Singapore is known for its business-friendly tax regime, but that doesn’t mean you should pay more tax than necessary. With smart, legal tax planning, businesses in Singapore can significantly reduce their tax burden while staying fully compliant with IRAS.
In this article, we’ll walk you through legitimate strategies that Singapore businesses—especially SMEs and startups—can use to lower their taxes without crossing any legal lines.
1. Leverage Tax Exemptions and Rebates
Singapore offers several tax exemption schemes designed to help small businesses grow:
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Start-Up Tax Exemption (SUTE): Qualifying startups enjoy:
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75% exemption on the first S$100,000 of chargeable income, and
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50% exemption on the next S$100,000
(valid for the first 3 consecutive YAs)
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Partial Tax Exemption (for non-startups):
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75% exemption on the first S$10,000
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50% exemption on the next S$190,000
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These can significantly reduce your corporate tax in the early years of operation.
2. Deduct Allowable Business Expenses
Ensure you’re claiming all allowable business expenses. These include:
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Staff salaries and CPF contributions
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Office rent and utilities
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Marketing and advertising costs
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Professional fees (accountants, consultants, etc.)
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Software subscriptions (including cloud accounting tools)
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Work-related travel and transport
Keeping detailed records and using cloud accounting software makes it easier to track and justify deductions during tax filing.
3. Utilise Capital Allowances
Instead of claiming the full cost of fixed assets upfront, businesses can spread it over a few years through capital allowances.
For example, computers, machinery, and office furniture used for business purposes can qualify. This helps reduce taxable income over time while aligning with IRAS guidelines.
4. Tap Into Government Grants
Grants may not be direct tax deductions, but they can reduce your taxable spending. Key options include:
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Productivity Solutions Grant (PSG)
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Enterprise Development Grant (EDG)
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SkillsFuture Enterprise Credit
The lower your net business expenses, the lower your profit—and hence, your tax payable.
5. Use the R&D Tax Deduction
If your business engages in qualifying R&D activities, you may be eligible for enhanced tax deductions under the Research and Development Tax Incentive.
This allows up to 250% tax deduction on eligible R&D expenses carried out in Singapore—a huge benefit for tech, biotech, and innovation-driven companies.
6. Optimise Staff Remuneration
Consider balancing employee pay with non-taxable benefits or deferred bonuses, which may be taxed in a later year when income is lower.
Using the Not Ordinarily Resident (NOR) scheme for qualifying expatriate employees can also reduce tax on income earned outside Singapore (note: this scheme is being phased out after YA 2020s).
7. Plan for Group Relief and Loss Carry-Back
If your company is part of a group, you may benefit from Group Relief, where current year unutilised losses, capital allowances, or donations can be transferred between group companies.
Additionally, the Loss Carry-Back Relief scheme allows you to carry back qualifying losses to offset against taxable income from the previous YA—resulting in a tax refund.
8. Donate Strategically
Donations to approved Institutions of a Public Character (IPCs) in Singapore qualify for 250% tax deduction.
This means a S$10,000 donation could reduce your chargeable income by S$25,000—supporting a good cause and helping your bottom line.
Final Thoughts
Lowering your business tax in Singapore isn’t about cutting corners—it’s about understanding what’s legally available and planning wisely. With proper bookkeeping, cloud-based tools, and professional tax advice, your company can optimise its finances and stay on the right side of IRAS.
If you’re unsure where to start, consult a tax advisor familiar with Singapore’s evolving tax landscape. A small investment in planning could save you thousands in taxes. Check out our website at https://ebos-sg.com/ to explore more articles and discover how our Cloud Accountant Services can support you on your business.
