Singapore has long been recognised as one of the most attractive destinations in Asia for entrepreneurs looking to start a business. Beyond its strategic location, robust legal framework, and ease of company incorporation, the city-state offers generous tax incentives designed to give new businesses a strong financial footing in their early years.
Chief among these incentives is the Tax Exemption Scheme for New Start-Up Companies, commonly known as SUTE. Administered by the Inland Revenue Authority of Singapore (IRAS), this scheme can substantially reduce the corporate income tax burden for qualifying companies during their first three years of operation.
This guide explains how SUTE works, who qualifies, how to claim the exemption, and what happens once the start-up period is over.
What Is the Start-Up Tax Exemption Scheme (SUTE)?
The Start-Up Tax Exemption Scheme was introduced in the Year of Assessment (YA) 2005 to encourage entrepreneurship and support the growth of locally incorporated companies. Under this scheme, qualifying new companies enjoy significant tax exemptions on their normal chargeable income for each of their first three consecutive YAs.
Singapore’s headline corporate income tax rate is a flat 17 per cent. However, thanks to SUTE, eligible start-ups can pay far less — or even nothing at all — on a substantial portion of their profits during the critical early years when cash flow matters most.
How Much Tax Can You Save?
For YA 2020 onwards, qualifying new companies enjoy the following exemptions on their normal chargeable income for each of their first three consecutive YAs:
- 75 per cent exemption on the first S$100,000 of normal chargeable income
- 50 per cent exemption on the next S$100,000 of normal chargeable income
This means that a qualifying start-up with S$200,000 or more in chargeable income would receive a total exemption of S$125,000 (i.e., 75% x S$100,000 + 50% x S$100,000). The remaining S$75,000 of the first S$200,000 would be taxed at the standard 17 per cent rate, resulting in a tax payable of just S$12,750 — an effective tax rate of approximately 6.4 per cent on the first S$200,000 of chargeable income.
For start-ups earning less than S$100,000 in chargeable income, the savings are even more significant. A company earning S$100,000, for example, would only pay tax on S$25,000 (after the 75 per cent exemption), resulting in a tax bill of just S$4,250 — an effective rate of only 4.25 per cent.
Who Qualifies for SUTE?
To be eligible for the Start-Up Tax Exemption Scheme, a company must satisfy all of the following conditions:
- Incorporated in Singapore — The company must be incorporated under the Companies Act and registered with the Accounting and Corporate Regulatory Authority (ACRA). Foreign companies and Singapore branches of foreign companies are not eligible.
- Tax resident in Singapore — The company must be a tax resident of Singapore for the relevant YA. A company is considered tax resident in Singapore if the control and management of its business is exercised in Singapore.
- Shareholding requirement — The company’s total share capital must be beneficially held directly by no more than 20 shareholders throughout the basis period for that YA, where at least one shareholder is an individual holding at least 10 per cent of the issued ordinary shares of the company.
Who Does Not Qualify?
The following types of companies are excluded from SUTE, even if they meet the general eligibility criteria above:
- Investment holding companies — Companies whose principal activity is the holding of investments (e.g., holding shares, property, or other assets for long-term capital appreciation or dividend income).
- Property development companies — Companies that are primarily engaged in the development of properties for sale.
These exclusions ensure that the scheme benefits genuine operating businesses rather than passive holding structures.
Understanding the Year of Assessment (YA)
A common source of confusion is the distinction between the financial year end (FYE) and the Year of Assessment (YA). In Singapore, corporate income tax is assessed on a preceding-year basis. This means that the income earned in the financial year ending in 2025 (the “basis period”) is assessed in YA 2026.
For SUTE purposes, the first three consecutive YAs begin with the YA in which the company first earns chargeable income — not necessarily the YA immediately following incorporation. For example, if a company is incorporated in 2025 but only starts generating revenue in the financial year ending 2026 (i.e., YA 2027), the start-up exemption will apply from YA 2027 to YA 2029.
