Last Updated on March 9, 2025 by Caesar
Small and Medium Enterprises (SMEs) play a crucial role in Singapore’s economy, contributing significantly to employment and economic growth. The Singaporean government has implemented a tax system that fosters SME growth by reducing financial burdens and providing various incentives. Here’s how the tax framework helps SMEs remain competitive:
1. Low Corporate Tax Rates
Singapore’s corporate tax system is one of the most business-friendly in the world. SMEs benefit from:
- A 17% corporate tax rate, significantly lower than many global counterparts.
- Partial Tax Exemption (PTE) – SMEs enjoy tax exemptions of up to 75% on the first SGD 10,000 of taxable income and 50% on the next SGD 190,000.
- Startup Tax Exemption (SUTE) – Newly incorporated SMEs receive additional tax relief for the first three years of operation.
2. No Capital Gains and Dividend Tax
Singapore does not impose capital gains tax, meaning SMEs can reinvest profits without additional tax liabilities. Additionally, dividends distributed to shareholders are not taxed, making it more attractive for entrepreneurs and investors.
3. Double Taxation Agreements (DTAs) and Tax Treaties
Singapore has signed over 90 double taxation agreements (DTAs) with various countries, ensuring that SMEs engaged in international trade do not pay taxes twice on the same income. This allows businesses to expand globally while reducing tax liabilities.
4. Research & Development (R&D) Tax Incentives
SMEs investing in innovation and technology can benefit from:
- Tax deductions of up to 250% on qualifying R&D expenditures.
- Productivity and Innovation Credit (PIC) Scheme, which supports SMEs in adopting automation and advanced technology.
5. Government Grants and Tax Rebates
Singapore offers various grants and tax rebates that alleviate financial pressure on SMEs:
- Corporate Income Tax Rebate – SMEs receive periodic tax rebates to reduce corporate tax burdens.
- Enterprise Financing Scheme (EFS) – Helps SMEs secure funding for expansion.
- Productivity Solutions Grant (PSG) – Supports SMEs in digital transformation.
Final Thoughts
The tax policies in Singapore create a thriving environment for SMEs by lowering costs and encouraging innovation. These incentives make it easier for businesses to remain competitive, scale efficiently, and expand globally.
Learn more with Savvy Platform about how Singapore’s tax system can benefit your SME and drive long-term success.
