Partial Tax Exemption Scheme for Companies in Singapore

The Partial Tax Exemption (PTE) Scheme is designed to reduce tax burdens for companies operating in Singapore. This guide provides a comprehensive overview of the PTE Scheme, eligibility criteria, tax exemptions, and how companies can maximize its benefits.

What is the Partial Tax Exemption Scheme?

The Partial Tax Exemption (PTE) Scheme offers tax relief to companies on a portion of their chargeable income, reducing the overall corporate tax payable. This scheme is available to all companies, including those limited by guarantee, except those claiming the Tax Exemption for New Start-Up Companies.

Key Features of the PTE Scheme

The PTE Scheme has undergone revisions over the years, with changes announced in Budget 2018 taking effect from the Year of Assessment (YA) 2020. The scheme provides tax exemptions on normal chargeable income, defined as income subject to the prevailing Corporate Income Tax rate of 17%.

Tax Exemptions for 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.

The maximum exemption for each YA is $102,500.

Tax Exemptions for 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.

The maximum exemption for each YA is $152,500.

Tax Exemption Breakdown

Table 1: Partial Tax Exemption (YA 2020 Onwards)

Table 2: Partial Tax Exemption (YA 2019 and Before)

Eligibility Criteria

All companies, including those limited by guarantee, are eligible for the PTE Scheme if they meet the following conditions:

1. Incorporated in Singapore:
   • The company must be registered and operating in Singapore.
2. Filing Tax Returns:
   • The company must file its Corporate Income Tax Return (Form C-S or Form C) on time.
3. Normal Chargeable Income:
   • The income must qualify as normal chargeable income subject to the prevailing tax rate of 17%.

Benefits of the PTE Scheme

1. Tax Savings:
   • The scheme significantly reduces the corporate tax liability, enhancing cash flow for businesses.
2. Encourages Growth:
   • Reduced tax burdens allow companies to reinvest in their operations and expand.
3. Support for Small and Medium Enterprises (SMEs):
   • SMEs benefit substantially, particularly in their early growth stages.

How to Claim the Partial Tax Exemption

1. Prepare Financial Statements:
   • Ensure accurate computation of chargeable income.
2. File Tax Returns:
   • Submit Form C-S or Form C by the annual deadline of 30 November.
3. Apply Tax Exemption:
   • The tax exemption will be automatically applied based on the chargeable income declared in the tax return.

Examples of Tax Savings

Scenario 1: Chargeable Income of $100,000 (YA 2020 Onwards)

• First $10,000: 75% exemption = $7,500 exempted
• Next $90,000: 50% exemption = $45,000 exempted
• Total exemption = $52,500

Scenario 2: Chargeable Income of $300,000 (YA 2019 and Before)

• First $10,000: 75% exemption = $7,500 exempted
• Next $290,000: 50% exemption = $145,000 exempted
• Total exemption = $152,500

Common Mistakes to Avoid

1. Missing Filing Deadlines:
   • Late submission of tax returns may result in penalties and loss of exemptions.
2. Misreporting Income:
   • Ensure accurate reporting of chargeable income to benefit fully from the scheme.
3. Assuming Automatic Eligibility:
   • Confirm that your company meets all eligibility criteria.

How Apexia Corporate Advisory Can Help

Navigating tax exemption schemes can be complex. At Apexia Corporate Advisory, we provide expert assistance to help companies maximize their tax benefits. Our services include:

1. Tax Advisory Services
   • Assess your company’s eligibility and optimize tax savings.
2. Tax Filing Assistance
   • Ensure accurate and timely submission of corporate tax returns.
3. Compliance Reviews
   • Conduct reviews to ensure adherence to IRAS regulations.
4. Financial Record-Keeping
   • Help maintain accurate records to support tax exemption claims.

Conclusion

The Partial Tax Exemption Scheme provides substantial tax relief to companies in Singapore, enabling them to reduce their tax liabilities and reinvest in their growth. By understanding the scheme and ensuring compliance with IRAS guidelines, businesses can maximize their tax benefits. For professional advice and assistance, contact Apexia Corporate Advisory today.