Forming an offshore company is becoming a strategic choice for international businesses, especially startups and SMEs, thanks to favorable tax policies. When you open an offshore company and bank account in Singapore, your business can benefit from one of the most attractive tax systems in the world.
In Singapore, eligible new companies can take advantage of the Startup Tax Exemption Scheme (SUTE). Specifically, for the first three years, a company can receive a 75% tax exemption on the first $100,000 of taxable income and a 50% exemption on the next $100,000. After the first three years, the company continues to receive a partial tax exemption. While the corporate tax rate is a flat 17%, these incentives can significantly lower the actual tax burden.
Besides Singapore, many other offshore companies also offer highly competitive tax policies, even providing a complete exemption from taxes on income generated outside their jurisdiction. For example, forming an offshore company in locations like the British Virgin Islands (BVI) or the Cayman Islands can help a business enjoy a 0% corporate income tax rate with no sales or capital gains taxes.
These incentives are why many businesses choose to register an offshore company to optimize costs and reinvest in their core operations.
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Specific Tax Incentives for SMEs in Singapore
In Singapore, small and medium-sized enterprises (SMEs), especially new ones, benefit from significant tax incentives designed to support their growth. Here are the specific tax benefits for SMEs:
1. Startup Tax Exemption (SUTE)
This scheme applies to eligible new companies for their first three years. The benefits include:
- A 75% tax exemption on the first S$100,000 of chargeable income.
- A 50% tax exemption on the next S$100,000 of chargeable income.
For a detailed comparison of popular international locations, read our full article on the best offshore jurisdictions for 2025 here.
2. Partial Tax Exemption (PTE)
After the first three years or if a company doesn’t qualify for SUTE, SMEs can still receive a partial tax exemption. This applies to all Singapore companies (including older ones) and includes:
- A 75% tax exemption on the first S$10,000 of chargeable income.
- A 50% tax exemption on the next S$190,000 of chargeable income.
Additionally, Singapore has a competitive flat corporate income tax rate of 17% and other policies such as:
- Double Tax Deduction for Internationalisation (DTDi): Allows for a double deduction of expenses for international business development activities.
- Tax deductions and incentives for research and development (R&D) costs.
