Start-ups that meet certain qualifying conditions do not need to pay tax on the first S$100,000 of chargeable income (excluding Singapore franked dividends) for any of the first 3 years of tax assessment from Year of Assessment 2005.

For who?

New companies that meet these criteria:

• From Year of Assessment (YA) 2005 to YA 2008:
  
  
  • incorporated in Singapore (except companies limited by guarantee)
    
    
  • a tax resident of Singapore in that YA
    
    
  • has its total share capital beneficially held, directly or indirectly, by no more than 20 individuals throughout the basis period relating to that YA.
  
  
• With effect from YA 2009:
  
  
• incorporated in Singapore (except companies limited by guarantee)
  
  
• a tax resident of Singapore in that YA
  
  
• has no more than 20 shareholders throughout the basis period for that YA where:
  
  
• all of the shareholders are individuals beneficially holding the shares in their own names; OR
  
  
• at least one shareholder is an individual beneficially holding at least 10% of the issued ordinary shares of the company
  
  
• With effect from YA 2010:
  
  
• incorporated in Singapore (including companies limited by guarantee)
  
  
• a tax resident of Singapore in that YA
  
  
• has no more than 20 shareholders throughout the basis period for that YA where:
  
  
• all of the shareholders are individuals beneficially holding the shares in their own names; OR
  
  
• at least one shareholder is an individual beneficially holding at least 10% of the issued ordinary shares of the company

For what?

• To help start-ups preserve their cash flow and profits.

Things to note

• Singapore franked dividends are dividends paid out of the profits of a company on which tax has already been paid in Singapore.
  
  
• The first YA of a qualifying company is the YA relating to the basis period during which the company is incorporated.
  
  

  E.g. Company A is incorporated in Singapore on 15 April 2003. The accounting year-end of the company is 30 June. The first YA of Company A is YA2004 (basis period 15 April 2003 to 30 June 2003). If Company A meets the qualifying criteria for YA2005 (i.e. second YA), Company A would enjoy full tax exemption of up to S$100,000 on its normal chargeable income (excluding Singapore franked dividends) for YA2005. Similarly, if Company A meets the qualifying criteria for YA2006 (i.e. third YA), Company A would enjoy full tax exemption of up to S$100,000 on its normal chargeable income (excluding Singapore franked dividends) for YA2006.

For more info

Tax Exemption for Start-ups
Inland Revenue Authority of Singapore (IRAS)