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
To help companies cope with the economic uncertainty and continue restructuring,
- 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)
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.
- 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promoting energy efficiency that have been introduced over the years, the ADA-EEET scheme introduced in 1996 will be withdrawn after 31 Dec 2017.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
To ease compliance
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
To facilitate and encourage more trading activities in Singapore and to simplify the GTP
- 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”)
To continue encouraging the growth of the aircraft leasing sector in Singapore, the ALS will be extended and refined
- 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.
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