Starting a business in Singapore comes with several tax benefits. One of them is the Start-Up Tax Exemption (SUTE) scheme. For many startups, the first few years are spent managing costs, building revenue, and expanding operations.
Tax relief during this period can help businesses retain more capital and allocate it where it matters most. The SUTE scheme allows qualifying companies to reduce their tax burden during their early years.
Need help with your business tax in Singapore? Reach out to One Tax CM via call, WhatsApp, email, or our contact form for any enquiries!
What Is the Start-Up Tax Exemption (SUTE) Scheme?
The Start-Up Tax Exemption (SUTE) scheme is a corporate tax relief for new companies in Singapore. It allows qualifying startups to reduce the amount of income that is taxed during their first three consecutive Years of Assessment (YA).
The scheme was introduced in YA 2005 under Section 43 of the Income Tax Act 1947 to support entrepreneurship and encourage the formation of local businesses. The exemption structure was revised in Singapore Budget 2018 and has applied to YA 2020 onwards.
How Much Tax Can Startups Save Under SUTE?
The Start-Up Tax Exemption (SUTE) scheme allows qualifying startups to reduce the amount of income subject to corporate tax, with exemptions of up to S$125,000 each Year of Assessment during their first three consecutive years.
For YA 2020 onwards, the exemption is structured as follows:
|
Chargeable Income |
Tax Exemption |
|
First S$100,000 |
75% exempt |
| Next S$100,000 |
50% exempt |
This means the maximum exemption a startup can receive is S$125,000 per Year of Assessment.
Example:
Let’s assume your startup has S$200,000 in chargeable income. The exemption will be calculated as follows:
- First S$100,000 → 75% exempt → S$75,000 not taxed
- Next S$100,000 → 50% exempt → S$50,000 not taxed
In total, S$125,000 of income is exempt from tax.
Only the remaining S$75,000 will be subject to the 17% corporate income tax rate set by the Inland Revenue Authority of Singapore (IRAS).
(Source – Envato.Elements)
Who Qualifies for the SUTE Scheme?
Not every company can claim the Start-Up Tax Exemption (SUTE). To qualify for the start up tax exemption Singapore offers, companies must meet several conditions set by the Inland Revenue Authority of Singapore.
1. The Company Must Be Incorporated in Singapore
The company must be incorporated in Singapore and recognised as a tax resident in Singapore for the relevant Year of Assessment. Companies are typically incorporated through the Accounting and Corporate Regulatory Authority.
2. The Shareholding Structure Must Meet Specific Requirements
The company must have no more than 20 shareholders during the basis period for the relevant Year of Assessment.
In addition, it must meet one of the following conditions:
- All shareholders are individuals, or
- At least one individual shareholder owns 10% or more of the issued ordinary shares
3. Certain Companies Are Not Eligible
Some businesses are not eligible for the SUTE scheme, including:
- Investment holding companies
- Companies engaged in property development for sale or investment
These companies cannot claim the start up tax exemption Singapore provides, even if they meet the other conditions.
How to Claim the SUTE Scheme
Claiming the Start-Up Tax Exemption (SUTE) scheme is straightforward if your company meets the eligibility requirements.
Step 1: File Estimated Chargeable Income (ECI)
Within three months after the financial year ends, companies must submit their estimated chargeable income to the IRAS, which helps them calculate potential exemptions early.
Step 2: File the Corporate Tax Return
At the end of the financial year, submit the corporate tax return using one of the following forms:
- Form C-S
- Form C-S (Lite)
- Form C
When these forms are completed correctly, the SUTE exemptions are applied automatically to the company’s chargeable income. No separate application is required.
Step 3: Verify Exemption
Check the final assessment from IRAS to confirm that the tax exemptions have been applied correctly. Keep all supporting records, such as shareholder information and incorporation documents, in case IRAS requests verification.
(Source – Envato.Elements)
Why the SUTE Scheme Matters for Startups
The Start-Up Tax Exemption (SUTE) scheme gives new companies in Singapore more control over their finances during the early years. By reducing the amount of taxable income, startups can retain capital that would otherwise be paid as corporate tax.
For many founders, these savings can be used to:
- hire employees
- develop products or services
- expand operations
- invest in marketing or infrastructure
Singapore’s startup ecosystem benefits from the scheme because it encourages entrepreneurship and reduces early-stage financial pressure.
Combined with clear tax rules and access to global markets, the scheme helps companies focus on growth instead of immediate tax costs.
Final Thoughts
The Start-Up Tax Exemption (SUTE) scheme helps new companies in Singapore reduce their corporate tax during the first three consecutive Years of Assessment, allowing businesses to retain funds that can be reinvested into growth, hiring, or product development.
For new entrepreneurs, the SUTE scheme is a tool that supports financial stability, encourages reinvestment, and strengthens the foundations of a growing business.
Need help with your business tax in Singapore? Reach out to One Tax CM via call, WhatsApp, email, or our contact form for any enquiries!