Corporate tax exemptions and partial-exemption scheme — Complete 2026 guide

Corporate tax exemptions and partial-exemption scheme rules reduce the effective tax bill of almost every Singapore company. Against a flat headline rate of 17%, the partial exemption frees 75% of the first S$10,000 and 50% of the next S$190,000 of normal chargeable income, while qualifying new companies enjoy an even more generous start-up exemption for their first three years.

The headline corporate tax rate

Singapore taxes company profits at a flat 17%. There is no separate higher band, and the same rate applies to local and foreign companies on Singapore-sourced income and on foreign income received in Singapore (subject to exemptions). The exemption schemes and the YA 2026 rebate are what bring the effective rate well below 17% for most small and medium-sized enterprises.

The partial-exemption scheme

The partial tax exemption is available to all companies that do not (or no longer) qualify for the start-up exemption. For each Year of Assessment, 75% of the first S$10,000 of normal chargeable income is exempt, and 50% of the next S$190,000 is exempt. That shelters up to S$102,500 of chargeable income from tax (S$7,500 + S$95,000). On the maximum sheltered amount, the tax saved is S$17,425 compared with a flat 17% charge.

The start-up tax exemption (SUTE)

Qualifying new companies enjoy a richer exemption for their first three consecutive Years of Assessment: 75% of the first S$100,000 of normal chargeable income is exempt, and a further 50% of the next S$100,000 is exempt — sheltering up to S$125,000 each year. To qualify, the company must be incorporated in Singapore, be tax-resident here, and have no more than 20 shareholders, of whom at least one individual holds at least 10% of the ordinary shares. Investment-holding companies and property-development companies are excluded from SUTE. Our colleagues at Raffles Corporate Services explain related structuring in Singapore Investment Holding Company: Tax Treatment, Concessions and Compliance (2026).

How corporate tax exemptions and partial-exemption scheme rules interact with the YA 2026 rebate

Exemptions reduce chargeable income; the CIT Rebate reduces tax payable. The order is: apply the relevant exemption, tax the balance at 17%, then apply the 50% YA 2026 rebate (capped at S$40,000 including the S$1,500 cash grant). The schemes stack, which is why a profitable SME can see a single-digit effective rate. The filing cycle that delivers these reliefs is set out in our GST registration, filing and InvoiceNow — Complete 2026 guide.

Foreign-sourced income exemptions

Beyond the SME schemes, section 13 of the Income Tax Act 1947 exempts certain foreign-sourced dividends, branch profits and service income when remitted to Singapore, provided the “subject to tax” and headline-rate conditions are met. Specific incentives administered by IRAS can further reduce tax for qualifying activities. Financial-statement presentation of tax should follow financial reporting standards administered by ACRA.

Numbers to remember

Headline rate: 17%. Partial exemption: 75% of first S$10,000 + 50% of next S$190,000 (up to S$102,500 sheltered). Start-up exemption: 75% of first S$100,000 + 50% of next S$100,000 for first three YAs (up to S$125,000 sheltered). Shareholder cap for SUTE: 20, with one individual holding at least 10%.

Common mistakes

Companies often claim the start-up exemption when they are an investment-holding or property-development company (both excluded), miscount the three-year SUTE window, or apply the rebate to chargeable income rather than to tax payable. Groups expanding headcount should also review the Singapore’s Tightening Job Market in 2026: What Foreign Professionals Need to Know to plan employment-cost and tax interactions.

Worked example: an SME’s effective rate

Take a qualifying new company in its second Year of Assessment with normal chargeable income of S$180,000. The start-up exemption frees 75% of the first S$100,000 (S$75,000) and 50% of the next S$80,000 (S$40,000), leaving S$65,000 taxable. Tax at 17% is S$11,050. Applying the YA 2026 CIT Rebate of 50% brings the charge down to about S$5,525 before the cash grant — an effective rate of roughly 3% on the original S$180,000. The same company in its fourth year would fall back to the partial exemption, which is less generous, illustrating why the first three years matter so much for cash flow.

Keeping your exemption claims clean

Exemptions are claimed through the corporate tax return, and IRAS applies them automatically once eligibility is established. The discipline that protects the claim is good record-keeping: shareholding registers that prove the SUTE shareholder conditions, evidence of Singapore tax residency such as board-meeting minutes held in Singapore, and a clear distinction between trading income and excluded investment-holding income. Where a company changes its activities — for example, drifting into investment holding — its exemption profile can change, so the position is best reviewed each year rather than assumed to be static.

FAQs

What is Singapore's corporate tax rate in 2026?
A flat 17%, before exemptions and the YA 2026 CIT Rebate.

How much income does the partial-exemption scheme shelter?
Up to S$102,500 of normal chargeable income (75% of the first S$10,000 and 50% of the next S$190,000).

Who qualifies for the start-up tax exemption?
A Singapore-incorporated, tax-resident company with no more than 20 shareholders, at least one of whom is an individual holding 10% or more of the ordinary shares. Investment-holding and property-development companies are excluded.

Can a company claim both the exemption and the YA 2026 rebate?
Yes. Exemptions reduce chargeable income, then tax is computed at 17%, then the 50% rebate reduces tax payable, capped at S$40,000 including the cash grant.

Is foreign income always taxable in Singapore?
Not always. Section 13 of the Income Tax Act 1947 exempts certain foreign dividends, branch profits and service income on remittance, subject to conditions.

Need help with this? Call, SMS or WhatsApp +65 8501 7133, or email [email protected]. Raffles Corporate Services works with a panel of corporate and employment law firms; this article is general information, not legal advice.