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General Tax Changes

Corporate tax rate

2010 Corporate tax rate remains the same as 2009 at 17%.

Start-up companies

With effect from YA 2010, the tax exemption scheme for new start-up companies will be extended to include companies limited by guarantee, subject to the same conditions.

Singapore Corporate Tax Rates for New Start Up

Tax Deduction for Angel Investors

This is a new incentive to encourage individuals who has the ability and/or means to invest in start-up businesses and support them as they grow.

Under this incentive, an approved angel investor needs to invest a minimum of S$100,000 into a start-up in a Year of Assessment, in order for him to enjoy tax deduction at 50% of his investment at the end of his second year of holding of the investment.

The deduction to an approved angel is capped at S$500,000 of investment into qualifying start-ups per Year of Assessment. The incentive is valid from 1 March 2010 to 31 March 2015.

This new incentive will be administered by SPRING Singapore.

Enhancements to Financial Sector Incentive (FSI)

With effect from 1 January 2011, the Qualifying Base for financial institutions, which are granted FSI Standard Tier awards, will be removed and instead the concessionary tax rate under the FSI-ST award will be changed in tandem from 10% to 12% as a revenue neutral change. The list of qualifying activities will also be updated. These changes will help to simplify the rules for the FSI scheme and to lower compliance costs for FIs.

Removal of Approved Start-up Fund Manager scheme

The Approved Start-up Fund Manager scheme provided funds set up by start-up fund managers in Singapore a one-year grace period, during which they did not have to satisfy conditions that other funds managed in Singapore had to meet for their funds to be exempt from tax while building a track record. The scheme expired on 17 February 2010.

The scheme will not be renewed, and No fund manager will be approved under the scheme after 17 February 2010.

Review of tax concession for offshore insurance business

Approved general, life and composite insurers currently eligible for a concessionary tax rate of 10% on qualifying income derived from offshore insurance business conducted from Singapore with no sunset clause or defined incentive period.

Starting 1 April 2010, Singapore government will introduce:

  1. Sunset clause of 5 years until 31 March 2010,
  2. The incentive will be awarded for a period of 10 years,
  3. New applicants for the scheme will have to fulfill the headcount criterion at the point of application.

Reduced withholding tax rate for non-resident public entertainers

Non-resident public entertainers (musicians, media artistes, athletes, and all others that perform similar entertainment vocations) will have the withholding tax reduced to 10% during the period from 22 Feb 2010 to 31 Mar 2015.

Foreign Worker Levy increase

Foreign worker levies will be raised gradually over the next three years. Starting July 1, levy rates for most Work Permit holders will increase by between S$10 and S$30 per month.

Levy for S-Pass holders will be raised from the current rate of S$50 per month to a minimum of S$100 per month.

Incentives

Productivity and Innovation Credit (PIC)

Productivity and Innovation Credit is a broad-based tax concession scheme created based on ESC’s recommendation to chart a new economic roadmap for Singapore.

PIC offers tax deductions to businesses that are willing to invest to promote innovation and productivity. Under the scheme, businesses can claim a tax deduction for 250% of qualifying expenditure incurred, subject to a cap of S$300,000 for each of the following activities:

  1. Research and development done in Singapore
  2. Design work done in Singapore
  3. Acquisition of intellectual property (IP)
  4. Registration of IP Time of Supply Rules
  5. Automation through technology or software
  6. Training of employees

Extension of Development Expansion Incentive (DEI) to International Legal Services

The existing incentive will be extended to cover income derived from the provision of international legal services to encourage law practices to do more international legal work.  The incentive is valid from 1 April 2010 to 31 March 2015 (both dates inclusive).

The Ministry of Law and EDB will release details of the new incentive in March 2010.

Extension of Maritime Finance Incentive (MFI)

The expiry date of the MFI will be extended from 28 February 2011 to 31 March 2016.  Taxpayers applying for the MFI between 1 March 2011 to 31 March 2016 (both dates inclusive) will be given approval for a period up to five years.

Incentive for ship brokers and Forward Freight Agreement (FFA) traders

The incentive is introduced to grant a company solely carrying out ship broking and/ or FFA trading in Singapore, a concessionary tax rate of 10%, subject to conditions.

Interested taxpayers can apply to MPA for this incentive from 1 April 2010 to 31 March 2015 (both dates inclusive).
Incentive recipients will enjoy incentive awards of five years.

Course Fees Relief

The Course Fees Relief will be increased from S$3,500 to S$5,500 with effect from Year of Assessment 2011. Course Fees Relief is an incentive for working individuals who are seeking to upgrade their skills through professional development. The courses, seminar or conference has to contribute or enhance current profession or relevant to a career change. Course Fees Relief is claimable after full completion of the selected course, seminar or conference.

Enhancement of tax deduction on donations

Tax deduction of 250% will be extended for another year for donations made during the period from 1 January 2010 to 31 December 2010. All existing rules to qualify for the enhanced tax deduction will remain.

Business

Merger & Acquisition (M&A) Allowance for qualifying M&A deals

The M&A allowance will be granted to qualifying M&As executed from 1 April 2010 to 31 March 2015 (both dates inclusive).

The quantum of the allowance is 5% of the value of the acquisition, subject to a cap of S$5 million of allowance granted for all qualifying M&A deals executed per Year of Assessment. The allowance will be written down equally over 5 years. IRAS will release details of the M&A allowance scheme by June 2010.

Stamp duty on the transfer of unlisted shares for qualifying M&A deals will also be remitted.

Phase out of Industrial Building Allowance (IBA)

IBA will be phased out with immediate effect. Qualifying capital expenditure incurred by businesses on or before 22 February 2010 on the construction or purchase of industrial buildings or structures will continue to qualify for IBA, subject to existing IBA rules.

