Category Archives: Budget Commentary

Income Tax – Changes Announced in Budget 2018

The  Finance Minister, Mr. Heng Swee Keat announced the following important changes to the Singapore income tax  on 19 February 2018

Enhancement and Extension of the Corporate Income Tax (“CIT”) Rebate for YA 2018 and 2019

To ease business costs and support restructuring by companies, the CIT  rebate will be enhanced and extended as follows:

YA 2018 – the CIT rebate will be enhanced to 40% of the corporate tax payable subject to an enhanced cap of $15,000.

YA 2019 – the CIT rebate will be extended to YA2019, at a rate of 20% of tax payable, capped at $10,000.

Adjustment to the Partial Tax Exemption (“PTE”) Scheme from YA 2020 onwards

The tax exemption under the PTE scheme will be adjusted with effect from YA 2020 as follows in order to strengthen support for firms to build capabilities:

  • 75% exemption on the first $10,000 of normal chargeable income; and
  • 50% exemption on the next $190,000 of normal chargeable income.

This means that for the maximum amount of PTE a corporate taxpayer can qualify will be reduced to $102,500.

Adjustment to the Start-up Tax Exemption  (“SUTE”) Scheme from YA 2020 onwards

Apart from the PTE scheme, the tax exemption under the SUTE scheme will also be adjusted as follows with effect from YA 2020:

  • 75% exemption on the first $100,000 of normal chargeable income; and
  • 50% exemption on the next $100,000 of normal chargeable income.

If a qualifying company;’s first YA is 2019, the existing SUTE parameters will continue to apply.  However, the revised parameters will be applied to YA 2020 and 2021.

Selected “PIC” Tax Measures to Support Businesses (YA 2019 to 2025)

Notwithstanding the expiry of the Productivity and Innovation Credit (“PIC”) Scheme effective from YA 2019, the Budget provides the businesses with the “extension” of three of the qualifying activities under the PIC scheme and this takes effect from YA 2019 to 2025

  • A 250% deduction for staff costs and consumable incurred on qualifying R&D projects performed in Singapore.
  • A 200% deduction for the first $100,000 of the qualifying IP registration costs incurred for each YAA 200% deduction for the first $100,000 of qualifying IP in-licensing costs incurred for each YA.  For this purpose, qualifying IP in-licensing costs include payments made by a qualifying person to publicly funded research performers or other businesses, but exclude related party licensing payments or payments for IP where any allowance was previously made to that person.

Enhanced Double Tax Deduction for Internationalisation Scheme from YA 2019 onwards

The $100,000 expenditure cap for claims without prior approval from iESingapore and STB will be raised to $150,000 per YA.  Businesses can continue to apply to IE Singapore or STB on qualifying expenses exceeding $150,000, or on expenses incurred on other qualifying activities.

IE and STB will release further details of the change by April 2018.

Extension of the Business and IPC Partnership Scheme (“BIPS”) until 31 December 2021

To continue supporting employee volunteerism through businesses, BIPS will be extended till 31 December 2021.  In addition, MOF and IRAS will review the administrative processes for BIPS based on feedback that has been received. Details of any change will be announced in the second half of 2018.

Extension of  the Investment Allowance (“IA”) scheme to include qualifying investment in submarine cable systems landing in Singapore

To strengthen Singapore’s position as a leading digital connectivity hub, the IA will be extended in respect of productive equipment to capital expenditure incurred between 20 February 2018 and 31 December 2023 on newly-constructed strategic submarine cable systems landing in Singapore, subject to qualifying conditions.

All other conditions of the IA scheme apply, except for the following which will be permitted:

  • The submarine cable systems can be used outside Singapore; an
  • The submarine cable systems, on which IA has been granted, can be leased out under the indefeasible rights of use arrangements.

MAS will announce further details at a later date.

Introduction of a review date for the Withholding Tax (“WHT”) exemption on container lease payments made to non-resident lessors

A review date of 31 December 2022 will be introduced to ensure that the relevance of the scheme is periodically reviewed. This means that unless the scheme is extended, such payments accruing to a non-resident lessor under any lease or agreement entered into on or after 1 January 2023 in respect of the use of a qualifying container for the carriage of goods by sea will be subject to WHT.

MAS will announce further details at a later date.


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Singapore GST – Changes Announced in Budget 2018

The  Finance Minister, Mr. Heng Swee Keat announced two important changes to the Singapore Goods & Services Tax (“GST”) on 19 February 2018.

