TRW & Co · Startups and founders
Startup Tax Exemption in Singapore: Who Qualifies and How Budget 2026 Rebates Stack
The startup tax exemption in Singapore exempts 75% of the first S$100,000 and 50% of the next S$100,000 of a new company's chargeable income for its first three Years of Assessment. It is only available to Singapore-incorporated, tax-resident companies that pass a shareholder test, and it excludes investment holding companies and property developers. Budget 2026 rebates are then applied on top.
Key pointThe shareholder test asks who holds the shares directly throughout the basis period, so a founder holding through a personal company, or a funding round that takes the company past 20 shareholders, can cost the exemption for that year.
At a glance
Up to S$125,000 exempt
For YA 2020 onwards, 75% of the first S$100,000 and 50% of the next S$100,000 of normal chargeable income is exempt in each qualifying YA.
First three YAs only
The exemption applies to a company's first three consecutive Years of Assessment; loss years still count, and unused exemption cannot be carried forward.
Shareholder test applies
No more than 20 shareholders holding directly throughout the basis period, all individuals or at least one individual holding at least 10% of ordinary shares.
Holding companies excluded
Companies whose principal activity is investment holding, and property developers, cannot claim the start-up exemption but can claim the partial tax exemption.
YA 2026 rebate stacks
After the exemption, a 50% CIT Rebate applies to tax payable for YA 2026, with a S$2,000 cash grant for eligible employers and a S$40,000 cap.
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The short answer: how the startup tax exemption in Singapore works
The startup tax exemption in Singapore is the Inland Revenue Authority of Singapore (IRAS) scheme formally called the tax exemption scheme for new start-up companies, often shortened to SUTE. For each of a qualifying company's first three consecutive Years of Assessment (YAs), 75% of the first S$100,000 of normal chargeable income and 50% of the next S$100,000 are exempt. That is up to S$125,000 of income taken out of tax every year.
Not every new company qualifies. The company must be incorporated in Singapore, tax resident in Singapore for the YA, and owned by no more than 20 shareholders who meet an individual-shareholder test. Companies whose principal activity is investment holding, and companies that develop property for sale or investment, are excluded. Those companies fall back on the partial tax exemption (PTE), which every company can claim.
As of October 2026, the exemption also interacts with Budget 2026 support: a Corporate Income Tax (CIT) Rebate for YA 2026 that was enhanced to 50% of tax payable in April 2026, with a cash grant element for companies that employ local staff. This article explains the conditions, the arithmetic and the traps. For the wider tax picture, see our tax structuring practice.
The numbers: start-up exemption versus partial tax exemption
Singapore taxes companies at a flat 17% of chargeable income. Both exemption schemes work by removing a slice of "normal chargeable income" (income taxed at 17%) from the tax base before the rate is applied. They do not apply to income taxed at a concessionary rate under an incentive.
The start-up scheme is more generous on the first S$100,000. Above S$100,000 the two schemes give the same 50% exemption, and both stop at S$200,000 of chargeable income for YA 2020 onwards. The value of the startup tax exemption in Singapore over the partial scheme is therefore capped, but for an early-stage company it is real money in the years when cash matters most.
| Feature | Start-up tax exemption (SUTE) | Partial tax exemption (PTE) |
|---|---|---|
| First band | 75% exempt on the first S$100,000 | 75% exempt on the first S$10,000 |
| Second band | 50% exempt on the next S$100,000 | 50% exempt on the next S$190,000 |
| Maximum exempt amount per YA | S$125,000 | S$102,500 |
| Duration | First three consecutive YAs only | Every YA, including from the fourth YA after a SUTE company |
| Who can claim | New Singapore-incorporated, tax-resident companies meeting the shareholder test | All companies, including companies limited by guarantee and Singapore branches of foreign companies |
| Excluded | Investment holding companies and property developers | No sector exclusion |
Put simply, a company with S$200,000 of normal chargeable income pays tax on S$75,000 under the start-up scheme, but on S$97,500 under the partial scheme. At 17%, that is S$12,750 against S$16,575 before any rebate. The benefit is a per-YA amount: an unused portion cannot be carried forward.
