The Angel Investors Tax Deduction Scheme is a tax incentive which aims to stimulate business angel investments into Singapore-based start-ups and encourage more angel investors to add value to these start-ups.
The scheme applies to an approved angel investor who commits a minimum of $100,000 of qualifying investment in a qualifying start-up. An approved angel can enjoy a tax deduction, equal to 50% of his investment amount, at the end of a two-year holding period. The tax deduction will be subject to a cap of $250,000 in each Year of Assessment (YA), and will be offset against total taxable income.
Illustration of Angel Investors Tax Deduction Scheme
For Angel Investors
|AITD Tax Deduction
||50% x Investment Amount of $100,000 = $50,000
|Taxable Income after AITD Tax Deduction
||$600,000 - $50,000 = $550,000
To qualify for the tax incentive, the individual must adhere to the following :
- Make the investment at the individual level; hence investment made via corporations, trust, institutionalised funds and other investment vehicles are not eligible.
- Demonstrate the ability to nurture investee companies by possessing at least one of the following characteristics :
- Experienced angel investor with experience in early-stage investments; OR
- Experienced/serial entrepreneur with an entrepreneurial track record; OR
- Senior management professional/executives with corporate senior management experience
Conditions of The Scheme
a. Investee company
To qualify for the tax incentive, the investee company must adhere to the following :
- On the date of first investment, the investee company must be a Private Limited Company (excluding company limited by guarantee) incorporated in Singapore for no more than 3 years and whose shares are not listed on any stock exchange in Singapore;
- On the date of first investment, have at least 50% of its total issued share capital beneficially held by no more than 20 individual shareholders;
- On the date of first investment, does not have any shareholder who is a relative of the approved investor;
- The approved investor, together with any of his relative, does not hold more than 25% of the issued share capital or 25% of the debt capital within a period of 2 years prior to the date of first investment;
- Have business operations in Singapore and be a Singapore tax resident for the entire holding period of the investment; AND
- Not have its core business activities falling under the following list :
- Undesirable activities, such as prostitution, nightclubs, social escort services, gambling-related businesses, non-CAT 1 massage/spa establishments (as indicated under MHA guidelines), etc.;
- Speculative activities
- Holding of investment of any kind of assets
- Real estate development and property investment; and
- Any other such activities as determined by the government.
To qualify for the tax incentive, the investment made by the approved investor must fulfill the following conditions :
c. Holding Period
- Only investments made after approval as an angel investor will be considered
- The first investment must be made within 12 months from date of approval of “Approved Angel” status. Thereafter, the approved investor will need to make up at least S$100,000 of investments within 12 months from date of first investment in the investee company.
- The investments made must meet the following conditions :
- Cash investment in newly issued shares for raising fresh capital (i.e. not replacement of capital);
- Cash investment in newly issued preference shares: No fixed or guaranteed dividend payment on the preference shares for the two-year holding period; and
- Cash investment in newly issued Redeemable/Convertible/ Preference Shares and Convertible Loans: No fixed or guaranteed dividend payment on the preference shares for the two-year holding period; and no right to redemption during the two-year holding period; and
- No interest payment on the convertible loans for the two-year holding period; and no principal repayment of the loan by the start-up company during the two-year holding period.
- Investments co-funded by SPRING Start-up Enterprise Development Scheme (SPRING SEEDS) and Business Angel Funds (BAF) are not eligible under the scheme
- The approved investor should possess no more than 50% shares of any investee company within the two-year holding period and; this also takes into account the potential shareholding should a convertible loan be converted into shareholding
d. Reporting by Approved Investor
- The two-year holding period will be clocked from the date of last investment tranche
- Shares transferred prior to the two-year holding period will not be eligible
- Investee companies that are liquidated, merged or acquired within the two-year holding period will not be eligible unless otherwise approved by SPRING
On approval, the approved investor shall upon the commencement date of becoming a qualified approved investor :
- Update SPRING every half-yearly for investments made during the qualifying period
- Submit Annual Reports of investment activities to SPRING in such template and timeline as may be required by SPRING.
Things to Note
- An approved investor will be given the approval status for at least 12 months, following which, the status will have to be renewed.
- SPRING reserves the right to interview and conduct on-site visits with qualified approved investor during screening process of application or duration of the incentive, including requests for any additional relevant documents.
- SPRING reserves the right to assess each applicant on the merits of each case, taking into account all information available.
- SPRING’s decision will be final and no correspondence will be entertained.
Interested applicants are required to provide the following documents/details :
- Application for Angel Investors Tax Deduction Scheme Form
- Resume/ Curriculum-Vitae
- Investment track record (include details of how investor value-added to the investees), if relevant; and
- Any other relevant information to demonstrate the individual’s ability to value-add as an investor without a formal director/advisor role.
All applications should be submitted in sealed envelopes to :
Angel Investors Tax Deduction Scheme
Attention : Hazel Ang
Entrepreneurship Development Division
1 Fusionopolis Walk
#01-02 South Tower, Solaris
Download the FAQs on Angel Investors Tax Deduction Scheme
(PDF format, 89kB).