Singapore Budget 2015
Singapore Budget 2015: Tax Changes for Businesses
Singapore’s Finance Minister and Deputy Prime Minister, Tharman Shanmugaratnam, presented the country’s Budget for the year 2015. Dubbed as the Jubilee budget by some of the financial commentators, it has committed Singapore to some of the radical changes.
On the public welfare side, it has increased the aid to weaker sections of the society in the form of GST vouchers and waving of exam fees for the students and etc. It has also fiddled with the interest rates for the special, retirement or Medisave accounts of the older workers. In an effort to provide these individual with a secure future, it has also raised the employers’ CPF contribution.
On the other hand, it has done something that the Singaporeans have not witnessed for a long time. It has raised the personal income tax for the top 5 percent taxpayers. From the YA 2017, they will have to pay as much as 22% of personal income tax.
| Name of Tax | Changed Tax Treatment | |
| For All Businesses | ||
| 1) | Corporate Income Tax (CIT) Rebate | Assuming, the businesses will continue to face cost pressures the 30% rebate will be continued for two more years (2016 -2017 YA), but with a reduced cap of $20,000 for a company in a year. |
| 2) | Productivity and Innovation Credit (PIC) Bonus |
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| 3) | The Mergers and Acquisition (M&A) Scheme | To help SMES grow and flourish through strategic acquisition the current scheme will be extended till 30st March 2020 with following changes Revised Tax Treatment under M&A Scheme
Revised Shareholding Eligibility Tiers It is necessary for the acquiring company to acquire general shares of the targeted company either directly or indirectly eventually resulting in acquiring holding of the company.
The current criteria of 75% shareholding eligibility will be removed. Acquisition carried out by acquiring more than 75% ordinary shareholdings provided shareholding of acquiring is more than 50% but less than 75% will not qualify under M&A Scheme. 12 Month Look-Back Period For simplifying the scheme revised treatment removes the 12 month look-back period The changes are mandated to take effect from 1 April 2015 for all the qualified acquisition **IRAS is set to release additional information by May 2015 |
| 4) | Double Tax Deductions (DTD) for Internationalization Scheme | The amount of qualifying manpower expenses to be allowed under DTD scheme will be capped at $1 million for each approved entity in a financial year subjected to conditions. International Enterprise Singapore has sole authority to approve or deny the DTD benefits offered to businesses applying for qualification of manpower expenses The prescribed change is applicable for qualifying manpower expenses incurred from 1 July 2015 to 31 March 2020 **IE is expected to release additional details by May 2015 |
| 5) | The International Growth Scheme | To support Singapore companies in their internationalization efforts government is introducing new International Growth Scheme. Companies qualified under IGS will enjoy 10% concession in tax rates for not more than five years on the incremental income they will be generating from their qualifying activities. The new scheme is supposed to be administered by IE 1 Apr 2015 to 31 March 2020 is the provided window for getting approval under this scheme. **IE is expected to release additional details by May 2015 |
| 6) | The Angels Investors Tax Deduction (AITD) Scheme | The current scheme will be extended till 31 March 2020 for encouraging angle investors to invest in startup companies and help them to flourish. New qualified investment incurred from 24 February 2014 to 31 March 2020 and cofounded by government under SEEDS or BAS are also eligible to apply for AITD. All the current treatment will remain the same. |
| 7) | Tax Refining for Venture Capital Funds and Venture Capital Fund Management | The approved venture capital fund management companies managing Section 13H funds on their specified income will be accorded 5% concession in tax rate. 1 Apr 2015 to 31 March 2020 will be the approval window time. Introduction of this new incentive will result in companies withdrawing the Pioneer Service incentive for venture capital management from 1 Apr 2015, provided, that the venture capital is no longer a pioneering activity in Singapore. Pioneering certificates already issued, will not be affected under this change. To ensure that the relevance of this scheme is periodically reviewed a review date of 31 March 2020 will be legislated for section 13H. |
| 8) | The Investment Allowance Energy Efficiency (IA-EE)Scheme | The combined two schemes called Investment Allowance – Energy Efficiency scheme will come in to effect from 1 March 2015, and it will be extended to 31 March 2021. EDB has sole authority to administer the scheme **EDB is set to release further details by March 2015 |
| 9) | The Development and Expansion Incentive for International Legal Services (DEI-Legal) Scheme` | The DEI-Legal scheme will be extended till 31 March 2020. All other conditions offered under the scheme will remain the same. |
| 10) | The Approved Foreign Loan (AFL) incentive | To ensure the relevance of this scheme is periodically reviewed a review date of 31 December 2023 will be legislated. From 24 February 2015, the minimum loan quantum under AFL incentive will be increased to $20 million. The ministry for Trade and Industry is authorized to approve an AFL application for a foreign loan lower than minimum legislated loan quantum of $20 million. |
| 11) | The Approved Royalties Incentive (ARI) | To ensure the relevance of this scheme is periodically reviewed a review date of 31 December 2023 will be legislated.