Who qualifies for the startup tax exemption in Singapore
IRAS sets out four conditions in addition to the sector exclusions. Each must be satisfied for the specific YA claimed, so a company can qualify in one of its first three YAs and fail in another.
Incorporated in Singapore
The company must be incorporated in Singapore. A foreign company, or the Singapore branch of a foreign company, cannot claim the start-up exemption, although it can claim the partial exemption. Founders who start trading through an overseas entity and later set up a Singapore subsidiary should look at which entity will actually earn the income. Our guide to company incorporation in Singapore covers the corporate steps.
Tax resident for that YA
Tax residence for a company depends on where control and management of its business is exercised, which IRAS generally looks at by reference to where the board makes its strategic decisions. A company whose directors all sit abroad and meet abroad may be Singapore-incorporated but not Singapore-resident. IRAS explains the test on its company tax residency page, and our article on corporate tax residency discusses board practice.
No more than 20 shareholders, with an individual anchor
Throughout the basis period, the company's total share capital must be beneficially held directly by no more than 20 shareholders, and either all of them must be individuals, or at least one individual must hold at least 10% of the issued ordinary shares. For a company limited by guarantee, IRAS applies an equivalent test to its members.
Two features of this test matter in practice. It looks at the whole basis period, not just year-end. And it refers to shares held directly, so a founder who holds through a personal holding company may not count as the individual anchor.
Within the first three consecutive YAs
The three YAs run consecutively from the company's first YA, whether or not it has income. A YA with losses or no income still uses up one of the three. A company that only becomes profitable in its third YA gets one year of benefit, then moves to the partial exemption from the fourth YA.
Investment holding companies and property developers
IRAS excludes companies whose principal activity is investment holding, and companies that undertake property development for sale, investment or both. Its stated reasons are that investment holding companies earn passive income such as dividends and interest, and that property groups commonly incorporate a new company for each project. Neither can use the startup tax exemption in Singapore, but both can still claim the partial exemption. IRAS's guidance for investment holding companies explains how such companies are taxed more generally.
The exclusion turns on principal activity, which is a question of fact. A technology company that parks surplus cash in deposits is not an investment holding company. But a founder's personal holding company, set up to own shares in an operating company, usually is. Where a group is being designed, the operating company is normally the entity that should qualify, and the holding company should be planned on the assumption that it will not.
Before you incorporate, decide which entity will earn the trading income and who will hold its shares directly. Most failed claims we see trace back to a cap table or group chart drawn up without the start-up conditions in mind, not to anything in the tax return itself.
How Budget 2026 rebates stack on the exemption
Budget 2026 was delivered on 12 February 2026. It announced a CIT Rebate for YA 2026 of 40% of tax payable, with a minimum benefit delivered as a cash grant and an overall cap. On 7 April 2026 the Government enhanced the package: according to IRAS, the YA 2026 rebate is now 50% of tax payable, the cash grant is S$2,000, and the total benefit from rebate and cash grant together is capped at S$40,000.
The order of operations matters. The startup tax exemption in Singapore reduces chargeable income first. Tax is then computed at 17%, and tax set-offs such as foreign tax credits are deducted. The rebate is then calculated on the tax that remains. A company that is eligible for the cash grant has the grant deducted from its rebate, so the grant is an advance of the rebate rather than an addition to it.
The local employee condition
The cash grant is paid only to active companies that made CPF contributions in calendar year 2025 to at least one local employee, being a Singapore citizen or permanent resident, excluding shareholders who are also directors. Many seed-stage companies are run solely by their founder-directors and so do not meet the condition. They still receive the percentage rebate on any tax payable, but not the minimum grant.
IRAS paid the grant automatically by the second quarter of 2026. A company that meets the condition through a centralised hiring or secondment arrangement but did not receive it can appeal through myTax Mail by 30 November 2026, with supporting documents. That deadline is close, so check now.
Other Budget 2026 measures founders should note
The Budget also enhances the Enterprise Innovation Scheme for YA 2027 and YA 2028, adding a 400% deduction on up to S$50,000 of qualifying AI expenditure each YA, without the cash payout option. It widens the Double Tax Deduction for Internationalisation scheme from YA 2027 by raising the cap for claims without prior approval from S$150,000 to S$400,000. The details are in MOF's Annex H-1 on tax changes. Our page on tax incentive strategy discusses how these schemes fit together.
