Singapore’s appealing history has contributed to its significant economic growth. The benefits of its prosperity have also been far-reaching for various businesses within the country. However, this Southeast Asian state had a rocky start after splitting from Malaysia about 55 years ago, with nothing of great value other than its land and people. And to ensure the country had made the right choice, policies to promote economic development were adopted.
The assistance the Singapore government offers to businesses has led the country to become an economic powerhouse in the region. Efficient tax policies, open and transparent regulation, and a world-class business culture all add to the success of the Singapore that we know today. The support assigned to businesses in the country isn’t limited to their activities in the local market. It also covers businesses within the country that plan to go global. It does this with some influential programmes like the Double Tax Deduction Scheme for Internationalisation (DTDi). This influential policy is discussed in greater detail below.
What Exactly Is The Double Tax Deduction Scheme For Internationalisation (DTDi)?
The Double Tax Deduction Scheme for Internalisation, DTDi, is simply a tax deduction scheme available to businesses registered in Singapore. This is not your typical tax relief programme, as it is only available to businesses looking to expand beyond the island’s borders. However, the tax relief given ensures that these companies can advance their internationalisation efforts without drawing significant taxation on their earnings.
The scheme provides businesses with a 200% tax deduction for expenses incurred as a result of overseas market expansion activities. Advertising in an approved local trade publication is one activity that stands qualified for tax exemption. Others include activities of an international nature, such as:
- Advertising and promotional campaigns
- Trade fairs
- Investment study trips and missions
- Business development trips and missions
- Packaging design
Furthermore, there are activities that demand consent from bodies like Enterprise Singapore, ESG, and Singapore Tourism Board, STB, before they can qualify for a 200% tax deduction. These include:
- Service or product certification that Enterprise Singapore must approve
- Virtual trade fairs that ESG approves
- Local trade fairs that must be sanctioned by either ESG or STB
Both ESG and STB are government agencies that will review your application, determine whether it is eligible for the significant 200% tax deduction, and approve it for you if it is. Its goal is to champion enterprise development, and they will need to okay you for a tax deduction before you can get it.
ESG and STB Exception
In reality, a DTDi can be obtained without the approval of either ESG or STB. If your total overseas spending is less than $150,000, you are automatically eligible for the Double Tax Deduction. In other words, you will receive all the DTDi benefits on your first eligible expenses incurred while engaging in the qualifying activities. The Internal Revenue Authority of Singapore (IRAS) will automatically apply the 200% tax deduction for qualified expenses up to $150,000 without any action on your part.
When your expenditure exceeds the $150,000 limit on eligible expenses, concrete approval from the ESG or STB is required. For other overseas developmental projects not among those listed, you will need a permit expressly from the ESG.
The Privileges You Stand To Gain From The DTDi
As per the ESG website, the DTDi provides advantages to businesses in four key categories to help them attain global success. They are as follows:
Market Preparation
ESG offers assistance to businesses looking to expand internationally. Companies intent on penetrating the global market can get a 200% tax deduction off their expenditure on packaging design for overseas markets, market surveys, feasibility studies, and service and product certification.
Market Exploration
ESG encourages businesses to search for and pursue both existing and new innovative solutions in their development and in areas that may require additional investment in their international efforts. This category provides tax relief for expenses incurred at virtual trade fairs, local trade fairs, overseas trade fairs, and overseas market improvement trips and missions.
Market Promotion
Activities such as overseas business development help to promote an international company’s presence, and ESG provides a tax break for this. Advertising in approved local trade publications and the production of corporate brochures for overseas distribution are two other activities it provides relief for under this category. Tax relief is also available for other forms of overseas advertising and promotional campaigns.
Market Presence
Fulfilling the above activities ensures the company’s presence in the global market, and ESG, therefore, provides tax breaks for these. As a result, expenses for overseas trade offices, investment feasibility and due diligence studies, employee overseas posting, master licensing and franchising, and overseas investment study trips and missions are all eligible for tax relief.
Eligibility For DTDi
The application for DTDi is simple and can be done online. However, you must first check that you are able to qualify for it before submitting your application. The primary eligibility criteria for the Double Tax Deduction for Internationalisation scheme are:
- The company must be based in Singapore
- It is promoting its products and services to the new target market(s)
- It has identified new customers in the target market(s) for its existing products and services
- Its new products and services are being promoted to existing customers to increase market share
How To Apply For DTDi
Eligible businesses can get the application form from the ESG official website. They should then proceed with the project once the form has been completed, submitted, and approved. They will also be required to visit ESG’s incentive portal and complete a project evaluation form.
The relief becomes available following the receipt of a “Letter of Support” from ESG, which you must present to the Inland Revenue Authority of Singapore when submitting the company’s annual income tax return.
Conclusion
The DTDi, or Double Tax Deduction Scheme for Internationalisation, is a significant avenue for businesses to venture internationally or improve their ventures overseas without incurring significant costs. If everything goes as planned, you should receive a significant tax deduction, which will benefit your company’s next annual tax filing. The good thing about the whole process is that obtaining it is straightforward.
If you want to know more about DTDi or other such tax reliefs, don’t hesitate to get in touch with Timcole. Our team of taxation experts would be able to guide you on all the tax benefits your company is eligible for and how you can use them to your best advantage.
