Most, if not all, founders are concerned about taxes.
The common understanding is that tax reporting is required on a quarterly or annual basis, and corporate income tax must be paid on profits.
While generally true, this statement lacks one important detail:
- It is allowed to carry forward operating losses to offset profits in subsequent years without a time limit.
However, most countries impose a cap on how much previous losses you can offset in the profitable year.
For example, in the USA, the net operating loss (NOL) may offset up to 80% of current year taxable income.
In France, the annual offset against future profits is limited to a maximum of €1 million, plus 50% of the portion of profit exceeding this threshold.
This creates certain complications in calculating profits and unutilized losses.
Singapore puts it simply:
- Singapore Companies are allowed to carry forward their operating losses indefinitely and offset against future trading profits.
In other words:
Singapore-based startups start paying corporate income tax only after they reach the break-even point.
This little favour from Singapore Government makes founders' lives easier and allows them to focus on their projects, leaving tax obligations till the break-even point.
How much trouble do taxes impose on your current project?
Please share in the comments.