How to claim, step by step
- Map your first three YAs. Work out the company's first YA from its financial year end. Remember the three YAs are consecutive and count even if the company makes no profit.
- Test eligibility for each YA. Confirm principal activity, tax residence and the shareholder test throughout the relevant basis period. Keep board minutes and register extracts showing who held shares, and when.
- Prepare the tax computation. Set off any unutilised trade losses brought forward first, as IRAS requires, then apply the exemption to normal chargeable income. Capital allowances can be deferred in appropriate cases, which can help preserve the exemption.
- Claim in the ECI and the return. Claim the exemption in the Estimated Chargeable Income filing and in Form C-S, Form C-S (Lite) or Form C. Do not deduct the CIT Rebate yourself; IRAS computes it.
- Check the rebate and any cash grant. Review the notice of assessment to confirm the rebate. If the company should have received the cash grant but did not, consider the IRAS appeal route before its deadline.
- Plan the fourth YA. From the fourth YA the company moves to the partial exemption. Budget for the higher effective rate in cash-flow forecasts and investor updates.
Illustrative scenario: a software start-up in its third YA
This scenario is illustrative only. The figures use the IRAS rates described above and assume no tax set-offs.
A Singapore-incorporated software company has two founders who each hold 40% directly, and an angel investor company that holds 20%. The board meets in Singapore. The company made losses in its first two YAs and has S$200,000 of normal chargeable income in YA 2026, its third YA, after setting off losses brought forward. It employed one Singapore citizen engineer in 2025.
Under the startup tax exemption in Singapore, S$125,000 is exempt and S$75,000 is taxed at 17%, giving S$12,750. The YA 2026 rebate is 50% of that, or S$6,375. Because the company met the local employee condition, it received the S$2,000 cash grant, and IRAS grants the remaining S$4,375 as a rebate. Net tax payable is S$8,375, with the S$2,000 grant received separately.
Two points stand out. The company qualifies despite a corporate shareholder because individuals hold at least 10% directly and there are fewer than 20 shareholders. And because the losses consumed the first two YAs, YA 2026 is its only year of start-up relief. From YA 2027, it will claim the partial exemption instead.
Risks and common mistakes
Holding founder shares through a personal holding company
Founders sometimes route their shares through personal holding companies for estate planning or future exit reasons. The shareholder test refers to share capital beneficially held directly, with an individual holding at least 10% of the issued ordinary shares if not all shareholders are individuals. If every shareholder is a company, the condition fails.
This is easy to fix before incorporation and harder afterwards, because moving shares later triggers stamp duty and may need investor consent. Model the cap table against the test before any shares are issued.
Overlooking a funding round mid-year
The shareholder test applies throughout the basis period. A priced round or a conversion of notes or SAFEs can push the number of shareholders above 20, or dilute the individual anchor below 10%. Either change can cost the exemption for that YA.
Founders should look at the timing of closings against the financial year, and consider whether investors should hold through a nominee or a single vehicle. Our article on seed financing covers the documents involved.
Splitting a profitable business into shell companies
IRAS treats as abuse arrangements that allocate the income of an existing profitable business to shell companies so that each stays within the exemption bands, or that charge fees to the profitable business without a bona fide commercial reason. It has audited companies for this and recovered tax and penalties.
A new company set up for a genuine new venture is fine. A company with no staff, minimal capital and income that is really another business's profit is not. If an existing structure looks like this, voluntary disclosure to IRAS is treated as a mitigating factor.
Assuming board meetings abroad do not matter
Incorporation in Singapore is not enough: the company must also be tax resident. If the founders relocate and the board starts making strategic decisions overseas, residence can shift, and with it the exemption and access to Singapore's treaty network.
Hold board meetings in Singapore where possible, minute them properly, and take advice before a founder relocates. Our article on cross-border expansion discusses the wider risks.
Cross-border founders and how TRW & Co helps
Many founders we advise come from Bangladesh, the UK, the UAE or China, and build in Singapore as a regional hub. The common questions are which jurisdiction should hold the intellectual property, where the board should meet, and whether a Singapore holding company should sit above or below an existing foreign entity. Each choice affects whether the startup tax exemption in Singapore is available and how much it is worth.