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| 12) | The Writing Down Allowance (WDA) Scheme on capital expenditure incurred on the acquisition of an indefeasible right to use of any international telecommunications submarine cable system under the Section 19D of ITA | To ensure the relevance of this scheme is periodically reviewed a review date of 31 December 2023 will be legislated. |
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For Financial Sector | ||
| 13) | The Tax Deductions for Collective Impairment Provisions made under the Monetary Authority of Singapore (MAS) notices | The Tax concession will be extended till YA 2019 to YA 2020 as per the case. All other details, terms and conditions of the scheme will remain the same. |
| 14) | The Enhanced-Tier Fund Tax Incentive Scheme | The existing concession for Master Feeder Fund Structure will be enhanced to apply for SPVs held buy master fund (subject to conditions). This enhancement enables master and feeder funds along with SPVs in master-feeder fund structure apply for the scheme and collectively meet the changing economic conditions. The changes are entitled to take place for all the applications made from 1 April 2015. **MAS is prepared to release further details by May 2015 |
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For Insurance Sector | ||
| 15) | The Tax Incentive Scheme For Insurance Businesses | The Scheme will be extended till 31 March 2020 as Insurance Business Development Incentive (IBDI) maintaining the concessionary tax rate at 10%. With effect from 1 April 2015, a renewal framework will be introduced for encouraging existing parties enjoying benefits of this scheme to continue expanding their operations in Singapore. **MAS is prepared to release further details by May 2015 |
| 16) | The Tax Concessions for listed Real Estate Investment Trusts (REITs) | The package of income tax concession offered to REITs in Singapore will be extended up to 31 March 2020. This extension enables tax exemption on qualified foreign sourced income as long as overseas property acquired by REIT or it’s wholly owned Singapore tax resident subsidiary company on or before 31st March 2020. The stamp duty concession under this scheme will be allowed to lapse after 31 March 2015. All other conditions will remain the same. **MAS is prepared to release further details by May 2015 |
| 17) | The GST remission for listed REITs and listed Registered Business Trusts (RBT), in the infrastructure, ship leasing and aircraft leasing sectors | The existing GST remission will be extended till 31 March 2020. Apart from facilitating fundraising qualified under current GST remission, they will be allowed to claim GST on business expenses incurred to setup SPVs. Provided that these SPVs are solely used to raise funds for REITs, RBTs, and does not hold qualifying asset of the REITs and RBTs either directly or indirectly. SUCH REITs and RBTs are also allowed to claim GST on the Business Expenses of Such SPVs. The enhancement of GST remission will take effect for GST incurred from 1 April 2015 to 31 March 2020. **IRAS is prepared to release further details by March 2015 |
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For Maritime Sector | ||
| 18) | The Maritime Sector Incentive (MSI) |
From 24 Feb 2015, the enhancement to the existing and new award recipients MSI will take effect. The Approval Window for awarding MSI-ASI for qualifying entry players, MSI-ML (Ship), MSI-ML (Container) and MSI-SSS will be extended till 31 May 2021. Apart from that, the automatic withholding tax exemption will also be extended on qualifying payments made on qualifying loans received on or before 31 May 2021. **The Maritime Port Authority of Singapore (MPA) will release further guidelines until May 2015. |
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Rationalizing the Tax System in Corporate Sector | ||
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| The Concessionary Tax Rate on Income Derived from Offshore Leasing on Machinery and Plant Under Section 43I of the ITA | Introduction of targeted tax incentive for leasing aircrafts, aircraft engines, ships and sea containers diminishes the relevance of Section 43I. As a process to simplify Singaporean tax regime, current scheme will be withdrawn from I January 2016. Any income generated after 1 January 2016, by the leasing company after offshore leasing of above-mentioned plants or machineries will be subjected to tax at the prevailing corporate tax rates. |
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| Approved Headquarter Incentive under Section 43E of ITA | From 1 October 2015, the existing the subjected tax incentive scheme will no longer exist. Subjected to meeting prescribed conditions, companies involved in carrying out headquarter activities on services in Singapore for the parent or network companies might qualify for the Development and Expansion Incentive. |
Singapore Budget 2015: Tax Changes for Individuals
| Name of Tax | Changed Tax Treatment | |||||||||||||||||||||||||||||||||||||||||||||||||
| Personal Income Tax | ||||||||||||||||||||||||||||||||||||||||||||||||||
| 1) | The Personal Income Tax rate for Resident Individuals
| The new structure of changes personal income tax rate is tabulated below
