Thursday, 23 February, 2017

Singapore Budget 2017: Key Highlights

Finance Minister Heng Swee Keat delivered the Budget Statement on 20 February 2017.  The Budget rallies the nation to move forward together and thrive in an uncertain and rapidly changing world.  It was no surprise that the Budget 2017 put an emphasis on digitalisation, innovation, and internationalisation. Consistent to these objectives are enhancements offered on various initiatives previously introduced as Singapore adapts to global changes. Budget 2017 aimed to develop enterprises and individuals’ capabilities and to build partnerships across the economy, with the government playing an enabling role and drawing different stakeholders together to align efforts.

Budget 2017 recognised the need to promote sustainable development;  worth noting from the speech is the need to meet the rising domestic demand whilst ensuring that our future generations remain on a sustainable fiscal footing.  A decision has to be made on broadening the sources of government revenues.  

Singapore reiterates its commitment to the Base Erosion and Profit Shifting (“BEPS”) project. The government is in the consultation stage with businesses on refining schemes and implementing relevant standards.  Noting that the BEPS project is affecting the global tax systems, the government is studying the taxation of digital transactions and cross-border trade to ensure a level playing field between local and foreign businesses. 

Key tax measures set out in the Singapore Budget 2017

For individuals

Following the major changes seen in the personal income tax regime on reliefs, concessions, and tax rates in the past Budgets, it is anticipated that there are limited changes for this year other than:

  • Granting of Personal Income Tax Rebate of 20% on tax payable with a cap of $500. This is part of the government’s measures to support families by reducing the tax bills for taxpayers in the middle income bracket
  • Withdrawing the GST Tourist Refund Scheme (TRS) due to low transaction volume.  This should have negligible impact on the Singapore Cruise Industry

For businesses

  • Enhancing the Corporate Income Tax Rebate to increase the cap from $20,000 to $25,000 for the Year of Assessment (“YA”) 2017 and extending it for another year to YA 2018, at a reduced rate of 20% of tax payable and capped at $10,000. Small and medium enterprises will benefit from this near-term support while recovering from the current economic slowdown 
  • A new Intellectual Property ("IP") regime named the IP Development Incentive ("IDI") will be introduced.  IP Income will be incentivised under the IDI. Accordingly, such income will be removed from the scope of Pioneer-Services/Headquarters Incentive and the Development and Expansion Incentive-Services/Headquarters for new incentive awards approved on or after 1 July 2017. Existing incentive recipients will continue to have such income covered under their existing incentives awards till 30 June 2021. The IDI will take effect on or after 1 July 2017, and will be administered by the Singapore Economic Development Board. This is to encourage the exploitation of IP arising from R&D activities of the taxpayer and the scheme will follow the modified nexus approach as proposed under BEPS Action Plan 5
  • A safe harbour rule for payments under Cost Sharing Agreements ("CSAs") for R&D projects will be introduced 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 providing the breakdown of the expenditure covered by the CSA payments which is subject to specific restriction rules. The change will apply to CSA payments made on or after 21 February 2017
  • Refining the Finance and Treasury Centre (“FTC”) Scheme. The aim is to streamline the qualifying counterparties for certain transactions of approved FTC. This is to help ease the compliance burden of approved FTCs. The change will apply to new or renewal incentive awards approved on or after 21 February 2017
  • Enhancing the Global Trader Programme ("GTP") to facilitate and encourage more trading activities in Singapore and to simplify the programme. GTP enhancement are as follows:

(a) The requirement for qualifying transactions to be carried out with qualifying counterparties will be removed. Consequently, concessionary tax rates will be granted to approved global trading companies on income derived from qualifying transactions with any counterpart

(b) Concessionary tax rates 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 Singapor

(c) Concessionary tax rates 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)

(d) The substantive requirement to qualify for the GTP will be increased

The enhancements in (a) to (c) will apply to qualifying income derived on or after 21 February 2017 by approved global trading companies from qualifying transactions. The enhancement in (d) will apply to new or renewal incentive awards approved on or after 21 February 2017. Further details will be released by May 2017.

  • Introducing carbon tax on greenhouse gas emissions in 2019 at a rate of between $10 and $20 per tonne of greenhouse gas emissions. The tax will generally be applied to power stations and other large direct emitters of greenhouse gases, not electricity users. This is part of Singapore’s efforts to fight climate change and maintain a high-qualify living environment  
  • The following schemes have been extended:-

Tax Scheme

Current

New (extended)

Withholding tax exemption on payments for international telecommunications submarine cable capacity under an Indefeasible Rights of Use (IRUs) agreement

27 Feb 2018

31 Dec 2023

Withholding tax exemption on payments made to non – resident non – individuals for structured products offered by Financial Institutions

31 Mar 2017

31 Mar 2021

Tax Incentive Schemes for Project and Infrastructure Finance (except for stamp duty remission which will lapse after 31 Mar 2017)

31 Mar 2017

31 Dec 2022

Integrated Investment Allowance (IIA) 
(extended with refinement)

28 Feb 2017

31 Dec 2022

Aircraft Leasing Scheme (ALS) 
(extended with refinement)

31 Mar 2017

31 Dec 2022

 

  • The following schemes have been allowed to lapse or withdrawn:-

Tax Schemes

 

Last effective date

 

Approved Building Project (ABP)

31 Mar 2017

International Arbitration Tax Incentive (IArb)

30 Jun 2017

Accelerated Writing-Down Allowances (WDA) for acquisition of Intellectual Property Rights (IPRs) for Media and Digital Entertainment (MDE) content

Last day of the basis period for YA 2018

 

Tax Deduction for Computer Donation

20 Feb 2017

Accelerated Depreciation Allowance for Energy Efficient Equipment and Technology (ADA-EEET)

31 Dec 2017

 

The views and information expressed in this article is not exhaustive and do not constitute legal, financial, or tax advice. To discuss how your business might be affected by Singapore’s Budget 2017, please contact Ming Pei Ong. 

For access to the full Singapore Budget 2017 speech, please click here.

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