; and
• Leads to or builds on proprietary know-how.

The projects must fall under one of the following criteria:

• Advanced manufacturing/ robotics;
• Biomedical science and healthcare;
• Clean technology;
• Information and communications technologies;
• New industries;
• Precision engineering;
• Transport engineering/ engineering services; and
• Food science and technology.

Start-Up tax Exemption Scheme

The Start-Up Tax Exemption (SUTE) tax exemption scheme aims to support new businesses and entrepreneurs in the country.

This scheme is only available for the first three-yearly assessments. After this period, companies can apply for the partial tax exemption scheme (PTE).

To qualify, businesses must:

• Be a tax resident in Singapore; or
• Owned by no more than 20 shareholders (where all the shareholders are individuals; or
• At least one shareholder controls 10 percent of the issued shares).

Businesses must not be:

• An investment holding company; or
• Engaged in the property development industry, either for investments or for sale.

Partial Tax Exemptions

Companies that do not qualify for SUTE may be eligible for the Partial Tax Exemption (PTE) scheme.

Enterprise Financing Schemes

Incentives for SMEs

Double tax deduction for internationalization

The enterprise financing scheme – merger and acquisitions (EFS-M&A) has been enhanced for four years from April 1, 2022, to March 31, 2026, and to include domestic M&A activities.

Under the scheme, the maximum loan quantum is S$50 million (US$36.9 million) per borrower or borrower group, and the maximum loan repayment is five years. The government’s risk share is 50 percent, but this is increased to 70 percent for young enterprises.

Most DTDi deductions are subject to approval from ESG and the Singapore Tourism Board. However, certain activities do not require approval on the first S$150,000 (US$110,656) of eligible expenses. The DTDi supports businesses in four categories and several sub-categories:

• Market preparation
• Product/service certification;
• Feasibility studies; and
• Design of packaging for the overseas market.
• Market exploration
• Overseas market development trips;
• Local trade fairs (must be approved by the ESG and the Singapore Tourism Board);
• Virtual trade fairs (must be approved by the ESG); and
• Overseas trade fairs.
• Market promotion
• Overseas advertising;
• Production of corporate brochures for overseas distribution;
• Overseas business development; and
• Advertising in approved trade publications.
• Market presence
• Overseas trade offices;
• Investment feasibility studies;
• Employee overseas posting;
• Master licensing and franchising; and
• Overseas investment trips.

The 100 percent investment allowance scheme

The investment allowance incentive is administered by the EDB, from which businesses can enjoy a tax exemption of up to 100 of fixed capital expenditure incurred.

The EDB defines fixed capital expenditure as expenditure incurred for qualifying projects within a five-year period, which can be extended up to eight years.

An extension of the 100 percent Investment Allowance (IA) scheme has been granted by the government until 2023. The approved 100 percent IA support is capped at S$10 million (US$7.4 million) and is part of the Automation Support Package (ASP), which comprises the following grants, loans, and tax support:

• Grant support through the Enterprise Development Grant (EDG), capped at S$1 million (US$737,705) for up to 50 percent of qualified automation projects;
• Loan financing of up to S$15 million (US$11.1 million) for automation equipment; and
• The 100 percent IA scheme.

The ASP support itself ended on March 31, 2021, but the 100 percent IA scheme will still be available.

This program offers tax relief that can be used to offset taxable income for approved automation projects by the EDG and ESG. The approved projects by the EDB include, among others:

• Manufacture of new products or increase production of existing products;
• Promotion of the tourism industry in the country;
• Research and development activities;
• Energy efficiency projects;
• Construction projects;
• Projects that focus on reducing water consumption;
• Provide specialized engineering or technical services; and
• Maintenance, repair and overhaul services for the aircraft industry.

The category for expenditures covered by the investment allowance consists of:

• New productive equipment;
• Building factories in Singapore; and
• Acquiring patents and know-how.

Enterprise Development Grant

The Enterprise Development Grant (EDG) helps Singapore businesses grow and innovate. The grant helps fund 50 percent of the project costs from April 1, 2023 until March 31, 2026.

The grant supports projects under three pillars:

• Core capabilities — projects under core capabilities help businesses strengthen their foundations, going beyond the basic functions of sales and accounting.
• Innovation and productivity — under innovation and productivity, EDG supports companies looking to enhance efficiency and explore new areas of growth.
• Market access — this helps Singaporean companies to venture overseas. The EDG may help defray some of the costs for this expansion.

Pioneer tax incentives

Businesses engaging in the manufacture of high-value-added products or services can apply for a pioneer certificate which entitles them to tax exemption for five years and can be extended depending on the company’s commitment to further expansion.

To qualify, applicants are assessed on qualitative and quantitative criteria. This includes:

• Ability to introduce and create employment for Singaporeans;
• Introduction of new skills and expertise;
• The capacity for business expenditure to create economic spin-off;
• Manufacturing projects must commit to developing soft and hard infrastructure;
• Introduce new technology and know-how that can advance an industry; and
• Business activities must be new and have not been undertaken by other companies in the country.

