Singapore

Corporate - Tax credits and incentives

Last reviewed - 30 May 2024

There are various tax incentives available to taxpayers involved in specified activities or industries identified as being beneficial to Singapore’s economic development.

Tax incentive applications are typically subject to an approval process during which the administering agency evaluates the applicant’s business plans in detail. Successful applicants are required to satisfy rigorous requirements and are expected to make significant economic commitments in Singapore.

Generally, applicants are expected to carry out substantive, high value activities in Singapore, and will be required to commit to certain levels of local business spending and skilled employment. Some factors that will be considered include the use of Singapore as a base from which to implement regional expansion strategies; introduction and anchoring of leading-edge skills, technology, and activities in Singapore; contributions to the growth of R&D and innovation capabilities; and potential spin-off to the rest of the economy.

Pioneer tax incentive

Corporations manufacturing approved products with high technological content or providing qualifying services may apply for tax exemption for five to 15 years for each qualifying project or activity under the pioneer tax incentive. Corporations may apply for their post-pioneer profits to be taxed at a reduced rate under the Development and Expansion Incentive, as discussed below.

Development and Expansion Incentive

Under the Development and Expansion Incentive, corporations engaging in new high-value-added projects, expanding or upgrading their operations, or undertaking incremental activities after their pioneer period may apply for their profits to be taxed at a reduced rate of not less than 5% for an initial period of up to ten years. The total tax relief period for each qualifying project or activity is subject to a maximum of 40 years.

Investment allowance

Under the investment allowance, a tax exemption is granted on an amount of profits based on a specified percentage (of up to 100%) of the capital expenditure incurred for qualifying projects or activities within a period of up to five years (up to eight years for assets acquired on hire-purchase). Investment allowances of 100% of capital expenditure (net of grants) may be granted to businesses seeking to make substantial investment in automation, subject to a cap of SGD 10 million per project.

Refundable investment credit

Companies making sizeable investments that bring high-value and substantive economic activities to Singapore in key economic sectors and new growth areas may apply for up to 50% investment credit on qualifying expenditure incurred during a qualifying period of up to ten years. The investment credit is to be offset against the company’s income tax payable, and any unutilised credits will be refunded to the company in cash within four years from when the company meets the conditions for receiving the credits. The scheme is intended to be consistent with the Global Anti-Base Erosion (GloBE) Rules for Qualified Refundable Tax Credits.

Incentives for internationalisation

The double tax deduction scheme for internationalisation allows companies expanding overseas to claim a double deduction for eligible expenses for specified market expansion and investment development activities. This includes qualifying manpower expenses incurred from 1 July 2015 to 31 December 2025 when Singaporeans or permanent residents of Singapore are deployed to overseas entities.

Enterprise Innovation Scheme (EIS)

For the years of assessment 2024 to 2028, businesses that engage in the following qualifying activities will be allowed a 400% tax deduction or allowances for qualifying expenditure:

R&D projects conducted in Singapore (capped at SGD 400,000 of qualifying expenditure).
IP registration (capped at SGD 400,000 of qualifying expenditure).
Acquisition or licensing of IP rights (capped at SGD 400,000 of qualifying expenditure and available only to businesses that generated less than SGD 500 million in revenue in the relevant year of assessment).
Employee training (capped at SGD 400,000 of qualifying expenditure).
Innovation projects carried out with Polytechnics, the Institute of Technical Education, or other qualified partners (capped at SGD 50,000 of qualifying expenditure).

Qualifying businesses may opt to convert the above tax deductions to a cash payout. They would receive, in lieu of the deduction, a non-taxable cash payout of 20% of total qualifying expenditure of up to SGD 100,000 across all qualifying activities (i.e. maximum cash payout of SGD 20,000 per year).

Intellectual Property Development Incentive (IDI)

The IDI scheme was introduced to encourage the use and commercialisation of IP arising from R&D activities of the taxpayer. An approved IDI company will be eligible for a reduced tax rate of either 5%, 10%, or 15% on a percentage of qualifying income derived from the commercialisation of certain IP. The percentage is determined by the modified nexus approach set out in the Action 5 report of the OECD base erosion and profit shifting (BEPS) project. The concessionary tax rate will increase at regular intervals as prescribed in the Income Tax Act.

Mergers and acquisitions allowance

The mergers and acquisitions allowance allows a write-off of 25% of the value of qualifying mergers or acquisitions deals executed between 1 April 2015 and 31 December 2025. The amount of allowance, to be claimed over five years, is subject to a cap of SGD 5 million (for deals executed between 1 April 2015 and 31 March 2016) or SGD 10 million (for deals executed between 1 April 2016 and 31 December 2025) for all qualifying acquisitions made in the basis period for each year of assessment. This incentive is available to companies that are incorporated, tax resident, and carrying on a business in Singapore. A 200% tax allowance is also granted on transaction costs (capped at SGD 100,000 per year of assessment) incurred on qualifying deals.