With the phase-out, IBA will not be allowed on capital expenditures on the construction or purchase of industrial buildings or structures which are incurred after 22 February 2010 except in specified scenarios.

IRAS will release more details of the phasing out of IBA in April 2010.

Land Intensification Allowance (LIA) Incentive

Businesses may claim the LIA on qualifying capital expenditures incurred for the construction of a qualifying building or structure. The qualifying expenditure can be written down over 15 years.

The commencement date of the incentive is 1 July 2010. The incentive will be in place for 5 years and will be administered by the Economic Development Board.

Details of the scheme will be released by the Jurong Town Corporation/EDB by June 2010.

Review of existing tax incentives for futures members of Singapore Exchange (SGX) and members of Singapore

Commodity Exchange Limited (SICOM)

The existing tax incentives - S43D & 43K - for futures members of SGX and members of SICOM will be discontinued on 31 December 2010. From 1 January 2011, new incentive applicants which engage in qualifying transactions that were incentivised under these two tax incentives will have to apply for Financial Sector Incentive (FSI) scheme, subject to conditions under the FSI at the point of application.

Extension of and enhancement to listed Real Estate Investment Trusts (REIT) concessions

The existing income tax, stamp duty and GST concessions for listed REITs, which expired on 17 February 2010, will be renewed from 18 February 2010 to 31 March 2015 (both dates inclusive).

The Foreign-Sourced Income Exemption income tax concession for listed REITs will subject to a sunset clause of five years till 31 March 2015.

Inclusion of ship management fees under Section 13A of Income Tax Act (ITA) and Approved International Shipping Enterprise (AIS) scheme

Ship management fees derived on or after 22 February 2010 from the rendering of ship management services to related qualifying Special Purpose Vehicles (SPVs) will be treated as qualifying income to be exempt from tax under Section 13A of the ITA and the AIS scheme, subject to conditions.

Renewal and enhancement of Investment Allowance (IA) scheme for aircraft rotables

The IA scheme for aircraft rotables will be renewed for another 5 years from 1 April 2010 to 31 March 2015. The scheme is enhanced by removing the “non-swapping condition”.

EDB will release the details by March 2010.

GST

Time of Supply Rules

As of 1 January 2011, the general time of supply rules will be simplified by removing:

  1. the basic tax point - when goods are made available and when services are performed; and
  2. the 14-day rule.

Import GST Deferment Scheme (IGDS)

Effective 1 October 2010, approved GST-registered businesses under IGDS can defer their import GST payments until their monthly GST return due dates.

Changes to the GST treatment of ship and ship related supplies

Starting July 2010, The following GST changes will take effect in:

  • Expanding the definition of “ship” in Section 21(4)(a);
  • Expanding the scope of zero-rating relief to include any goods to be used /installed on board any qualifying ship;
  • Expanding the scope of zero-rating relief on international transport of passengers/goods.

Changes to the GST treatment of aircraft related supplies

With effect from 1 July 2010, zero-rating relief will be expanded to include the supply of stores and merchandise for resale on board any qualifying aircraft.

GST concession for REITS and Qualifying Registered Business Trusts Listed in Singapore

The concession for REITs and Qualifying Registered business trusts listed in Singapore, which expired on 17 February 2010, will be renewed from 18 February 2010 to 31 March 2015 (both dates inclusive).

Property

Review of existing property tax rebate for owner-occupied residential properties

For property tax payable from January 2011, the 1994 GST Rebate will be replaced by a progressive property tax regime for owner-occupied residential properties:

  • 0% for the first S$6000 of Annual Value (AV);
  • 4% for the next S$59,000 of AV;
  • 6% for the balance of AV in excess of S$65,000.

Non-owner-occupied residential properties and other properties will continue to be subject to 10% property tax.

Personal Tax Changes

Spouse Relief

Effective YA 2010,  Spouse Relief will replace Wife Relief. With this change, male and female resident taxpayers will be able to claim Spouse Relief of S$2,000 if the wife or husband does not have annual income exceeding S$4,000.

Handicapped Spouse Relief

Handicapped Spouse Relief will be removed as of YA 2010.

Parent Relief

With effect from YA2010, the Parent Relief will be increased to S$7,000 if the dependant lives with the taxpayer and S$4,500 if the dependant does not live with the taxpayer. The income of the dependant earned in the preceding year must not exceed S$4,000.

Handicapped Parent Relief

Effective YA2010, the Handicapped Parent Relief will be increased to S$11,000 if the handicapped dependant lives with the taxpayer and S$8,000 if the handicapped dependant does not live with the taxpayer. The S$2,000 income threshold for the Handicapped Parent Relief has been removed with effect from YA2010.

Qualifying Child Relief (QCR)

With effect from YA2010, taxpayers can claim QCR if the dependant's income earned in the preceding year did not exceed S$4,000. Working mothers who satisfy the conditions for QCR/HCR may also claim for the Working Mother's Child Relief (WMCR).

Handicapped Child Relief (HCR)

Handicapped Brother/Sister Relief

The S$2,000 income threshold for HCR and Handicapped Brother/Sister Relief has been removed with effect from YA2010.

CPF Cash Top-Up Relief

The current S$2,000 income threshold for the CPF Cash Top-Up Relief in respect of spouse and sibling will be raised from S$2,000 to S$4,000 with effect from YA2011.

There will be no income threshold condition for CPF Cash Top-Up Relief in respect of handicapped spouse and handicapped sibling with effect from YA2011.

The Ministry of Manpower (MOM)/CPF Board will release further details in March 2010.