FAQ - Singapore Taxation

“He is wise who knows the sources of knowledge - who knows who has written and where it is to be found.” - A. A. Hodge

1. What is a Private Limited Company?
2. What is an Exempt/Deemed Exempt Private Limited Company?
3. What is the 3-year tax exemption scheme for newly incorporated companies?
4. Which companies are eligible for Partial Tax exemption?

1. Question : What is a Private Limited Company?
   Answer : A Private Limited company is company limited by shares pursuant to and governed by the Singapore Companies Act, Cap 50. Shareholders are not held personally liable for the debts of Limited Companies, with their liability limited to the capital they have invested in return for registered shares. The number of shareholders is limited to fifty or less.
   
   
2. Question : What is an Exempt/Deemed Exempt Private Limited Company?
   Answer : An Exempt/Deemed Exempt Private Limited Company is a private company which has less than 20 shareholders, with none of them being a corporate shareholder.

   Such a company is exempted from statutory audit, if it qualifies under the small company concept under the thirteenth schedule of the Companies Act enacted on 1st July 2015.

   Should the Company cease to be a small company, it will no longer be deemed ”exempt“. The status is not specially conferred. It is simply a status by operation of law.

   A company wholly owned by the Govt, may however be declared as exempt by the minister by a notification in the Gazette.

3. Question : What is the 3-year tax exemption scheme for newly incorporated companies?
   Answer : All newly incorporated companies, where any of their first three Years of Assessment (YA) falls in or after 2020 qualify for IRAS’s 3-year tax exemption scheme on the first S$200,000 of their net profit, as illustrated in the table below:
   
   

   Net Profit	Exempt amount		Tax Amount in SGD	Effective Tax Rate
   	%	SGD
   First S$100,000	75%	$75,000	$4,250	4.25%
   Next S$100,000	50%	$50,000	$8,500	8.50%
   Taxable Income		$75,000	$12,750	6.375%
   *$200,001		17%

   
   

   Under this scheme, the total tax payable for the first S$200,000 net profit is S$12,750 – 6.375% ETR (Effective Tax Rate).

   *Tax on profits from $200,001 onwards will be taxed at the regular corporate tax rate of 17%.

4. Question : Which companies are eligible for Partial Tax exemption?
   Answer : Partial tax exemption is available for all companies which do not qualify as new start-up companies, that is, they have been incorporated for more than three years during the year of assessment under discussion.

   This tax exemption is available only on the first $200,000 of their earnings. This entitlement is as follows:

   Net Profit	Exempt amount		Tax Amount in SGD	Effective Tax Rate
   	%	SGD
   First S$10,000	75%	$7,500	$425	4.25%
   Next S$190,000	50%	$95,000	$16,150	8.50%
   Taxable income		$97,500	$16,575	8.2875%
   *$200,001	17%

   
   

   Total tax payable for the first S$200,000 net profit is S$16,575, 8.2875%.

   *Tax on profits from $200,001 onwards will be taxed at the regular corporate tax rate of 17%.