Financial services incentives

Financial Sector Incentive (FSI) scheme

The FSI scheme covers a broad range of financial institutions, including bond intermediaries, derivative traders, fund managers, equity capital market intermediaries, operational headquarters, providers of high-value-added processing services supporting financial activities, providers of trustee and custodian services, and trust management or administration services. Financial institutions that plan to expand their Singapore operations and are prepared to meet various strict qualifying conditions may apply for this incentive.

Under the FSI scheme, income from certain high growth, high-value-added activities, such as services and transactions relating to the bond market, derivatives market, equity market, and credit facilities syndication, may be taxed at 5%, while a broader range of financial activities will qualify for a 13.5% tax rate.

The concessionary tax rates available under the FSI scheme will be revised to either 10% or 13.5% for new awards and renewals of existing awards approved on or after 1 January 2024.

Finance and treasury centre (FTC)

Income derived by an FTC from approved FTC activities is taxed at a reduced rate of 8% or 10%. Approved activities include international treasury and fund management activities, corporate finance and advisory services, economic and investment research and analysis, and credit control and administration.

Interest payments to overseas banks and approved network companies are also exempt from WHT where the funds borrowed are used for approved activities.

Debt securities incentives

A package of tax concessions is available to various players in the Singapore bond market, including those involved in certain Islamic financing arrangements.

Insurance Business Development (IBD) scheme

The IBD scheme is an umbrella incentive for the insurance sector. Incentives offered under this scheme include a 10% concessionary tax rate for qualifying income of life, general, and composite insurers from carrying on insurance businesses from Singapore, and income derived from the provision of insurance broking and advisory services. This includes income from marine hull and liability insurance and captive insurance businesses.

Real Estate Investment Trusts (REITs)

Distributions made to foreign non-individual investors by a listed REIT out of rental income from Singapore real estate are subject to a reduced tax rate of 10%, subject to certain conditions being met. Listed REITs investing in foreign properties can apply for tax exemption for certain foreign income received in Singapore. Distributions out of this income similarly are exempt.

Tax transparency treatment may be accorded for specified income of Singapore-listed REIT Exchange-Traded Funds (REIT-ETFs) so that there will be parity in tax treatment between investing in individual S-REITs and via REIT-ETFs with investments in S-REITs.

As a concession, Singapore-listed REITs are allowed to claim GST on expenses incurred for their business and for their special purpose vehicles, regardless of whether the REIT is eligible for GST registration, subject to a specified formula and certain conditions.

Islamic financing arrangements

The income tax, stamp duty, and GST treatment of prescribed Islamic financing arrangements and Islamic debt securities (Sukuk) are aligned with that of the conventional financing contracts to which they are economically equivalent, subject to certain conditions.

Infrastructure project finance incentives

Tax exemption is available for income earned from qualifying investments in qualifying infrastructure projects/assets. Income from qualifying project debt securities is also exempt. FSI companies that provide project finance advisory services related to qualifying projects/assets may enjoy certain tax concessions for their qualifying income.

Sovereign wealth funds

Tax exemption is available for income derived by a sovereign fund entity and an approved foreign government-owned entity from funds managed in Singapore.

Singapore Variable Capital Companies (VCC)

A VCC is treated as a company and a single entity for tax purposes. The tax exemptions for income from funds managed in Singapore and the existing GST remission for funds are extended to qualifying VCC. A 10% concessionary tax rate under FSI incentive for fund managers has been extended to approved fund managers managing an incentivised VCC.

Headquarters schemes

Depending on their level of economic commitments to Singapore, international headquarters can apply for various tax incentives, including concessionary tax rates on qualifying income.

Maritime Sector Incentive (MSI) scheme

The MSI scheme is the umbrella incentive for the maritime sector. Incentives offered include tax exemption for shipping companies and a 10% concessionary tax rate for international freight and logistics operators. Approved ship investment managers are also taxed at 10% on qualifying management-related income. The scheme also includes approved ship investment vehicles, which are tax exempt on their qualifying vessel lease income; approved container investment enterprises, which are taxed at 5% or 10% on qualifying income from container-leasing; and approved container investment management companies, which are taxed at 10% on qualifying management fees. From income year 2023 (year of assessment 2024), qualifying shipping entities may opt to apply an alternative net tonnage basis of tax.

Qualifying ship operators and lessors under the MSI scheme also enjoy automatic tax exemption on gains from the disposal of vessels, vessels under construction, and new building contracts.

Global Trader Programme (GTP)

International traders are taxed at concessionary rates of 5%, 10%, or 15% on qualifying income from physical trading, brokering of physical trades, and derivative trading income.