Singapore Budget 2018
21 Mar, 2018
Budget 2018 – corporate taxation
The Budget for 2018 was presented to Parliament by the Finance Minister on 19 February 2018. Details of the Budget with regard to corporate taxation are summarized below.
1. Tax rebate
For the year of assessment (YA) 2018, the corporate income tax (CIT) rebate will be increased from 20% to 40% of tax payable and the cap will be raised from SGD10,000 to SGD15,000.
The CIT rebate will be extended for another year to YA2019, but at a reduced rate of 20% of tax payable with a cap of SGD 10,000.
2. Tax exemptions (from YA 2020 on)
The Budget provides for the following tax exemptions:
From YA 2020, the Tax Exemption Scheme for New Start-up Companies will be modified as follows:
• 75% exemption (previously full exemption) on the first SGD100,000 of normal chargeable income; and
• A further 50% exemption on the next SGD100,000 (previously on the next SGD200,000) of normal chargeable income.
From YA 2020, the Partial Tax Exemption for Companies (PTE) will be modified as follows:
• 75% tax exemption on the first SGD10,000 of normal chargeable income; and
• A further 50% tax exemption on the next SGD190,000 (previously on the next SGD290,000) of normal chargeable income.
3. Tax deductions
From YA 2019 to 2025, the tax deduction for qualifying R&D expenses conducted in Singapore will be modified as follows:
•100% tax deduction;
• Additional 150% (previously 50%) on:
1. 60% of fee paid; or
2. Actual staff costs (excluding directors' fees) and consumables incurred if the amount is more than 60% of fee paid.
The Budget 2018 also raised the tax deduction for qualifying IP registration costs, enhancing it from 100% to 200% on the first SGD100,000 of qualifying IP registration costs incurred for each YA from YA 2019 to YA 2025. The (now additional) 100% tax deduction will continue to be allowable on qualifying IP registration costs incurred in excess of SGD100,000 for each YA from YA 2019 to YA 2025.
The same deduction scheme will be granted also on the qualifying IP in-licensing costs incurred for each YA (from YA 2019 to YA 2025). Qualifying IP in-licensing costs include payments made to publicly funded research performers or other businesses, but exclude related party licensing payments or payments for IP where any other allowance was previously claimed.
For expenses incurred on or after YA 2019, the Double Tax Deduction for Internationalisation (“DTDi”) scheme has been enhanced, so that the SGD100,000 expenditure cap for claims without prior approval from IE Singapore or STB will be raised to SGD150,000 per YA. It will still be possible to apply to IE Singapore or STB on qualifying expenses exceeding SGD150,000 or on expenses incurred on other qualifying activities.
The 250% tax deduction currently granted for qualifying donations will be extended for donations made on or before 31 December 2021, for both individuals and businesses.
4.Good and Services Tax (GST)
Through the Budget 2018 presented to the Parliament, Finance Minister announced that GST will be increased between 2021 and 2025.
Moreover, GST will be introduced on imported services on or after 1 January 2020, with the following dynamics:
• B2B imported services will be taxed via a reverse charge mechanism. The reverse charge will apply only on businesses that: whether make exempt
supplies or do not make any taxable supplies. The reverse charge mechanism will require the local business customers to account for GST to IRAS on the imported services. The local business customer will be able to claim in turn 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 (including electronic marketplace operators offering a significant supply of digital services) to local consumers to register with IRAS for GST.
The Budget 2018 has unveiled new grant categories, that will be further explained and developed from March 2018 onwards.
• Enterprise Development Grant (EDG): Businesses can apply for funding support of up to 70% for qualifying expenses to upgrade capabilities, innovate and internationalise.
• Productivity Solutions Grant (PSG): Businesses can apply for funding support of up to 70% for qualifying expenses to access a wider range of productivity solutions for business upgrading.
• Partnerships for Capability Transformation (PACT) Scheme (ENHANCED): Companies can receive co-funding support of up to 70% to pursue a wide range of business development needs such as knowledge transfer, capability building, co-innovation and accessing overseas opportunities.
6. Other Taxes and Measures
• The wage credit scheme will be extended until 2020, with the government co-funding wage increases for Singapore employees up to a gross monthly wage of SGD 4,000. The scheme will provide 20% co-funding for 2018, 15% for 2019 and 10% for 2020.
• Carbon taxation of SGD 5 per tonne of greenhouse gas emission will be imposed on facilities producing 25,000 tonnes or more of greenhouse gas emissions a year from 2019 to 2023. The rate will be increased to between SGD 10 and SGD 15 per tonne by 2030.
• The top marginal buyer's stamp duty rate for residential properties will be increased from 3% to 4% on the portion in excess of SGD 1 million with effect from 20 February 2018.
• Tobacco excise duty will be increased by 10% for all tobacco products with effect from 19 February 2018.
• From April 1 2019, rules applying to Foreign Domestic Workers (FDW) will be modified as follows:
1. For the first FDW who is employed without levy concession, the monthly levy will be raised from $265 to $300.
2. For the second FDW who is employed without levy concession, the monthly levy will be raised to $450.
3. The qualifying age for levy concession under the aged person scheme will be raised from 65 to 67 years.
• The Investment Allowance (IA) Scheme has been extended to include qualifying investment (incurred between 20 February 2018 and 31 December 2023) in submarine cable systems landing in Singapore. Beyond all the other conditions of the scheme (that still apply) it is worth noting that:
1. The submarine cable systems can be used outside Singapore; and
2. The submarine cable systems, on which the IA has been granted, can be leased out under the indefeasible rights of use arrangements.
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