Overview: Singapore Business Incentives Scheme
Singapore offers various incentives to businesses operating in specific areas. Every company in Singapore that is not a new venture or a medium and small enterprise (SME) or a foreign subsidiary of a well-established business, can benefit from these incentives when operating within the specific sector.
The Inland Revenue Authority of Singapore (IRAS) is the tax authority of Singapore and has a variety of tax programs that help companies lower their taxes. Government officials like those of the Economic Development Board (EDB), and International Enterprise Singapore have created numerous incentives to draw businesses to Singapore and also to encourage the spirit of entrepreneurship and innovation within Singapore.
Through this post, we will explore the numerous industry-specific business incentives that are available in Singapore.
Authorities Granting Business Incentives in Singapore
The following government agencies in Singapore provide and administer incentives to businesses for Singapore organizations:
Singapore Economic Development Board (EDB)
A government agency that works to help promote Singapore as a world-class business location and to encourage foreigners to establish their businesses in Singapore.
International Enterprise Singapore (IE Singapore)
A government-run agency was created to boost the export-oriented economy of the country. It also assists Singapore businesses to establish their presence internationally within other international countries.
Monetary Authority of Singapore (MAS)
The financial regulatory authority & the Central Bank of Singapore.
Inland Revenue Authority of Singapore (IRAS)
The tax-regulatory authority of Singapore.
Sector-Specific Business Incentives Scheme
1. Manufacturing & Services
1. Development and Expansion Incentive (DEI)
A reward for Singapore-registered companies to perform actions that provide an economic and social benefit to Singapore. This incentive also assists companies to expand their operations.
Authority: EDB
Benefit: A tax concession rate of 10%, 5%, or 15% on the income earned from qualified actions.
2. Land Intensification Allowance
A tax allowance can help increase the efficiency of land owned by companies in the industry sector.
Authority: EDB
Benefits: A tax-free initial allowance of 25%, and the annual tax allowance is 5% for qualified capital expenditure. The capital expenditure that qualifies as qualifying is to be used to construct or renovate a regulated design or construction.
The expense includes stamp duty to be paid as well as demolition costs, design fees for the building, and more.
3. Approved Foreign Loan Incentive
A motivation to encourage businesses to invest in efficient equipment to run their businesses in Singapore.
Authority: EDB
Benefits: Tax rates for withholding taxes are lower on the interest payments to a non-resident lender in the purchase of production equipment. The rates are 0% or 5%, or 10%.
4. Investment Allowance
A capital allowance is granted to Singapore companies in connection with an approved project as well as the capital costs that businesses have to pay in the course of the project.
Authority: EDB
Benefits: An investment allowance is a proportion of permanent capital expense (not over 100 percent). This allowance is given on top of the standard capital allowance.
The projects for that businesses are eligible for this allowance include research and development and construction, engineering, and technical services, for example.
5. Integrated Investment Allowance (IIA)
A capital allowance is granted to Singapore companies to cover the cost of the placement of the equipment or plant outside Singapore to be used for a project approved by Singapore.
Authority: EDB
Benefits: This allowance is given as an addition to the regular capital allowance. Capital allowances are granted to any company that uses machinery, plant and equipment employed solely for business use.
The IIA is a calculation of the percent of the approved fixed capital expense (not more than 100 percent) on equipment that is productive that is located outside of the country for an authorized project.
2. Research & Development
1. Initiatives in New Technology
A grant for training to encourage technological advancement and industrial R&D and know-how for professionals.
Authority: EDB
Benefit: 30% co-funding for items that qualify, such as the cost of training or for trainees.
2. Approved Royalty Incentive
A motivation to encourage the use of technology and know-how by Singapore businesses.
Authority: EDB
Benefits: Taxes on withholding are lower for royalties (0-5%) paid to non-residents by Singapore businesses compared to present taxes on withholding within Singapore.
3. Research Incentive Scheme for Companies (RISC)
An incentive program that helps companies to set up R&D centers and facilities. The principal goal is to enhance capacities for research and development in key technological areas.
Authority: EDB
Benefits: Support for co-funding specific expenses such as manpower costs (30-50 percent) Equipment and materials (30 percent) licensing and royalty (30 percent) and so on.
3. Internationalisation
1. Market Readiness Assistance (MRA) Grant
A grant was given to Singapore-incorporated companies, to aid their global expansion.
