What is the SUTE Scheme?
The Start-up Tax Exemption (SUTE) scheme is a government initiative designed to support new businesses in Singapore. It provides significant tax exemptions on the first S$200,000 of a company's chargeable income for its first three consecutive Years of Assessment (YAs).
| Chargeable Income | Tax Exemption (First S$100,000) | Tax Exemption (Next S$100,000) |
|---|---|---|
| First 3 Years of Assessment (YA) | 75% | 50% |
| From 4th Year Onwards | Partial Exemption (different rates apply) | Partial Exemption (different rates apply) |
Eligibility Criteria for SUTE
To qualify for the SUTE scheme, your company must meet all the following conditions:
- It must be a tax resident in Singapore for that YA.
- It must be incorporated in Singapore.
- It must have no more than 20 shareholders throughout the basis period for that YA where:
- all of the shareholders are individuals; or
- at least one shareholder is an individual holding at least 10% of the issued ordinary shares.
Companies whose principal activity is that of investment holding or developing properties for sale, investment or both are not eligible for the SUTE scheme.
How SUTE Works in Practice
Let's assume your startup has a chargeable income of S$250,000 in its first year. The standard corporate tax rate is 17%.
- Without SUTE: Tax payable would be S$250,000 * 17% = S$42,500.
- With SUTE:
- First S$100,000: S$75,000 is exempt. Taxable amount is S$25,000. Tax = S$25,000 * 17% = S$4,250.
- Next S$100,000: S$50,000 is exempt. Taxable amount is S$50,000. Tax = S$50,000 * 17% = S$8,500.
- Remaining S$50,000: Fully taxable. Tax = S$50,000 * 17% = S$8,500.
- Total tax payable with SUTE: S$4,250 + S$8,500 + S$8,500 = S$21,250.
In this example, SUTE results in tax savings of S$21,250 in the first year alone.
Final Thoughts
The SUTE scheme is one of Singapore's most powerful incentives for new businesses. Ensuring your company structure meets the eligibility criteria from day one is crucial for maximizing these tax benefits and increasing your startup's runway.