It is well known that Singapore is one of the best countries in the world for entrepreneurs to set up their businesses. The nation’s political stability, highly educated population, and relatively low-interest at 17% flat-rate for profits exceeding S$300K. This is a huge draw for investors. On top of this, the Singaporean government has also offered several ways for businesses to cut down on their corporate tax. Here’s a useful list to find out how you lower the level of tax paid:
1) Check for tax deductions, tax exemptions, and incentives.
These tax deductions stem from expenses that are incurred in the course of running their businesses. As such, statutory contributions to CPF, research and development costs, as well as accounting or book-keeping services, for instance, are deductible.
It’s also important to look for updates on the IRAS website to find out how to cut down on costs – and whether old tax incentives are still applicable. For instance, tax exemptions are introduced for new start-up companies in an effort to help local businesses grow and become competitive. 75% exemption has thus been given on the first $100,000 of normal chargeable income while a further 50% exception will be given on the next $100,000 of normal chargeable income. These could amount to massive savings for the average business. For more information, do drop by IRAS’s website here.
2) Ensure your business structure is tax-efficient
Picking the correct business model could help reduce your tax liability. A corporation, for instance, can possibly pay more in taxes compared to a sole proprietorship or partnership. Running your business as a sole proprietor means paying taxes based on individual income rate. Depending on how much your company is earning, you could potentially pay as low as 2% income tax compared to the flat rate of 17% as a corporation. That too is a sizeable amount you could save by making the right decisions.
3) Hire a professional to do your tax planning
Let’s face it, staying updated on the latest statutory regulations as well as crunching numbers can be hard work. It’s easy to miss out on the small details that could potentially cost your business money. Hiring a second pair of eyes would help. Companies can engage in tax planning to minimize their tax liability. This can include optimizing the timing of business transactions, maximizing tax deductions and exemptions, and restructuring the company’s operations in a tax-efficient manner.
It’s important to note that while these strategies can help a company save on corporate tax, they should be implemented with careful consideration of the company’s overall business goals and compliance with tax laws. It’s always a good idea to consult with a tax professional or financial advisor to determine the best approach for a specific business.
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