Start-Up Tax Exemption Guide for New Singapore Companies

Last updated on January 17, 2024

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What is the Start-Up Tax Exemption (SUTE) Scheme?

The Start-Up Tax Exemption (SUTE) scheme was introduced in Year of Assessment (YA) 2005 by the Inland Revenue Authority of Singapore (IRAS) to encourage entrepreneurship and support local enterprises. The scheme reduces the amount of corporate tax that new companies have to pay on their normal chargeable income for their first few years of incorporation.

Normal chargeable income refers to the company’s taxable income (e.g. income from investments) after deducting allowable business expenses (e.g medical expenses of employees).

Income is taxable when the income is earned in Singapore, or received in Singapore from outside of the country. On the other hand, income is non-taxable when it is a capital gain (e.g. gains on sale of fixed assets like machinery, and gains on foreign exchange of capital transactions).

The SUTE applies for the company’s first 3 consecutive YAs. The exemption will start running from the first YA, even if the company has not made any chargeable income yet.

Hence, if the company only starts making chargeable income in its third YA, it will only qualify for 1 year of tax exemption under the SUTE.

How is the first Year of Assessment of a company determined?

A company is taxed on the income earned in the preceding financial year.

This means that income earned in the financial year 2020 will be taxed in 2021. In tax terms, 2021 is the YA, which refers to the year in which the company’s income is assessed to tax.

To assess the amount of tax, IRAS would look at the company’s income, expenses etc. during the financial year, which is known as the  ‘basis period’. This is generally a 12-month period that precedes the YA.

The dates of the company’s first YA depends on the date chosen as the company’s financial year end when the company was first incorporated, and the closing date for its first set of accounts.


Suppose Company A was incorporated on 1 April 2019 and chooses its financial year end date to be 31 March of each year (i.e., in this example, the financial year end date is 31 March 2020). Any income earned from 1 April 2019 to 31 March 2020 will be taxed in 2021, which is the YA.

Do note that a company’s financial year end is determined by what best suits the company’s business operations, and is not determined by IRAS.

What is the Amount of Tax Exemption Under the SUTE?

The tax exemptions for qualifying companies for their first 3 consecutive YAs are set out in the table below:

From YA 2020 onwards For YA 2019 and before
  • 75% exemption on the first $100,000 of normal chargeable income; and
  • A further 50% exemption on the next $100,000 of normal chargeable income
  • Full exemption on the first $100,000 of normal chargeable income; and
  • A further 50% exemption on the next $200,000 of normal chargeable income.
Maximum exemption for each YA is $125,000 ($75,000 + $50,000) Maximum exemption for each YA is $200,000 (100% x $100,000 + 50% x $200,000)

Which Companies Qualify for SUTE?

SUTE is open to all newly-incorporated companies that:

  1. Are incorporated in Singapore;
  2. Are a tax resident in Singapore for that YA; and
  3. Have no more than 20 shareholders beneficially holding the company’s total share capital. Furthermore, either all the shareholders must be individuals, or at least 1 shareholder must be an individual holding at least 10% of the company’s issued ordinary shares.

The newly-incorporated company also cannot be:

  1. A company whose principal activities are that of investment holdings; or
  2. A company which undertakes property development for sale, for investment, or for both investment and sale

This is because investment holding companies generally only earn passive income (e.g. dividend and investment income), while property developers typically incorporate a new company for each new property development.

With its aim of encouraging entrepreneurship, the SUTE is not intended for such companies. These companies will instead be given partial tax exemption (see below).

When is a company considered a Singapore tax resident?

A company is considered tax-resident in Singapore if its control and management had been exercised in Singapore for the preceding YA. Control and management refers to the making of strategic decisions by the company.

Generally, the location of the company’s board meetings will determine whether control and management had been exercised in Singapore or elsewhere,  rather than the company’s place of incorporation.

Do companies limited by guarantee also qualify for SUTE?

Companies limited by guarantee also qualify for SUTE, provided that:

  1. They have members who are all individuals throughout the YA; or
  2. At least 1 of its members is an individual whose contributions to the assets of the company under the company’s constitution, in the event of the company being wound up, amounts to at least 10% of the total contributions of the members of the company throughout the basis period for that YA.

How to Claim Tax Exemption under SUTE

Filling in of forms

To claim the tax exemption under SUTE, you simply need to file your corporate tax return as per normal. IRAS will then compute the amount of tax exemption you’re entitled to automatically.

For more information, please refer to our guide to filing and paying corporate tax in Singapore.

You may also wish to check out our article on the common mistakes to avoid when filing corporate tax.

Do note that there are penalties for filing incorrect tax returns, even if you had no intention to evade tax.

Is a company still eligible for tax exemption after its third YA?

After its first 3 YAs, the company will no longer be eligible for SUTE. However, it can still enjoy Partial Tax Exemption (PTE). Currently, all companies, including companies limited by guarantee, are eligible for PTE. 

What is the tax exemption amount under the Partial-Tax Exemption (PTE)?

From YA 2020 onwards For YA 2019 and before
  • 75% exemption on the first $10,000 of normal chargeable income; and
  • A further 50% exemption on the next $190,000 of normal chargeable income
  • 75% exemption on the first $10,000 of normal chargeable income; and
  • A further 50% exemption on the next $290,000 of normal chargeable income
Maximum exemption for each YA is $102,500 (75% x $10,000 + 50% x $190,000) Maximum exemption for each YA is $152,500 (75% x $10,000 + 50% x $290,000)

Abuse of Tax Exemption Schemes

There have been instances where companies were set up without any genuine commercial reasons in order to abuse the SUTE scheme. Please note that tax evasion or fraud is a criminal offence punishable by law.. 

If you need any help with determining your eligibility for SUTE and filing your company’s corporate tax returns, you may wish to approach a corporate services firm to assist you with the process. You can also check out our competitive rates for tax and other corporate services.

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