Proposed change in GST rate from 7% to 9%

As widely speculated by the industry key players and the tax practitioners, the Government plans to raise GST from 7% to 9% sometimes in the period from 2021 to 2025.  However, the Minister said that the exact timing of this GST rate hike will depend on (i) the state of the economy; (ii) how much the Government expenditure grows; and (iii) how much buoyant the existing Singapore taxes are.

The Minister did expect that this change should occur earlier rather than later in the above period, citing the reason that even after exploring various options to manage the Government expenditure through prudent spending, saving and borrowing for infrastructure, there is still a gap.  Moreover, raising GST by 2% will provide the Government with a revenue that is equivalent to almost 0.7% of GDP per year.

Similar to the last rate hike announced in Budget 2007, the Government will implement the GST increase in a progressive manner such as

  • continue to absorb GST on publicly-subsidized education and healthcare
  • enhance the permanent GST Voucher (GSTV) scheme when the GST is increased, so as to provide more help to lower-income households and seniors.
  • implement an offset package for a period to help Singaporeans adjust to the GST increase. Lower- and middle-income households will receive more support.

Comments from WHM Consulting Pte Ltd: we anticipate the proposed GST hike in 2013 as it is a matter of time for the Government to do so because it is one of the easiest and most efficient ways to increase the Government’s tax revenue collection.  It would suggest that as a GST-registered business, you are under a heavier obligation to ensure the proper compliance with the GST provision as the quantum of any penalty imposed for failure of complying with the GST provisions will be increasing. 

Introduction to the reverse charge provision from 1 Jan 2020

Singapore has made the decision to suspend the reverse charge provision as stipulated under Section 14 of the GST Act since 1 April 1994.  What this means is that GST is currently not applicable on imported services provided by an overseas supplier that does not have an establishment in Singapore.

To ensure that the Singapore tax system remains fair and resilient in a digital economy, the Government has embarked on the feasibility study of activating the reverse charge provision 2 years ago and finally in this Budget, it is announced that the reverse charge provision will be effective from 1 January 2020.

For B2B transactions, only businesses that (i) make exempt supplies, or (ii) do not make any taxable supplies need to apply reverse charge. The majority of businesses make taxable supplies and thus would not be affected by this reverse charge mechanism.

The reverse charge mechanism requires the local business customer to account for GST to IRAS on the services it imports. The local business customer can, in turn, claim the GST accounted for as its input tax, subject to the GST input tax recovery rules.

The taxation of B2C imported services will take effect through an Overseas Vendor Registration (OVR) mode. This requires overseas suppliers and electronic marketplace operators which make significant supplies of digital services to local consumers to register with IRAS for GST.

IRAS will release further details by the end of February 2018.

Comments from WHM Consulting Pte Ltd: we were not surprised with the introduction of the reverse charge mechanism as we understand that the Government has embarked on the feasibility study a few years back.  Even Malaysia has introduced reverse charge mechanism in its GST provision when it was first launched in 2014.  GST-registered businesses should get proper education to understand how the reverse charge provisions work and make sure that they have systems in place to keep track of such B2B transactions.

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Budget Commentary 2014: Implication for Corporate Taxpayers

On 21 February 2014, DPM and Minster of Finance, Mr. Tharman Shanmugaratnam, presented his Budget Speech to the Parliament.

The theme in Budget 2014 is consistent with that between Budget 2010 and Budget 2013 – focusing on improving productivity and encouraging innovation of the SMEs.   We summarise our comments on the various proposed tax changes for your easy reference:

1.    Productivity and Innovation Credit (“PIC”) Scheme to be extended for another 3 Years of Assessment

As  anticipated, the PIC Scheme will be extended for another three years of assessment – i.e. Years of Assessment 2016 to 2018.   The number of qualifying activities remains the same.  The expenditure cap of $400,000 per qualifying activity per YA will be maintained unless taxpayer falls within the new PIC+ Scheme which is designed for SMEs (see below).

In addition, with effect from YA 2014, taxpayer will be allowed to claim PIC benefits on training expenses incurred in respect of individuals hired under centralised hiring arrangements.  Further details will be announced by IRAS by end March 2014.

With effect from YA 2016, businesses who apply for PIC cash payout will have to meet the 3 local employees condition for a consecutive period of at least 3 months before claiming the cash payout.  However, tax deferral option will lapse with effect from YA 2015.

Our view:  We are glad that the Government has decided to extend the PIC scheme despite for only 3 YAs.  Having said that, we are a little bit disappointed that the scheme is not extended to provide PIC benefits for business owners who have to undergo training to upgrade themselves.  We hope that the Government will make further relaxation of this rule in next year’s Budget.

