Managed by Singapore’s Economic Development Board (EDB), the IHQ program aims to incentivize businesses to establish or expand their headquarters activities in Singapore, such as headquarters functions, research and development, and financial management. Depending on their business plans, applicants may qualify for the Pioneer Certificate Incentive (PCI), Development & Expansion Incentive (DEI), or Finance and Treasury Center (FTC) policy.

Why is Singapore’s IHQ program so attractive to multinational companies? 

The key reasons are:

● Tax Benefits: Eligible multinational companies can enjoy preferential tax rates between 5% and 10% for a period of 5 to 20 years. This incentive is available to Singapore-registered companies providing corporate support, headquarters-related services, and business expertise at a regional and global level.

● 5% Tax Rate: Companies must perform at least one headquarters activity in Singapore within the first five years, employ at least 18 skilled workers by the third year, and incur local business expenditure (TBE) of SGD 8 million annually. By the fifth year, they must employ at least 30 skilled workers and incur a TBE of SGD 13 million annually.

● 10% Tax Rate: Similar conditions apply, but with an additional requirement to employ at least 15 skilled workers by the third year, with TBE of SGD 5.5 million, and 25 skilled workers by the fifth year, with TBE of SGD 9 million.

● 15% Tax Rate: More relaxed conditions apply, requiring at least 8 skilled workers by the third year and a TBE of SGD 3 million, and at least 13 skilled workers by the fifth year, with a TBE of SGD 5 million. (Note: These more relaxed tax incentives are based on the most recent policy issued around August 2024.)

● Other Eligible Activities: Activities like managing, coordinating, and controlling group business operations, including procurement, supply chain management, marketing, human resources, legal, finance, and brand management services.

● Employee Requirements: All new skilled employees must become tax residents of Singapore within the respective year.

● Eligibility Period: The tax incentive is valid for five years.

● Base Income Calculation: Base income is calculated as the average pre-tax profit from eligible activities over the first 36 months. For cost-center headquarters, base income is not calculated. (Note: Newly established Singapore companies are not subject to the base income concept.)

● Business Environment: Singapore’s stable political and economic environment, along with an efficient administrative system, provides an excellent foundation for business growth.

● Substantive Headquarters Activities: Companies must perform strategic business planning, management, marketing, R&D, and other value-creating activities in Singapore.

● Multinational Operations Management: Companies must manage and coordinate subsidiaries in at least three countries, with Singapore serving as the core of the Asia-Pacific region.

● Good Group Standing: The company must be of a certain scale and influence within its industry.

● Senior Management Structure: Companies must establish an effective management system in Singapore to oversee and control operations.

● Local Employment: Companies must employ local management, professional, or technical support personnel.

● Economic Contributions: Companies must engage in economic activities like capital investment, overseas expansion, employee training, introducing new technologies, or investing in large-scale projects in Singapore.

To enjoy tax incentives under the IHQ program, companies must also meet the following conditions:

● Capital Investment: Companies must have a paid-up capital of at least SGD 200,000 by the end of the first year, increasing to SGD 500,000 by the end of the third year.

● Overseas Expansion: By the end of the third year, companies must establish subsidiaries, branches, or representative offices in at least three countries outside Singapore, providing at least three types of services from the headquarters.

● Employee Training: At least 75% of the company’s employees should receive technical training and obtain related certificates, with a minimum of NTC2 (National Training Certificate Level 2).

● Professional Employment: By the end of the third year, companies must have hired at least 10 professionals, with at least one holding a Singapore-recognized diploma.

● Senior Position Salaries: The average salary of five senior employees must reach at least SGD 100,000 by the same period.

● Increased Expenditure: Companies must increase their annual operating expenses in Singapore by at least SGD 2 million, excluding costs subcontracted to overseas entities outside Singapore.