Sector-Specific Business Incentives in Singapore
Singapore provides several targeted incentives to companies in specific sectors. Every business in the country, whether a startup, a small and medium enterprise (SME), or a foreign branch of an established business can avail these benefits if it is operating in the relevant sector. This article provides an overview of the sector specific incentives available currently.
The Inland Revenue Authority of Singapore (IRAS), which is the tax authority of the country has several tax schemes which help businesses reduce their taxes. SPRING Singapore also offers funding schemes especially targeted towards the growth of startups in the country. Besides the tax and funding schemes, there are other business incentives (in the form of grants or preferential treatment in other areas) that are available in the country. Government authorities such as the Economic Development Board (EDB), International Enterprise Singapore have designed these incentives to attract companies to Singapore and to promote entrepreneurship and innovation in the country.
Authorities Granting Business Incentives
The following government authorities in Singapore offer and administer business incentives for Singapore entities:
Singapore Economic Development Board (EDB) – A government agency that works to promote Singapore as a global business destination and encourages foreigners to set up their business in Singapore.
Enterprise Singapore (ESG) – A government agency to promote the export economy of the country and help Singapore companies establish a global presence in other countries.
Monetary Authority of Singapore (MAS) – The central bank and financial regulatory authority of Singapore.
Inland Revenue Authority of Singapore (IRAS) – The tax regulatory authority of Singapore.
Types of Incentives by Sector
Manufacturing & Services
Development and Expansion Incentive (DEI)
OVERVIEW
An incentive to Singapore registered companies for qualifying activities that bring an overall economic benefit to Singapore. The incentive further helps the companies in their expansion plans.
AUTHORITY
EDB
BENEFITS
A concessionary tax rate of either 5%, 10% or 15% on income from qualifying activities or services.
Land Intensification Allowance
OVERVIEW
An allowance which helps improve the productivity of land held by businesses in industry sectors.
AUTHORITY
EDB
BENEFITS
An initial tax allowance of 25% and an annual allowance of 5% on qualifying capital expenditure. The qualifying capital expenditure must be incurred for the construction or renovation of an approved structure or building. The expenditure includes stamp duty payable, demolition cost, design fees of the building, etc.
Approved Foreign Loan Incentive
OVERVIEW
An incentive to promote companies to invest in productive equipment for their business in Singapore.
AUTHORITY
EDB
BENEFITS
Lower withholding tax rates on payments made towards interest to a non-resident lender for the purchase of productive equipment. The rates are either 0%, 5% or 10%.
Investment Allowance
OVERVIEW
A capital allowance to Singapore companies for an approved project and the capital expenditure that companies incur for the project.
AUTHORITY
EDB
BENEFITS
An investment allowance which is a percentage of the fixed capital expenditure (not exceeding 100%). This allowance is granted in addition to the normal capital allowance. The projects for which companies can claim this benefit include research & development, construction, engineering or technical services, etc.
Integrated Investment Allowance (IIA)
OVERVIEW
A capital allowance to Singapore companies for expenditure incurred in placing a plant or equipment outside Singapore for an approved project.
AUTHORITY
EDB
BENEFITS
This allowance is granted in addition to the normal capital allowance. A capital allowance is available to any business when the plant, machinery, etc is used directly for business purpose. The IIA is a calculated as a percentage of an approved fixed capital expenditure (not exceeding 100%) on a productive equipment placed outside the country for an approved project.
Research & Development
Initiatives in New Technology
OVERVIEW
A training grant to promote the development of technology, industrial R&D and professional know-how.
AUTHORITY
EDB
BENEFITS
30% co-funding support for qualifying items that include training or trainee costs.
Approved Royalty Incentive
OVERVIEW
An incentive to promote technology and know-how in Singapore companies.
AUTHORITY
EDB
BENEFITS
Lower withholding tax applicable on royalty payments (0-5%) made to non-residents by Singapore companies compared to the current withholding tax rates in Singapore.
