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  • Alton Neo
  • 27 Nov, 2024
  • 6 min read

Going Global: How Does the Double Tax Deduction for Internationalisation Help?

Going Global: How Does the Double Tax Deduction for Internationalisation Help?
Inside this Article

As globalisation continues to reshape the business landscape more so after COVID-19, companies are increasingly expanding their operations beyond their home countries. They do so to tap into new markets, unlock growth opportunities, and gain a competitive edge, especially through e-commerce

In this blog, we explore Singapore’s Double Tax Deduction for Internationalisation (DTDi) scheme, and how it propels these firms to expand out of their motherland.

Get DTDi Tax Deduction

Why is it Beneficial for Companies to Go Global?

Here are some reasons why it makes sense for businesses to internationalise:

Increased Market Potential

By expanding into international markets, a company can tap into new customer bases and access a larger pool of potential consumers. This can lead to increased sales and revenue streams.

Economies of Scale

Internationalisation often leads to economies of scale, allowing companies to optimise their production processes, reduce costs, and increase profitability. This can be achieved through centralised procurement, standardised operations, and leveraging global supply chains.

Diversification

Internationalisation allows companies to diversify their operations and reduce dependence on a single market. This helps mitigate risks associated with economic growth or changes in local market conditions, such as the bear market during the aftermath of COVID-19.

Competitive Advantage

Entering new markets enables companies to gain a competitive edge by introducing innovative products, technologies, and business practices. It also provides an opportunity to learn from and adapt to different market dynamics and consumer preferences.

What is the Double Tax Deduction for Internationalisation (DTDi)?

The Singapore government recognises the importance of businesses expanding overseas and has established several incentives to motivate them to do so.

Companies in Singapore looking to expand their operations overseas can take advantage of the DTDi scheme which supports the activities of the company through the key stages of a company’s overseas growth journey. 

They can enjoy a 200% tax deduction on eligible expenses incurred for international market expansion and investment development activities. 

This tax deduction serves as an incentive for companies to venture into new markets and invest in their expansion efforts. By leveraging its benefits, businesses can reduce their tax burden significantly while simultaneously fueling their growth and global presence.

The DTDi offers support for activities across 4 key categories of a firm’s overseas growth, specifically in:

  • Market preparation
  • Market exploration
  • Market promotion
  • Market presence

Related Read: 6 Ways to Lower Your Corporate Taxes in Singapore Legally

What is the Market Readiness Assistance (MRA) Grant?

The MRA grant supports companies in their expansion into new overseas markets by covering the costs of:

  • Market promotion
  • Business establishment
  • Business development

How is the DTDi Different From the MRA?

While both incentives seem similar at first glance, they differ in certain areas. For example, companies sending employees to overseas subsidiaries to perform marketing efforts can claim staff salary costs and even airfare under the DTDi, which would not be possible under the MRA.

We take a quick look at their key differences:

Incentive DTDi MRA
Incentive Type
  • Tax Deduction
  • Grant (Cash Payout)
Purpose
  • Encourages large companies such as MNCs to enter new markets overseas to help in their development and growth
  • To aid smaller local companies such as SMEs to expand into new overseas markets and internationalise
Benefits Non-automatic DTDi
Eligible businesses can receive financial support in the 4 key categories with a 200% tax deduction on qualifying expenses

Automatic DTDi
Companies can claim a 200% tax deduction automatically on the 1st S$150,000 of qualifying expenses for these 9 activities per YA without gaining pre-approval from EnterpriseSG:

  • Overseas market development trips
  • Overseas investment study trips
  • Overseas trade fairs
  • Local trade fairs (Must be ESG/STB-approved)
  • Virtual trade fairs (Must be ESG-approved)
  • Product/service certification
  • Overseas promotional and advertising campaigns
  • Packaging design for overseas markets
  • Advertising in approved local trade publication

Note that these will require ESG’s approval:

  • Qualifying activities outside the 9 areas
  • Expenses exceeding S$150,000

Companies must seek approval for eligible expenses under overseas market development trips and investment study trips for certain payments

  • Finances up to 50% of qualifying costs for local SMEs
  • Covers these supported activities at S$100,000 per company per new market, which is an enhanced grant limit that is extended till end-March 2025:
    • Market promotion overseas (20%)
    • Business development overseas (50%)
    • Business set up overseas (30%)
  • Each application is limited to 1 activity per overseas market
Eligibility
  • Business must reside in Singapore
  • Main purpose must be to promote the trade of goods or provision of services
  • Firms benefiting from discretionary incentives can also qualify for the DTDi on a case-by-case basis, of which ESG or STB must approve
    • Firms must have international headquarters in Singapore and intend to internationalise
  • The project must achieve these main aims:
    • Promote the firm’s new products and/or services to new target market(s)
    • Determine new consumers in target market(s) for existing products and services
    • Promote new products and services to current clients
    • Increase market share by promoting current products and services to existing markets
  • Applications must be submitted through the DTDi portal before the project commencement
  • Business must be registered and be operating in Singapore
  • Business must have a minimum of 30% local equity, whether held directly or indirectly by Singaporean(s) and/or PRs, which is determined by the overall individual ownership
  • Business must have a Group Annual Sales Turnover of below S$100 million , or a Group employment size of less than 200 employees
  • Must be new to the target market
    • Annual sales in the target market cannot exceed S$100,000 in any of the preceding 3 years

Some companies may be unaware that they can obtain tax deductions under the scheme even after incurring qualifying costs outside of the automatic DTDi.

This is where our tax experts at InCorp can help. As your tax agent, InCorp can work directly with you to identify the costs incurred relative to the activities under the non-automatic DTDi through an application to ESG to qualify for the tax deduction.

Contact our professional team to find out how we can assist your business in obtaining tax deductions today!

FAQs

  • What is the DTDi scheme in Singapore?

  • The Double Tax Deduction Scheme for Internationalisation (DTDi) is a strategic initiative designed to incentivise Singaporean businesses to expand their operations overseas.

    By providing double tax deductions on eligible expenses, the scheme aims to encourage companies to venture into new markets and seize international opportunities.

  • What is Section 14B and 14H?

  • Under Sections 14B, 14H, and 14I of the Income Tax Act 1947, eligible companies can take advantage of the double tax deduction for qualifying expenses incurred in nine specific activities.

  • How can I apply for the DTDi scheme?

  • You can engage our qualified tax experts at InCorp to help you apply for the scheme with ease of mind.

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About the Author

Alton Neo

Alton has deep technical expertise in the Singapore Financial Reporting Standards as well as hands-on experience in accounting for publicly-listed entities and growing enterprises in Singapore. Beyond that, Alton also provides expertise to fund managers and family offices on structuring.

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