A multitude of other tax incentives and development schemes are available in Singapore. These serve well to draw international investment funds to the island state. Many multinational companies as well as small-medium enterprises opt to expand their global operations, particularly into South Asia, and South East Asia, through Singapore. The following are some of the key incentive schemes:
The Pioneer Certificate Incentive (PC) and the Development and Expansion Incentive (DEI)
Companies that conduct global or regional headquarters activities of managing, coordinating and controlling business activities for a group of companies can consider applying for PC or DEI for these headquarters activities.
Once the company is approved for the incentive schemes, it may qualify for a corporate tax exemption or a concessionary tax rate of 5% or 10%, respectively, on income derived from qualifying activities. There are various quantitative and qualitative criteria to be met, in order to qualify for these incentives such as:
- employment created
- total business expenditure
- commitment to growing capabilities (e.g. technology, skillsets, knowhow) in Singapore.
In a nutshell, the scheme encourages companies to use Singapore as a regional or global base.
Under the investment allowance scheme, a tax exemption is granted on an amount of profits based on a specified percentage of capital expenditure which is incurred for the purposes of specific activities, or projects that qualify under the scheme.
This percentage can be up to 100%.
Where a business is willing to investment heavily in automation, investment allowances of up to 100% may also be applied for, up to a cap of S$10 million per project.
IP Development Incentive (IDI)
The IDI was introduced in the Singapore Budget 2017. It serves to encourage businesses to use and commercialise intellectual property rights (patents and copyrights subsisting in software). These should arise from research and development (R&D) activities.
Once a company is approved as an IDI company, it will become eligible for a reduced corporate tax rate of either 5% or 10%. This will apply to a percentage of qualifying income derived from intellectual property income during the incentive period. The concessionary rate will incease by 0.5% at regular intervals.
The Productivity Grant is targeted at industrial operations in Singapore. It serves to enhance environmental and operational sustainability. Qualifying entities will become eligible for co-funding support of up to 20% of qualifying project costs. For cutting edge projects with the Singapore entity leading in productivity, an even higher co-funding support of 30% may be grated. The incentive period is limited to 3 years, and qualifying costs include consultancy, manpower, equipment, software, materials and training.
Research Incentive Scheme for Companies
The Research Incentive Scheme for Companies (RISC) serves to promote research and development activities, specifically in the fields of science and technology. This grant is open to companies incorporated in Singapore and which are willing to invest heavily in R&D. The grant makes available co-funding support of up to 30% of qualifying projects, covering consultancy, manpower, training, equipment, software, material and intellectual property costs. The incentive period is up to three years.
For more information on tax incentives, visit the Economic Development Board of Singapore.