Category Archives: Budget

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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Income Tax – Public Consultation on Draft Income Tax (Amendment) Bill 2017


The Ministry of Finance has published for public consultation the Draft Income Tax (Amendment) Bill 2017 to incorporate 34 proposed legislative amendments, including:

1.   Eight Budget 2017 changes, including

  •  Enhancement and extension of the Corporate Income Tax (CIT) rebate for Year of Assessment (YA) 2017 and YA 2018.
  • Introduction of the Personal Income Tax rebate of 20% (capped at S$500) for YA 2017.
  • Liberalisation of the tax deduction for payments under Cost Sharing Agreements (CSAs) for Research and Development (R&D) projects.

2.  Amendment to introduce mandatory Transfer Pricing Documentation Requirement 

To limit compliance burden for smaller businesses, the mandatory TPD requirement will only apply to businesses with a turnover exceeding $10m and significantly related party transactions. The majority of companies will not be affected, as this change will only be relevant to fewer than 5% of all companies, many of which have already been maintaining TPD.

3. 25 Other non-budget changes including

  • Amendments relating to third-party voluntary contributions to the Medisave accounts of private sector employees and self-employed persons (SEPs).
  • Changes to enable the Minister for Finance to implement Singapore’s obligations under the Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting (BEPS).

The consultation exercise will end on 10 July 2017.

If you have any questions regarding the above, contact us at support@whm-consulting.com.

Singapore GST – GST Tax Changes on Budget 2017


It was announced in the Budget 2017 that with effect from 1 July 2017, the GST Tourist Refund Scheme (TRS) will be withdrawn for tourists who are departing by the international cruise from the cruise terminals.

Tourists who are departing by the international cruise from the cruise terminals and have made purchases before 1 July 2017 have until 31 August 2017 claim the refunds on such purchases.

The eTRS facilities at the cruise terminals will be removed after 31 Aug 2017.

What does this mean to the retailers?

Retailers who continue to issue the tickets on or after 1 July 2017 will be committing an offense under the GST (General) Regulations and can be penalized.

IRAS has updated the following e-Tax Guides on 22 Feb 2017 accordingly.

–   GST: Electronic Tourist Refund Scheme (eTRS)
–  GST: Guide for Visitors on Tourist Refund Scheme
  GST: Guide for Retailers participating in Tourist Refund Scheme

If you have any questions, contact us at support@whm-consulting.com.

Income Tax – Corporate Tax Changes from Budget 2017 (Non-Financial Services)


In Budget 2017 announced on 20 February 2017 by the Finance Minister Mr. Heng Swee Keat, the following corporate tax changes (non-financial services related) were announced:

(A)   Enhancing and Extending the Corporate Income Tax (“CIT”) Rebate

Policy Objective
To help companies cope with the economic uncertainty and continue restructuring,

Tax Changes

  • The CIT Rebate cap will be raised from $20,000 to $25,000 for YA 2017 (with the rebate rate unchanged at 50% of corporate tax payable)
  • The CIT Rebate will be extended for another year to YA 2018, at a reduced rate of 20% of tax payable and capped at $10,000.

(B)  Introducing the IP Development Incentive (IDI)

Policy Objective
To encourage the use of IPs arising from taxpayer’s R&D activities, IP income will be incentivised under a new IP Regime named the IP Development Incentive (IDI), which incorporates the BEPS-compliant modified nexus approach.

Tax Changes

  • Effective from 1 July 2017,  IP income will be removed from the scope of Pioneer-Services/Headquarters Incentive and the Development and Expansion Incentive-Services/Headquarters.
  • Existing incentive recipients will continue to have such IP income covered under their existing incentives awards till 30 Jun 2021.
  • The IDI will take effect on or after 1 Jul 2017, and will be administered by EDB.

EDB will release further details of the change by May 2017.
(C)   Withdrawing the Accelerated Depreciation Allowance for Energy Efficient Equipment and Technology (“ADA-EEET”) scheme

To streamline incentives promoting energy efficiency that have been introduced over the years, the ADA-EEET scheme introduced in 1996 will be withdrawn after 31 Dec 2017.  No ADA-EEET will be granted for equipment installed on or after 1 Jan 2018.
(D)  Allowing the Approved Building Project (“ABP”) scheme to lapse

The ABP scheme will be allowed to lapse after 31 Mar 2017.

