Tax Saving For Setup Company

Tax Saving For Setup Company | Private Limited Companies

All sole proprietorships and partnership in Singapore are taxed based on the personal income tax rate of their owners under the Income Tax Act. Owners or individual partners will be subjected to a tax based on their share of profits from their trade under Section 10(1)(a) of the Income Tax Act. The current progressive tax rates are as listed below:

YA 2017

	Chargeable Income	Rate	Gross Tax Payable
	$	(%)	$
On the first	20,000	0	0
On the next	10,000	2.0	200
On the first	30,000		200
On the next	10,000	3.5	350
On the first	40,000		550
On the next	40,000	7.0	2,800
On the first	80,000		3,350
On the next	40,000	11.5	4,600
On the first	120,000		7,950
On the next	40,000	15	6,000
On the first	160,000		13,950
On the next	40,000	18	7,200
On the first	200,000		21,150
On the next	40,000	19	7,600
On the first	240,000		28,750
On the next	40,000	19.5	7,800
On the first	280,000		36,550
On the next	40,000	20	8,000
On the first	320,000		44,550
Above	320,000	22

By registering your business as a private limited company (PLC) and setting up a private limited company in Singapore, the company is entitled to:

1. Tax Exemption for New Start-up Companies: Newly established Singapore incorporated companies are entitled to full tax exemption in their first three years of assessments.
   • Before YA 2020: the first S$100,000 is exempted at 100 percent; the next S$200,000 is exempted at 50 percent.
   • YA 2020 onwards: the first S$100,000 is exempted at 75 percent; the next S$100,000 is exempted at 50 percent.
2. Partial Tax Exemption: All existing Singapore incorporated companies may claim partial tax exemption on their profits yearly.
   • Before YA 2020: the first S$10,000 is exempted at 75 percent; the next S$290,000 is exempted at 50 percent.
   • YA 2020 onwards: the first S$10,000 is exempted at 75 percent; the next S$190,000 exempted at 50 percent.

Comparison of the tax savings of a private limited company over a sole proprietor or partnership:
As you can see from the table above, personal tax for a chargeable income of S$320,000 is S$44,550. We will do a comparison with corporate tax figures to illustrate the tax savings.

 

BEFORE YA 2020

COMPANY TAX – under tax exemption for new start-up companies

Please refer to IRAS website for the qualifying criteria for new start-up tax exemption

Exemption	Chargeable income	Rate	Gross tax payable
	$	%	$
100% on first $100,000	100,000	0	0
50% on next $200,000	200,000	8.5	17,000
0% on next $20,000	20,000	17	3,400
	320,000		20,400

 

Tax savings: 44,550 – 20,400 = $24,150

COMPANY TAX – under partial tax exemption

Exemption	Chargeable income	Rate	Gross tax payable
	$	%	$
75% on first $10,000	10,000	4.25	425
50% on next $290,000	290,000	8.5	24,650
0% on next $20,000	20,000	17	3,400
	320,000		28,475

 

Tax savings: 44,550 – 28,475 = $16,075

 

YA 2020 ONWARDS

COMPANY TAX – under tax exemption for new start-up companies

Please refer to IRAS website for the qualifying criteria for new start-up tax exemption

Exemption	Chargeable income	Rate	Gross tax payable
	$	%	$
75% on first $100,000	100,000	4.25	4,250
50% on next $100,000	100,000	8.5	8,500
0% on next $120,000	120,000	17	20,400
	320,000		33,150

 

Tax savings: 44,550 – 33,150 = $11,400

COMPANY TAX – under partial tax exemption

Exemption	Chargeable income	Rate	Gross tax payable
	$	%	$
75% on first $10,000	10,000	4.25	425
50% on next $190,000	190,000	8.5	16,150
0% on next $120,000	120,000	17	20,400
	320,000		36,975

 

Tax savings: 44,550 – 36,975 = $7,575

3E Accounting Pte Ltd can help to incorporate your new business as a private limited company and thus claim a tax exemption on your trade profits. We can provide tax advice on commencement of business activities and describe how to maximise the year of assessment during the first three years where tax exemptions are available to newly incorporated companies through effective tax planning.

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