Singapore Budget 2010 – Overview of Tax Changes
The following tax changes were announced by Minister for Finance, Mr. Tharman Shanmugaratnam in his Budget Speech for the Financial Year 2010 which was delivered in Parliament on Monday, 22 February 2010.
|Spouse Relief||With effect from Year of Assessment 2010, Wife Relief will be replaced by Spouse Relief. With this change, male and female resident taxpayers will be able to claim Spouse Relief of $2,000 if the wife or husband does not have annual income exceeding $4,000.|
|Handicapped Spouse Relief||The $2,000 income threshold for the Handicapped Spouse Relief will be removed with effect from Year of Assessment 2010.|
|Parent Relief||With effect from Year of Assessment 2010, the Parent Relief will be increased to $7,000 if the dependant lives with the taxpayer and $4,500 if the dependant does not live with the taxpayer. The income of the dependant earned in the preceding year must not exceed $4,000.|
|Handicapped Parent Relief||With effect from Year of Assessment 2010, the Handicapped Parent Relief will be increased to $11,000 if the handicapped dependant lives with the taxpayer and $8,000 if the handicapped dependant does not live with the taxpayer. The $2,000 income threshold for the Handicapped Parent Relief has been removed with effect from Year of Assessment 2010.|
|Qualifying Child Relief (QCR)||With effect from Year of Assessment 2010, taxpayers can claim the QCR if the dependant’s income earned in the preceding year did not exceed $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)||The $2,000 income threshold for HCR and Handicapped Brother/Sister Relief has been removed with effect from Year of Assessment 2010.|
|Handicapped Brother/Sister Relief||No changes|
|CPF Cash Top-Up Relief||The current $2,000 income threshold for the CPF Cash Top-Up Relief in respect of spouse and sibling will be raised from $2,000 to $4,000 with effect from Year of Assessment 2011.There will be no income threshold condition for CPF Cash Top-Up Relief in respect of handicapped spouse and handicapped sibling with effect from Year of Assessment 2011.
The Ministry of Manpower (MOM)/CPF Board will release further details in March 2010.
|Course Fees Relief||The Course Fees Relief will be increased from $3,500 to $5,500 with effect from Year of Assessment 2011.|
|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 the same.|
|Reduced withholding tax rate for non-resident public entertainers||Withholding tax rate for non-resident public entertainers will be reduced from 15% to 10% if the income for the services rendered is due and payable to the non-resident public entertainer during the period from 22 February 2010 to 31 March 2015.|
|Tax Deduction for Angel Investors||Under this incentive, an approved angel investor needs to invest a minimum of $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 $500,000 of investment into qualifying start-ups per Year of Assessment. The incentive is valid from 1 March 2010 to 31 March 2015 (both dates inclusive) and applies to qualifying investments in qualifying start-ups made during this period.SPRING Singapore which administers this incentive will release the details of the scheme by June 2010.|
|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:(i) 0% for the first $6000 of Annual Value (AV);
(ii) 4% for the next $59,000 of AV;
(iii) 6% for the balance of AV in excess of $65,000.
Non-owner-occupied residential properties and other properties will continue to be subject to 10% property tax.
|Productivity and Innovation Credit (“The Credit”)||The Productivity and Innovation Credit is introduced to provide significant tax deductions for investments in a range of six activities along with the innovation value chain – R&D done in Singapore; the registration of Intellectual Property (“IP”); acquisition of IP; investments in design done in Singapore; spending on equipment or software aimed at automating processes; and costs of training employees so as to upgrade skills and capabilities.It will be available for all businesses from Years of Assessment 2011 to 2015.
Businesses which have at least 3 local employees (Singapore Citizens or PRs with CPF contributions) may convert the tax deductions or allowances arising from their qualifying expenditure on the six types of activities under the Credit into a non-taxable cash grant.
|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 $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 (EDB).
Details of the scheme will be released by the Jurong Town Corporation (JTC)/ EDB by June 2010.
|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.|
|Enhancements to Financial Sector Incentive (“FSI”)||With effect from 1 January 2011, the Qualifying Base will be removed and instead the concessionary tax rate under the FSI Standard Tier award will be changed in tandem from 10% to 12% as a revenue neutral change. The list of qualifying activities will also be updated.MAS will release details of the changes by April 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 (i.e. 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.Further details will be released by MAS by April 2010.|
|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 (FSIE) income tax concession for listed REITs will be subject to a sunset clause of five years till 31 March 2015.|
|Removal of Approved Start-up Fund Manager Scheme||The scheme has expired on 17 February 2010. Funds managed by fund managers approved on or before 17 February 2010 under the Approved Start-Up Fund Manager scheme will continue to be allowed the 12-month grace period from the date of set up of the fund, even if such grace period stretches beyond the expiry of the scheme on 17 February 2010.|
|Review of tax concession for offshore insurance business||The following changes to the tax incentive will be introduced with effect from 1 April 2010:- The incentive will be subject to a sunset clause of 5 years till 31 March 2015;
– The incentive will be awarded to an approved recipient for a period of 10 years; and
– New headcount requirement will be imposed for incentive recipients (except for captive insurers).
Further details will be released by MAS by April 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.
MPA will release the implementation details by March 2010.
|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.MPA will release the implementation details by March 2010.|
|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.|
|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.|
Goods & Services Tax (GST)
|Time of Supply Rules||With effect from 1 January 2011, the general time of supply rules will be simplified by removing:(i) the basic tax point (i.e. when goods are made available and when services are performed); and
(ii) the 14-day rule.
|Import GST Deferment Scheme (IGDS)||With effect from 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 The following GST changes will take effect from 1 July 2010:
(i) Expanding the definition of “ship” in Section 21(4)(a);
(ii) Expanding the scope of zero-rating relief to include any goods to be used /installed on board any qualifying ship;
(iii) 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).|
|Stamp Duty Remission for Qualifying Merger & Acquisition (M&A) Deals||The transfer of unlisted shares for qualifying M&A deals will be eligible for Stamp Duty remission capped at $200,000 per year.
This remission is available for qualifying M&A deals executed from 1 April 2010 to 31 March 2015 (both dates inclusive).
|Extension of Stamp Duty Remission for REITS||The Stamp Duty remission granted to REITS will be extended and granted on chargeable documents executed from 18 February 2010 to 31 March 2015 (both dates inclusive).The qualifying condition for listing of REITS on the Singapore Exchange has been extended from the current one month to six months from the execution of the chargeable document from 18 February 2010 to 31 March 2015 (both dates inclusive).|