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| 2) | Personal Income Tax Rebates for Resident Individuals | A Personal Income Tax Rebate of 50% capped at $1,000 per taxpayer is granted for all resident individual taxpayers for the YA 2015. | ||||||||||||||||||||||||||||||||||||||||||||||||
| 3) | Claim for Rental Expenses | Individuals are allowed to claim rental expenses as per 15% on the gross rental income in lieu of the actual amount of deductible expenses. The individual can continue to deduct against his/her qualifying rental income any deductible interest expense. These tax changes do not apply to the rental income derived
The scheduled changes are expected to take effect from YA 2016. **IRAS is set to release further details by May 2015 | ||||||||||||||||||||||||||||||||||||||||||||||||
| 4) | Tax Exemption for Non-Tax-Resident mediators | For supporting, motivating and promoting commercial mediation activity in Singapore, income derived by a non-tax-resident mediator in Singapore from 1 April 2015 to March 2020 is exempted from all kind of taxes. **The Ministry of Law is gearing up to provide additional details regarding this change on their official website by March 2015 | ||||||||||||||||||||||||||||||||||||||||||||||||
| Tax Exemption for Non-Tax-Resident Arbitrators | To ensure that the relevance of the scheme is viewed periodically a review date of 31 March 2020 is legislated for the tax exemption of non-tax-resident arbitrators | |||||||||||||||||||||||||||||||||||||||||||||||||
Singapore Budget 2015: Tax Changes for Individuals and Businesses
| Name of Tax | Changed Tax Treatment | |
| Motivating Philanthropy | ||
| 1) | The 250% tax deductions on Donations | As a part of SG50 Jubilee Celebration, Singapore is all set to motivate the culture of “Giving”. All the qualifying donations made to IPCs and other qualifying recipients in 2015, will be liable for a tax deduction of up to 300%. The same tax deduction will revert to the current 250% for qualifying donations made to IPCs and other qualifying recipients from 1 January 2016 to 31 December 2018. |
| Rationalizing the Current Personal Tax System | ||
| 2) | The Tax Concession on Royalties and Other Payments from Approved Intellectual Property or Innovation Under Section 10(16) of the ITA | Having analyzed the current tax concession scheme for income derived on royalties or from intellectual or innovation properties is no longer relevant, the section 10 (16) concession will be withdrawn from Year of Assessment 2017. |
Singapore Budget 2015: Other Tax Changes
| Name of Tax | Changed Tax Treatment | |
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Goods and Service Tax | ||
| Goods and Service Tax (GST) | With a motive to ease GST compliance, the claiming of pre-registered GST will be simplified. This allows newly GST registered businesses to claim pre-registration in full on the following goods and services acquired within six months before the GST registration date of the business
Thus, businesses do not have to pay the pre-registration GST on the above-mentioned goods and services. Although these goods and services have already been used for making supplies straddling GST registration or the goods have already been consumed prior to GST registration. Provided that, the use of these goods and services after GST registration if for making taxable supplies and not for exempt supplies. Existing pre-registration GST rules will apply, for other goods and services acquired before GST registration, including those acquired six months prior to formal GST registration date. The changes are due to take effect for all the businesses that will be GST registered on or after 1 July 2015. **IRAS is all set to release further details on simplifying pre-registration GST claim rules for GST registered businesses by June 2015. | |
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Vehicle Tax | ||||||||||||||||||||||||||||||||||||||||||
| The Carbon Emission-Based Vehicle Scheme (CEVS) | Enhancing support to the Green Cars, the CEVS is extended by additional two years. Now the revised CEVS is applicable from 1 July 2015 to 30 June 2017 with two major refinements To update the surcharge and rebate bands for reflecting improvements in vehicle engine technology and To increase the highest rebate and surcharge quantum from $20,000 to $30,000
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| Petrol Duty Rates | The initial petrol duty rates introduced in 2003 will be updated
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| Road Tax Rebate for Petrol Vehicles | In order to ease the impact of revised petrol duty a one year road tax rebate will be provided to the petrol vehicles 20% for cars 60% for Motorcycles 100% for commercial vehicles The rebate is entitled to take effect from 1 August 2015 to 31 July 2016 | |||||||||||||||||||||||||||||||||||||||||
The budget 2015 has put forth a daunting challenge to the business leaders of Singapore. Singapore’s political leaders want them to spread their businesses out of Singapore and conquer the world. Singapore has always supported its Small and Medium Enterprises sector. Now, it is as if the authorities have high expectations from these businesses. They don’t want them only to be content with the survival and local market penetration, but spread their wings and aim for the distant shores. To overcome the headwinds of businesses in Singapore, you can take advice from professional services like SBS Consulting.
