Tax Saving For Setup Company

Tax Saving For Setup Company | Private Limited Companies

All sole proprietorships and partnerships in Singapore are taxed based on the personal income tax rates 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:

 

 

 

	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
On the next	180,000	22	39,600
On the first	500,000		84,150
On the next	500,000	23	115,000
On the first	1,000,000		199,150
On the next	1,000,000	24

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 new start-up tax exemption in their first three years of assessments.
   • the first S$100,000 is exempted at 75%
   • the next S$100,000 is exempted at 50%
2. Partial Tax Exemption: All existing Singapore incorporated companies may claim partial tax exemption on their profits yearly.
   • the first S$10,000 is exempted at 75%
   • the next S$190,000 exempted at 50%

Comparison of the tax savings of a private limited company over a sole proprietor:
To provide a conservative illustration, let us consider a chargeable income of S$320,000. Based on the personal income tax rates above, the tax payable amounts to S$44,550. We will now compare this with the corporate tax payable under the relevant exemptions to highlight the potential tax savings.

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

You may 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 (under personal tax) – $33,150 (under company tax) = $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 (under personal tax) – $36,975 (under company tax) = $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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