(E)   Introducing a safe harbor rule for payments under Cost Sharing Agreements (“CSAs”) for R&D projects effective from 21 Feb 2017

Policy Objective
To ease compliance

Tax Changes
Taxpayers may opt to claim tax deduction under Section 14D for 75% of the payments made under a CSA incurred for qualifying R&D projects instead of subjecting the CSA payments to specific restriction rules which disallow certain categories of expenditure.

IRAS will release further details of the change by May 2017.

(F)  Extending the Withholding Tax (“WHT”) exemption on payments for international telecommunications submarine cable capacity under an Indefeasible Rights of Use (“IRUs”) agreement

In line with the Government’s thrust to grow the digital economy and continue to be a key hub for data flow, the WHT exemption on payments for international telecommunications submarine cable capacity under an IRU agreement will be extended till 31 Dec 2023.

(G)  Enhancing the Global Trader Programme (“GTP”) Effective from 21 Feb 2017

Policy Objective
To facilitate and encourage more trading activities in Singapore and to simplify the GTP

Tax Changes

  • The requirement for qualifying transactions to be carried out with qualifying counterparties will be removed. Consequently, concessionary tax rate will be granted to approved global trading companies on income derived from qualifying transactions with any counterparty
  • Concessionary tax rate will be granted to approved global trading companies on physical trading income derived from transactions in which the commodity is purchased for the purposes of consumption in Singapore or for the supply of fuel to aircraft or vessels within Singapore
  • Concessionary tax rate will be granted to approved global trading companies on physical trading income attributable to storage in Singapore or any activity carried out in Singapore which adds value to commodity by any physical alteration, addition or improvement (including refining, blending, processing or bulk-breaking)
  • The substantive requirement to qualify for the GTP will be increased.

IE Singapore will release further details of the change by May 2017.

(H)  Extending and refining the Aircraft Leasing Scheme (“ALS”)

Policy Objective
To continue encouraging the growth of the aircraft leasing sector in Singapore, the ALS will be extended and refined

Tax Changes

  • The ALS will be extended till 31 Dec 2022
  • The scope of qualifying ancillary activities for approved aircraft lessors will be updated to cover incidental income derived from the provision of finance in the acquisition of aircraft or aircraft engines by any lessee with effective from 21 Feb 2017.
  • The concessionary tax rate on income derived from the lease of aircraft or aircraft engines and qualifying ancillary activities will be streamlined from 5% and 10% to a single rate of 8%, applicable to new or renewal incentive awards approved on or after 1 April 2017
  • Automatic withholding tax exemption regime will be extended to qualifying payments made on qualifying loans entered into on or before 31 Dec 2022.

EDB will release further details of the change by May 2017.

(I) Extending and refining the Integrated Investment Allowance (“IIA”) scheme

The IIA scheme will be extended till 31 Dec 2022.

In addition, one of the requirements is liberalized in that the qualifying productive equipment may be used by the overseas company primarily (instead of solely) to manufacture products for the qualifying company under an approved project.

The above liberalization in the qualifying requirement will apply to expenditure incurred on a qualifying productive equipment for a project approved on or after 21 Feb 2017.

(J)   Allowing the International Arbitration Tax Incentive (“IArb”) to lapse

As part of the Government’s regular review of tax incentives, the IArb will be allowed to lapse after 30 Jun 2017.

(K)   Allowing the accelerated Writing-Down Allowances (“WDA”) for acquisition of Intellectual Property Rights (“IPRs”) for Media and Digital Entertainment (“MDE”) content scheme to lapse

As the scheme is assessed to be no longer relevant and to simplify our tax regime, the accelerated WDA for the MDE content scheme will be allowed to lapse, in respect of IPRs acquired for MDE content after the last day of the basis period for YA 2018.

MDE companies or partnerships may elect to claim WDA over a writing-down period of 5, 10 or 15 years on the capital expenditure incurred to acquire the qualifying IPRs under Section 19B or the ITA.

If you have any questions regarding the above, contact us at support@whm-consulting.com