2.     PIC+ Scheme for SMEs (Effective from YA 2015 to 2018)

A new PIC+ Scheme will be introduced to provide further support to SMEs.  Under this schemed, the expenditure cap will be increased to $600,000 per qualifying activity per YA.  The combined expenditure will be increased to $1.4 million for YA 2015 and up to $1.8 million for YA 2016 to 2018.  However, the expenditure cap for PIC cash payout will remain at $100,000 of qualifying expenditure per YA.  IRAS will release further details by end March 2014.

Our view:  We believe that the Government ‘s intention is clearly to support SMEs.  The medium-sized enterprises should take advantage of this increased cap to improve their productivity.  It is uncertain how the small enterprises would benefit from this new scheme.

3.    Extending R&D Tax Measures

The current R&D scheme whereby an additional 50% tax deduction will be allowed under Section 14DA(1) will be extended for 10 years till YA 2025.  In addition, to encourage businesses to conduct R&D projects in Singapore, further tax deduction granted under Section 14E will be extended for 5 years until 31 March 2020.

In view of the above, businesses can continue to claim tax deduction and enhanced PIC benefits on R&D expenditure incurred not relating to their existing trades as long as the R&D is conducted in Singapore.

4.     Extension of Writing Down Allowance under Section 19B till YA 2020

As anticipated, the writing down allowance (“WDA“) under Section 19B will be extended for another 5 years till YA 2020.  The accelerated WDA for Media and Digital Entertainment companies will also be extended for another 3 years till YA 2018.

However, what is disappointing is that intellectual property rights (“IPR“) in relation to customer-based intangibles and documentation of work processes will be expressly excluded from the definition of IPR.  A list of non-qualifying IPR will also be legislated by December 2014.

Our view:  We are disappointed by the proposed expressed exclusion of customer-based intangibles as we believe that in the modern M&A transactions, buyers have been willing to pay a reasonable price for acquiring certain kinds of customers-related intangibles.  It would be inappropriate for IRAS to eliminate this category completely. We would suggest IRAS to reconsider this proposed exclusion.

5.     Extension of Section 14A Tax Deduction Scheme for Registration Costs of Intellectual Property till YA 2020

The current tax deduction on registration costs of Intellectual Property will be extended till YA 2020 and PIC allowances can be claimed till YA 2018.

6.   Extending the Land Intensification Allowance (“LIA”) Scheme till 30 June 2020

The LIA Scheme will be extended till 30 June 2020.

With effective from 22 February 2014, the scheme will be extended to logistics sector and businesses carrying out qualifying activities on airport and port land.   However, a new condition requiring existing buildings that have already met or exceeded GPR criterion of 10% will be introduced in order to encourage business to continue intensifying their land use.  The EDB will release the implementation details by end May 2014.

7.    Recovery of GST for Qualifying Funds extended till 31 March 2019

The concession whereby input tax will be allowed to be claimed on expenses at a fixed rate on funds managed by prescribed fund manager in Singapore will be extended to 31 March 2019.  The MAS will release further details by end May 2014.

8.   Minor Tax Changes

Investment Allowance scheme for aircraft rotables will be allowed to lapse after 31 March 2015.

Sections 13CA, 13R and 13X schemes on qualifying funds will be extended for 5 years till 31 March 2019 whereas Section 13C scheme will be allowed to lapse after 31 March 2014. MAS will release the details of the changes by end May 2014.

Foreign-sourced income exemption for listed infrastructure RBTs will be enhanced to cover dividend income originating from foreign-sourced interest income subject to certain conditions, and interest income derived from a qualifying offshore infrastructure project/ asset.   IRAS will release the details and the effective date of these enhancements by end May 2014.

The Designated Unit Trust (“DUT“) Scheme will be limited to only unit trusts offered to retail investors with effect from 21 February 2014.  From 1 September 2014, unit trusts do not have to apply for the DUT scheme to enjoy the benefits of the scheme.  IRAS. will released the details of the change by end May 2014.

If you have any questions regarding the above, please contact us at

Be Well!

Singapore 2012 Budget – Tax Implications for Multinational Companies

Dear Clients and Business Associates,

We are pleased to attach our Singapore 2012 Budget Commentary in which to discuss the tax implications for Multinational Companies for your information.

2012 Budget Commentary

We trust that you will find our comments useful.  If you have any questions or comments on this alert, please contact us at

Best regards
Jack HM Wong
Founder and Lead Business & Tax Advisor
WHM Consulting Pte Ltd