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Understanding Partial Tax Exemption for Singapore Companies

26 June 2024

Editor: ET


All companies in Singapore, including those limited by guarantee, can benefit from partial tax exemption (PTE) under Section 43 of the Income Tax Act 1947. This exemption helps reduce the taxable income for companies, providing financial relief and encouraging business growth.


However, companies that are claiming the tax exemption for new start-up companies are not eligible for this scheme.

Revisions in the Partial Tax Exemption Scheme

In Budget 2018, the Singapore government announced a revision to the PTE scheme effective from the Year of Assessment (YA) 2020. This change aligns with the increased support for companies to build their capabilities. Here’s a breakdown of the tax exemptions for qualifying companies:


YA 2020 Onwards

  • 75% exemption on the first $10,000 of normal chargeable income.

  • 50% exemption on the next $190,000 of normal chargeable income.


YA 2019 and Before

  • 75% exemption on the first $10,000 of normal chargeable income.

  • 50% exemption on the next $290,000 of normal chargeable income.


Normal chargeable income refers to income taxed at the prevailing Corporate Income Tax rate of 17%.


Tax Exemption Amounts

To provide a clearer understanding, here are the tables summarizing the amount of tax exemption for different years:


Table 1: Partial Tax Exemption on First $200,000 of Chargeable Income (YA 2020 onwards)

Chargeable Income

% Exempted From Tax

Amount Exempted From Tax

First $10,000

75%

$7,500

Next $190,000

50%

$95,000

The maximum exemption for each YA is $102,500 ($7,500 + $95,000).


Table 2: Partial Tax Exemption on First $300,000 of Chargeable Income (YA 2019 and before)

Chargeable Income

% Exempted From Tax

Amount Exempted From Tax

First $10,000

75%

$7,500

Next $290,000

50%

$145,000

The maximum exemption for each YA is $152,500 ($7,500 + $145,000).

For detailed examples on how to compute the tax exemption, companies can refer to the official guidelines and computation examples provided by the Inland Revenue Authority of Singapore (IRAS).


Understanding and leveraging the partial tax exemption scheme can significantly benefit companies in Singapore. By reducing the taxable income, businesses can allocate more resources towards growth and development. Staying informed about tax policies and updates is crucial for financial planning and compliance.

For professional assistance with tax exemptions and other accounting needs, consider consulting with experts like Expede.com.sg. Their experienced team can guide you through the complexities of corporate tax and help optimize your financial strategies.

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