Category Archives: Ministry of Finance

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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Key Changes Arising from Income Tax (Amendment) Act 2013


The Income Tax (Amendment) Act 2013 was passed by the Parliament on 21 October 2013 and assented to by the President on 5 November 2013.  Some of the key amendments are highlighted as follows:

2014 Budget Statement to be delivered on 21 February 2014


It was reported on the Ministry of Finance’s website on 5 January 2014 that our Deputy Prime Minister and Minister for Finance, Mr Tharman Shanmugaratnam will deliver the FY2014 Budget Statement in Parliament on 21 February 2014.

The “live” webcast of the delivery of the Budget Statement will be available at the Singapore Budget website and the Budget Statement will be uploaded on the Singapore Budget website after the speech has been delivered.

In this year, the public can also access information on the Budget on the Budget 2014 Mobile App, which will be released in February. This mobile app allows subscribers to listen and view the Budget Speech ‘live’, while on the move.  The app app will also feature ‘live’ streaming of the Budget Speech as it is being delivered on 21 February 2014, access to press releases and real-time announcements, video clips, the Budget Quiz and an email subscription for the full Budget Statement.  This is the first time in the history of Singapore’s annual Budget Statement.

4.         Those who wish to receive the Budget Statement via email after it has been delivered can visit the Singapore Budget website to subscribe to the Budget Statement mailing list. This free service will be available for subscription from 21 January 2014 till 20 February 2014.

Watch the Pre-Budget 2014 Conversation with Mrs. Josephine Teo, Senior Minister of State, Ministry of Finance and Ministry of Transport below:

If you have any questions regarding the above, please contact me at jack.wong@whm-consulting.com.

Be Well!
Jack:)