Enterprise Innovation Scheme

To encourage businesses to engage in innovation and R&D, the government introduced the Enterprise Innovation Scheme (EIS) in Budget 2023. EIS enhances as well as introduces new tax measures for qualifying companies.

There are five qualifying activities as stated below.

Qualifying R&D undertaken in Singapore

Businesses undertaking R&D activities in Singapore enjoy a 100 percent tax deduction for all qualifying expenditures incurred on R&D projects. There is also an additional 150 percent tax deduction for staff costs and consumables for such projects.

Under Budget 2023, the government now offers a 400 percent tax deduction for the first S$400,000 (US$298,000) of the costs of consumables and staff incurred on qualifying R&D projects conducted in Singapore. The incentive is applicable from the year of assessment (YA) 2024 to the year of assessment (YA) 2028.

Enhanced tax deductions for qualifying intellectual property registration costs

Businesses currently enjoy a 200 percent tax deduction on the first S$100,000 (US$74,600) of qualifying IP registration costs (patents, designs, trademarks, etc.).

Budget 2023 has enhanced this incentive to a 400 percent tax deduction for the first S$400,000 (US$298,000) of qualifying IP registration costs, for each YA 2024 to YA 2028.

Acquisition and licensing of IP rights

Under the existing tax measures for IP rights, companies can enjoy a 100 percent write-down allowance on capital expenditure on qualifying IP rights. Further, there was a 200 percent tax deduction on the first S$100,000 (US$74,200) of qualifying expenditure on licensing of IP rights.

Budget 2023 has also enhanced this incentive to 400 percent tax allowances/deductions for the first S$400,000 (US$298,000) of qualifying expenditure on the acquisition and licensing of qualifying IP rights. This is applicable for YA 2024 to YA 2028.

Tax deductions for training expenditure

Courses approved by SkillsFuture Singapore can enjoy a tax deduction of 400 percent for the first S$400,000 (US$298,000) qualifying training expenditure. This has been enhanced by a 100 percent tax deduction.

Tax deductions for innovation projects carried out by polytechnics and other qualified partners

To encourage businesses to carry out innovation projects with local polytechnics, the Institute of Technical Innovation, or other qualified partners, Budget 2023 has introduced a 400 percent tax deduction scheme for up to S$50,000 (US$37,300) of qualifying expenditure of qualifying innovation projects. This is applicable for YA 2024 to YA 2028.

Development and expansion incentive

After the pioneer tax incentive period has ended, businesses can attain the Development and Expansion Incentive (DEI). This awards companies that migrate to business activities that add more value (such as investing in projects that advance key industries like manufacturing), with a five to 10 percent tax break. The tax relief period is subject to a maximum of 40 years.

Accelerating digital transformation

Singapore will accelerate the digital transformation of local businesses through three strategies:

• Scale broad-based digitalization — providing SMEs with access to relevant resources and advisory;
• Develop digital leaders — building a local core of enterprises that can compete regionally;
• and globally; and
• Catalyze new products and business models — helping businesses to scale up and innovate.

Scale broad-based digitalization

Under this strategy, the government issued the (CTO)-as-a-Service scheme that enables SMEs to tap professional IT consultancies to receive end-to-end digital solutions based on their company’s profile. These consultants have expertise in areas, such as artificial intelligence, data analytics, and cybersecurity.

Further, the digital consultants will be managed by IT firms appointed by the Infocomm Media Development Authority (IMDA) and will be selected based on their relevant industry experience and reputation. The service will be available to all registered SMEs in the form of a web application.

Develop digital leaders

To develop digital leaders, the DLP seeks to identify high-potential, promising companies and equip them with the digital capabilities to transform their businesses.

The DLP will support companies to:

• Build expertise in the firm, including the hiring of digital talent; and
• Develop and implement digital transformation roadmaps.

The program will initially support 80 companies beginning with those more advanced in their use of digital technologies, providing up to 70 percent on qualifying costs. Eligible firms will participate in an initial two-year pilot.

Catalyze new products and business models

To increase the speed of digital innovation and drive more collaboration, the government has enhanced the Open Innovative Platform (OIP) initiative. The OIP was launched in 2018 to support businesses in getting resources to meet their innovative needs effectively.

The OIP has been enhanced to include two new features:

• The Discovery Engine facilitates the search and matching of technology solutions through automated recommendations; and
• The Digital Bench provides quick proof-of-concept (POC) testing through a virtual POC platform.

The government hopes that the OIP will lead to more co-innovations, and the fast-track development of prototypes, reducing the time for products and services to be commercialized.

Extension and rationalization of withholding tax exemption for the financial sector

The withholding tax (WHT) exemption for payments 1 to 4 will be extended until December 31, 2026. The WHT exemption for payment 5, lapsed December 31, 2022.

• Payments made under a currency swap transaction by Singapore swap counterparties to issuers of Singapore dollar debt securities;
• Interest payments on margin deposits under derivative contracts by approved clearinghouses, approved exchanges, members of approved clearinghouses, and members of approved exchanges;
• Payments made under currency swap transactions or interest rates by the Monetary Authority of Singapore (MAS);
• Specific payments made under repurchase agreements or securities lending; and
• Payments made under currency swap transactions or interest rates by financial institutions.