Angel Investors Tax Deduction Scheme (AITD)

Overview Criteria How to apply? Related Links & Resources

Overview

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

Investment Amount	$100,000
AITD Tax Deduction	50% x Investment Amount of $100,000 = $50,000
Taxable Income	$600,000
Taxable Income after AITD Tax Deduction	$600,000 - $50,000 = $550,000

Criteria

For Angel Investors
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 :
  1. Experienced angel investor with experience in early-stage investments; OR
  2. Experienced/serial entrepreneur with an entrepreneurial track record; OR
  3. 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 :
  1. Undesirable activities, such as prostitution, nightclubs, social escort services, gambling-related businesses, non-CAT 1 massage/spa establishments (as indicated under MHA guidelines), etc.;
  2. Speculative activities
  3. Holding of investment of any kind of assets
  4. Real estate development and property investment; and
  5. Any other such activities as determined by the government.

b. Investment
To qualify for the tax incentive, the investment made by the approved investor must fulfill the following conditions :

• 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 :
  1. Cash investment in newly issued shares for raising fresh capital (i.e. not replacement of capital);
  2. Cash investment in newly issued preference shares: No fixed or guaranteed dividend payment on the preference shares for the two-year holding period; and
  3. 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
  4. 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

c. Holding Period

• 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

d. Reporting by Approved Investor
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.

How to Apply?

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
SPRING Singapore
1 Fusionopolis Walk
#01-02 South Tower, Solaris
Singapore 138628

Related Links & Resources

Download the FAQs on Angel Investors Tax Deduction Scheme (PDF format, 89kB).