TRW & Co gives legal advice on structuring, constitutional documents, shareholder agreements and investor terms, and we coordinate with your tax adviser or accountant, who prepares and files the tax computation. We do not act as your tax agent. Where a foreign tax position is involved, we work with advisers in that jurisdiction through our network.
Checklist: making the most of the startup tax exemption in Singapore
- Confirm the operating company, not a holding company, will earn the trading income.
- Check that at least one individual will hold at least 10% of ordinary shares directly, and that there will be no more than 20 shareholders.
- Plan board meetings so control and management is exercised in Singapore.
- Map the first three YAs and forecast in which of them profit will actually arise.
- Time funding rounds and note conversions with the shareholder test in mind.
- Confirm whether the company met the local employee condition for the YA 2026 cash grant, and appeal by 30 November 2026 if needed.
- Budget for the move to the partial exemption from the fourth YA.
To review your structure before the next filing or funding round, contact our Singapore team. You can also read our overview of corporate income tax compliance.
Frequently asked questions
01What is the startup tax exemption in Singapore?
It is the IRAS tax exemption scheme for new start-up companies. For each of a qualifying company's first three consecutive Years of Assessment, 75% of the first S$100,000 and 50% of the next S$100,000 of normal chargeable income are exempt, so up to S$125,000 can be exempt each year. The company must be incorporated and tax resident in Singapore and meet a shareholder test. Investment holding companies and property developers are excluded, and every company that cannot claim it can use the partial tax exemption instead.
02Can a company with a corporate shareholder claim the start-up exemption?
Yes, provided the shareholder test is met throughout the basis period. The company's share capital must be beneficially held directly by no more than 20 shareholders, and if not all of them are individuals, at least one individual must hold at least 10% of the issued ordinary shares. So a company owned by two founders and a venture fund can qualify, but a company owned entirely by corporate shareholders, including founders' personal holding companies, will not.
03Does a loss-making year count as one of the three years?
Yes. IRAS counts the first three consecutive Years of Assessment from the company's first YA, whether or not the company has income. If the company has losses or no income in a YA, the exemption simply has nothing to apply to, but that YA is still used up. Unutilised losses brought forward must also be set off before the exemption is applied, although capital allowance claims can be deferred in appropriate cases.
04How does the YA 2026 Corporate Income Tax Rebate interact with the exemption?
The exemption reduces chargeable income first. Tax is computed at 17% on what remains, tax set-offs are deducted, and the YA 2026 rebate of 50% of tax payable is then applied, subject to a combined cap of S$40,000. Companies that met the local employee condition received a S$2,000 cash grant, which is deducted from the rebate they would otherwise receive. IRAS computes the rebate automatically; companies should not deduct it in their own filings.
05Why are investment holding companies excluded?
IRAS explains that investment holding companies derive passive income such as dividends and interest, and that property developers typically incorporate a new company for each project, while the scheme is intended to encourage entrepreneurship. The test is the company's principal activity, which is a question of fact. Both types of company can still claim the partial tax exemption on their normal chargeable income.
06Does TRW & Co file my company's tax return?
No. TRW & Co gives legal advice on company structure, shareholding, constitutional documents and investor terms, and we coordinate closely with your accountant or tax adviser, who prepares and files the Estimated Chargeable Income and the corporate tax return. That division keeps the legal structure and the tax filing aligned without us acting as your tax agent. Where IRAS raises queries on eligibility, we can advise on the legal facts, such as shareholding history and board practice.
Sources and official materials
- IRAS: Corporate Income Tax Rate, Rebates and Tax Exemption Schemes — Start-up and partial exemption bands, conditions, abuse warnings and the YA 2026 CIT Rebate
- IRAS: Tax Residency of a Company — Control and management test for company tax residence
- IRAS: Investment Holding Companies — Tax treatment of investment holding companies
- MOF Budget 2026 Annex H-1: Tax Changes — Budget 2026 CIT Rebate, EIS and DTDi changes
- Singapore Budget 2026 — Budget Statement delivered on 12 February 2026
General information only, current as at 20 October 2026. It is not legal advice and does not create a lawyer–client relationship. Singapore law and regulatory practice change; check current official sources and take advice on the facts of your matter.