It is therefore important to plan your company’s financial year end carefully. For guidance on the broader costs and compliance obligations associated with running a Singapore company, see our article on the true cost of incorporating and maintaining a Singapore company annually.
How to Claim the Start-Up Tax Exemption
Claiming SUTE is straightforward — there is no separate application required. Eligible companies simply need to claim the exemption when filing their corporate income tax returns (Form C-S or Form C) with IRAS.
Step 1: File Your Estimated Chargeable Income (ECI)
Within three months of the end of your financial year, you must file your Estimated Chargeable Income with IRAS. When filing ECI, you should factor in the start-up exemption to arrive at your estimated tax payable.
Step 2: File Your Corporate Income Tax Return
By 30 November of each YA, you must file your corporate income tax return (Form C-S or Form C). In the return, you will indicate that the company qualifies for the start-up exemption and provide the relevant details. IRAS will then compute the exemption and issue a Notice of Assessment.
Step 3: Maintain Proper Records
Ensure that your company maintains proper accounting records and financial statements to support the income figures reported in your tax return. Companies that have adopted the appropriate financial reporting standards will find this process much smoother.
What Happens After the First Three Years?
Once a company has exhausted its three consecutive YAs under SUTE, it transitions to the Partial Tax Exemption (PTE) scheme, which is available to all Singapore-resident companies (not just start-ups). Under PTE, companies enjoy the following exemptions:
- 75 per cent exemption on the first S$10,000 of normal chargeable income
- 50 per cent exemption on the next S$190,000 of normal chargeable income
While the PTE benefits are less generous than SUTE, they still provide meaningful tax relief for small and medium-sized enterprises. A company earning S$200,000 in chargeable income under PTE would pay approximately S$23,800 in tax — an effective rate of about 11.9 per cent, still well below the headline rate of 17 per cent.
Other Tax Incentives for Start-Ups
Beyond SUTE, Singapore offers a range of other tax incentives and schemes that start-ups should be aware of:
- Corporate Income Tax Rebate — IRAS periodically grants corporate income tax rebates as part of national budget measures. Check the latest Budget announcements for any rebates applicable to the current YA.
- Enterprise Innovation Scheme (EIS) — Introduced in YA 2024, the EIS provides enhanced tax deductions or allowances for businesses that engage in qualifying activities such as research and development, innovation, and capability development.
- GST Registration Considerations — Start-ups should also be aware of their GST registration obligations, particularly once their taxable turnover exceeds S$1 million.
- Double Tax Deduction for Internationalisation — Companies expanding overseas can claim double tax deductions on qualifying expenses incurred for international market expansion activities.
Practical Tips for Maximising Your Tax Benefits
To get the most out of SUTE and Singapore’s broader tax framework, consider the following:
- Choose your financial year end wisely — Aligning your FYE with your expected revenue ramp-up can help you maximise the three-year SUTE window.
- Keep your shareholding structure simple — Ensure your company meets the 20-shareholder limit and the 10 per cent individual shareholder requirement.
- File on time — Late or non-filing of ECI and tax returns can result in penalties and the loss of tax benefits. Keep track of all annual return and filing deadlines.
- Engage a corporate service provider — A professional CSP can help you navigate the tax filing process, ensure compliance, and identify all applicable tax incentives.
How Raffles Corporate Services Can Help
Understanding and claiming tax exemptions is just one part of running a successful business in Singapore. From incorporation and company secretarial services to bookkeeping, tax filing, and ongoing compliance, Raffles Corporate Services provides end-to-end support for start-ups and established businesses alike.
Our experienced team can help you structure your company to take full advantage of SUTE and other available tax incentives, prepare and file your corporate income tax returns, and ensure that your business stays on the right side of all regulatory requirements. Contact us today to find out how we can support your business.
— The Editorial Team, Raffles Corporate Services