Tax Reliefs Many Singapore SMEs Don’t Fully Use
- enda416
- 3 days ago
- 4 min read
16 February 2026
Editor: ET
For many Singapore SMEs, paying taxes is often seen as a fixed and unavoidable cost of doing business. While most business owners are aware of corporate income tax obligations, fewer fully understand the wide range of tax reliefs and incentives available to reduce their tax burden legally. As a result, many SMEs end up paying more tax than necessary simply because they overlook or misunderstand these reliefs.
Based on common observations from Singapore accounting and compliance specialists, a significant number of SMEs do not maximise tax reliefs due to poor record-keeping, late filings, or lack of proactive tax planning. Understanding and using these reliefs properly can make a meaningful difference to cash flow, reinvestment capacity, and long-term business growth.
Below are some of the most commonly underutilised tax reliefs among Singapore SMEs—and how businesses can take advantage of them.
1. Partial Tax Exemption (PTE) Scheme
The Partial Tax Exemption scheme is one of the most basic yet frequently misunderstood tax reliefs. While many SMEs know it exists, few actively factor it into tax planning.
Under the scheme, companies enjoy:
75% exemption on the first $10,000 of chargeable income
50% exemption on the next $190,000 of chargeable income
This means that the first $200,000 of profits is taxed at a significantly reduced effective rate. SMEs that do not forecast profits properly or submit inaccurate financial statements often fail to optimise this benefit.
Proper bookkeeping and early preparation of management accounts help ensure companies fully benefit from this exemption.
2. Startup Tax Exemption (SUTE) for Eligible Companies
Newly incorporated companies may qualify for the Startup Tax Exemption scheme, but many miss out because they do not realise the eligibility window is limited.
Eligible startups enjoy substantial tax exemptions for the first three consecutive Years of Assessment, provided they meet ownership and activity requirements. Some SMEs unknowingly disqualify themselves by restructuring shareholdings without understanding the tax impact.
Seeking early professional advice ensures new businesses structure themselves correctly from day one to enjoy maximum relief.
3. Capital Allowances on Business Assets
Many SMEs purchase equipment, computers, machinery, or renovation fixtures without claiming capital allowances correctly.
Capital allowances allow businesses to deduct the cost of qualifying assets over time, reducing taxable income. Common missed opportunities include:
Office equipment and IT hardware
Production machinery
Renovation and refurbishment costs (subject to qualifying rules)
SMEs that expense everything immediately or fail to maintain fixed asset registers often lose track of what can be claimed.
Maintaining proper asset records and schedules allows businesses to claim the full value of allowable deductions over the years.
4. Productivity and Innovation-Related Deductions
Singapore actively encourages innovation and productivity improvements, yet many SMEs do not claim available deductions because they assume these incentives only apply to large corporations or tech companies.
In reality, qualifying expenses may include:
Automation tools and software
Process improvement initiatives
Training related to productivity upgrades
Certain research and development activities
Even modest improvements can qualify, provided documentation is in place. SMEs that keep detailed records of project costs and business justifications are better positioned to claim these deductions.
5. Employee-Related Tax Deductions
Hiring and developing local talent is heavily encouraged in Singapore, but many SMEs fail to fully utilise employee-related tax deductions.
Common deductible expenses include:
Staff salaries and bonuses
Employer CPF contributions
Training and skills development costs
Course fees and approved training programmes
Inadequate payroll documentation or mixing personal and business expenses often leads to under-claiming. Clear payroll records and CPF reconciliation are essential to maximise deductions while staying compliant.
6. Carry-Forward of Unutilised Losses
During challenging years, many SMEs incur losses but fail to plan how these losses can be used strategically in future profitable years.
Singapore allows qualifying businesses to carry forward unutilised losses and capital allowances, subject to shareholding continuity rules. However, changes in ownership or poor record-keeping can disqualify these valuable offsets.
Forward-looking tax planning helps businesses preserve these benefits and use them effectively when profitability improves.
7. PIC-Related Benefits and Legacy Claims
Although the Productivity and Innovation Credit (PIC) scheme has ended, some SMEs still have unclaimed benefits or incorrectly reported past claims.
Failing to review historical filings may result in missed refunds or exposure to future compliance risks. Conducting periodic tax reviews ensures that past reliefs were claimed accurately and in line with regulations.
Why SMEs Miss Out on Tax Reliefs
The most common reasons SMEs fail to maximise tax reliefs include:
Late or rushed tax filings
Incomplete financial records
Lack of awareness of eligibility conditions
No regular tax planning or advisory support
Many businesses only think about tax when deadlines approach, rather than treating tax planning as an ongoing process.
Further Reading: How Proper Records Protect Your Business During Audits in Singapore
How Proper Tax Planning Makes a Difference
SMEs that work with experienced accounting and compliance professionals often uncover savings they did not realise were available. Regular reviews, accurate bookkeeping, and timely submissions help ensure that all eligible reliefs are claimed while remaining compliant with IRAS requirements.
Insights shared by firms such as Expede consistently highlight that proactive planning—not last-minute filing—is the key to reducing tax exposure and strengthening financial resilience.
Tax reliefs are not loopholes; they are deliberate incentives designed to support Singapore businesses. When used correctly, they free up cash for growth, hiring, and innovation. For SMEs, the real risk is not claiming too much—but claiming too little.
Understanding what reliefs apply to your business and preparing early can make a significant difference to your bottom line year after year.
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