The corporate income tax rate in Singapore is a flat 17% of a company’s chargeable income. This applies to both local and foreign companies that operate in Singapore.
There are ways to reduce a company’s corporate income tax (legally).
For a start, you can consider starting a separate company for new business initiatives.
Creating two distinct companies, especially for services with separate teams, not only offers tax benefits but also shields one business from the liabilities of the other in case of failure. This approach may also facilitate a more flexible shareholding structure for investors.
However, the Inland Revenue Authority of Singapore (IRAS) strongly warns against abusing this scheme, citing instances where profitable companies allocate income to shell companies to exploit tax thresholds. Entrepreneurs should be starting new companies for entrepreneurship and commercial reasons, rather than as a way to avoid paying corporate income tax. Top of Form
Known as Loss Carry-Back Relief, companies can also offset current-year losses against taxes paid in the preceding year, allowing for the reclamation of up to $100,000 in qualifying deductions. Companies have to make the loss carry-back claim on their own as it’s not given automatically.
Another way is via volunteering work. Through the Business and IPC Partnership Scheme (BIPS), companies can enjoy a 250% tax deduction on qualifying expenditures when their employees volunteer or provide services to Institutions of a Public Character (IPCs).
Through BIPS, companies can claim tax relief on basic wages (either on actual salary or $10 per hour for general volunteering and $20 per hour for skills-based volunteering) as well as other related expenses incurred by the business necessary for providing services to IPC.
Eligible businesses, encompassing various entities like companies, sole proprietorships, and partnerships, can choose from a list of registered charities aligning with their values. There is a qualifying expenditure cap of $250,000 per business per YA. A qualifying expenditure cap of $50,000 is also imposed on each IPC per calendar year.
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