Authority: IE Singapore
Benefits: Support for financing up to 70% of qualified expenses with a maximum annual limit of S$20,000 for each company.
The admissible costs are the third-party expenses of marketing, including marketing through Internet marketing, market research, feasibility studies, as well as others. For more details, refer to MRA Grant.
2. Mergers & Acquisitions (M&A) Scheme
A program that encourages M&A of businesses to boost their growth by facilitating their acquisition processes. This program is primarily targeted at Small and Medium Enterprises (SMEs).
Authority: EDB
Benefits: The government will give an entity that acquires shares of the company that is targeted:
- An M&A allowance is calculated on the cost total for the purchase of shares by the company of interest.
- Stamp duty relief.
- Double Tax Deduction (DTD) on the cost of a transaction.
The government alters allowances, relief from stamps, and DTD periodically. For more, see M&A Scheme.
3. International Growth Scheme (IGS)
A scheme to encourage the development of Singapore-incorporated firms to widen & thrive in the foreign market while operating their key business activities in Singapore.
Authority: IE Singapore
Benefits: A tax concession rate of 10% over a maximum of five years on marginal income qualifies as qualifying.
It is only applicable to certain activities that qualify, such as business and related activities that involve engineering and technical services manufacturing and related services, and professional services.
4. Regional & International Headquarters Awards
A plan to lure corporations to relocate their office in the region or internationally to Singapore.
Authority: EDB
Benefits: Regional Headquarters Award is a discount rate for corporate tax of 15%.
International Headquarters Award is a discount rate for corporate tax of 5-10%.
The tax rate is based on the additional income earned from activities that qualify under these programs. These rates for corporate tax are in contrast to the standard corporation tax of 17% which is available to Singapore businesses.
4. Trading
1. Global Trader Programme
A program that is designed to help facilitate transactions in the market.
Authority: IE Singapore
Benefits: A corporate tax concession (5 percent or 10 percent) for a time period of between 3 and five years for the qualifying income from trading, which includes all income generated by physical transactions, derivative trading or derivatives, etc.
Companies that are eligible for this tax benefit must be able to conduct the major portion of trading in Singapore. For more, see Global Trader Scheme.
5. Finance & Treasury
1. Finance & Treasury Centre (FTC) Incentive
An incentive to boost Treasury and finance activities in Singapore.
Authority: EDB
Benefits: A tax concession of 8% for the income that qualifies for the FTC. In addition, FTCs are exempted from withholding tax for payments made to non-residents, such as the payment of interest to banks.
2. Financial sector incentive scheme
The scheme encourages the expansion that the banking sector is experiencing in Singapore.
Authority: MAS
Benefits: Tax rates are low (either 5 %, 10 percent, or 12 percent) dependent on the type of financial transactions.
6. Other Tax Incentives
In addition to the above business incentives, there are numerous tax breaks and deductions that are available to Singapore companies generally.
The incentives are tax exemptions and deductions, such as the Productivity and Innovation Credit Scheme (PIC Scheme) that is available to businesses that are investing in innovations, a tax exemption for startups as well as tax deductions for businesses who promote charitable activities and so on.
Conclusion
A well-designed incentive program can provide your company with numerous opportunities to grow and expand both in the short and long-term term. Singapore offers a number of business incentive programs that consistently entice international investment and support the country’s economic expansion. The program is an integral component of the government’s initiatives to develop an atmosphere that is conducive to company growth and promotes innovation and entrepreneurship. Singapore offers a number of sector-specific business incentive programs, including ones for the manufacturing, trading, and R&D industries.
Contact our business specialists at Odint Consultancy if you wish to form a company in Singapore and benefit from the business programs.
FAQ’s
The author defines incentives as business aid programs that offer companies advantages such as tax breaks or cash grants, free land, as well as free training for employees.
They could include low or no rates of interest loans, subordinated loans operating or maintenance grants as well as interest-related subsidies.
The most popular monetary incentives include; Pay & allowances. However, pay increases that are regular throughout the year, and allowances are effective motivators.
In the course of running an incentive plan, your company will see an increase in sales because clients will feel encouraged to purchase from your company.
Incentive programs improve performance, as they will indirectly boost the performance of employees on average by 22%.
6 Steps To Effective Incentive Compensation
- Find out what the plan is to achieve.
- Find the participants.
- Set clear goals for performance.
- Decide on the logistics.
- Re-rinse, repeat.