Research Incentive Scheme for Companies (RISC)
OVERVIEW
A scheme to support businesses set up R&D centres and facilities. The main aim is to develop research and development capabilities in strategic areas of technology.
AUTHORITY
EDB
BENEFITS
Co-funding support to specific expenditures including manpower cost (30-50%), equipment and materials (30%), licensing and royalty (30%), etc.
Internationalisation
Market Readiness Assistance (MRA) Grant
OVERVIEW
A grant offered to Singapore incorporated companies to support them for global expansion.
AUTHORITY
IE Singapore
BENEFITS
Funding support of 70% of eligible costs with a yearly cap of S$20,000 per company. The eligible costs are third-party costs incurred for marketing activities including online advertising, market research, market feasibility studies, and other. For more, see MRA Grant.
Mergers & Acquisitions (M&A) Scheme
OVERVIEW
A scheme to encourage M&A of companies to further their growth through the acquisition process. This scheme mainly targets Small and Medium Enterprises (SMEs).
AUTHORITY
EDB
BENEFITS
The government will grant a company acquiring shares in the target company the following:
An M&A allowance which is calculated on the total cost of the acquisition of shares in the target company.
A stamp duty relief.
Double Tax Deduction (DTD) on the transaction cost.
The government revises the allowance, stamp relief, and DTD from time to time. For more, see M&A Scheme.
International Growth Scheme (IGS)
OVERVIEW
A scheme to promote the growth of Singapore-incorporated companies to expand and grow in the overseas market while conducting their key business activities in Singapore.
AUTHORITY
IE Singapore
BENEFITS
A concessionary tax rate of 10% for a total of 5 years on the qualifying incremental income. This is applicable only on qualifying activities which include business services and activities, engineering and technical services, manufacturing and related services, professional services, etc.
Regional & International Headquarters Awards
OVERVIEW
A scheme to attract corporations to move the regional or international headquarters to Singapore.
AUTHORITY
EDB
BENEFITS
Regional Headquarters Award is a concessionary corporate tax rate of 15%.
International Headquarters Award is a concessionary corporate tax rate of 5 to 10%.
This tax rate is on the incremental income from qualifying activities under these schemes.
These corporate tax rates are as against the standard corporate tax rate of 17% applicable to Singapore companies.
Trading
Global Trader Programme
OVERVIEW
A programme designed to facilitate trading operations in the country.
AUTHORITY
IE Singapore
BENEFITS
A concessionary corporate tax rate (5% or 10%) for a period ranging from 3 – 5 years on qualifying trading income that includes any income from physical trading, derivative trading income, etc. Companies eligible for this benefit must carry out a majority of their trading operations in Singapore. For more, see Global Trader Scheme.
Finance & Treasury
Finance & Treasury Centre (FTC) Incentive
OVERVIEW
An incentive to promote finance and treasury activities in Singapore.
AUTHORITY
EDB
BENEFITS
A concessionary tax rate of 8% on the qualifying income of the FTC. Additionally, FTCs are exempted from withholding tax on payments made to non-residents such as interest payments to banks.
Financial Sector Incentive Scheme
OVERVIEW
The scheme encourages the growth of the financial sector in Singapore.
AUTHORITY
MAS
BENEFITS
Low tax rates (either 5%, 10% or 12%) depending on the category of financial activities.
Other Tax Incentives
Besides the above business incentives, there are several tax exemptions and deductions available to Singapore businesses in general. These incentives include the Productivity and Innovation Credit Scheme (PIC Scheme) that is applicable to companies that invest in innovation, tax exemption scheme for new startups, tax deduction for businesses that promote charitable activities, etc.
Next Steps
The Singapore government extends several schemes and incentives to support the growth of businesses within specific sectors of the country. However, it is essential to evaluate whether or not these incentives are applicable to your business. Every scheme and incentive has specific qualifying conditions and eligibility criteria that your business must fulfill. It is advisable to take the assistance of a corporate services provider who can analyze your business situation and provide advice on the schemes and incentives that may be appropriate for your situation.
