Singapore Budget 2012 – Overview of Tax Changes
The following tax changes were announced by Minister for Finance, Mr. Tharman Shanmugaratnam in his Budget Statement for the Financial Year 2012 which was delivered in Parliament on Friday, 17 Feb 2012.
For Individual Tax Payers
|Enhanced Earned Income Relief (EIR) for elderly and handicapped workers||With effect from Year of Assessment (YA) 2013, the amount of EIR and Handicapped EIR will be increased to encourage elderly workers to stay employed and to provide more support to handicapped workers.|
For All Businesses
|SME Cash Grant for companies||Companies will be granted a one-off non-taxable SME cash grant pegged at 5% of the company’s revenue for YA2012, capped at $5,000. To enjoy the cash grant, the company must have made CPF contributions for at least one employee during the relevant accounting period for YA 2012.|
|Enhancement of the Productivity and Innovation Credit (PIC) Scheme||To provide more support for businesses to invest in innovation and productivity, the PIC scheme will be enhanced in 4 areas:(i) Cash PayoutThe cash payout rate will be increased from 30% to 60% for up to $100,000 of qualifying expenditure from YA2013 to YA2015. Businesses may also claim the cash payout any time after the end of each financial quarter, but no later than the due date for the filing of its income tax return for the relevant year.
(a) In-house training courses
Certification will not be required for qualifying in-house training expenditure incurred up to $10,000 per YA. The total training expenditure cap eligible for tax deduction remains unchanged at $400,000.
(b) Training of prescribed agents/ representatives
PIC may be claimed by certain businesses that incur training expenditure for the following categories of individuals, who are not employees:
(iii) Research & Development (“R&D”)
|Enhancing the Renovation and Refurbishment (“R&R”) deduction scheme||To help businesses that need to renew and refresh their premises regularly to remain competitive, the R&R deduction scheme will become a permanent feature of the income tax regime. With effect from YA2013, the expenditure cap will be doubled to $300,000 for each three-year period.|
|Enhancing the Merger & Acquisition (“M&A”) Scheme||To further support companies carrying out M&A, 200% tax allowance will be granted on the transaction costs incurred on qualifying M&A, subject to an expenditure cap of $100,000 per YA. The allowance will be written down in 1 year.
The definition of qualifying M&A has been extended to include those where:
Extension of scheme
|Simplifying capital allowance claims for low-value assets||With effect from YA2013, the full cost of each asset that may be written down in one year will be increased to no more than $5,000 to further ease the claiming of capital allowances.|
|Providing certainty of non-taxation of companies’ gains on disposal of equity investments||For companies’ disposal of shares on or after 1 Jun 2012, gains derived from the disposal of equity investments by companies will not be taxed, if:(i) the divesting company holds a minimum shareholding of 20% in the company whose shares are being disposed; and(ii) the divesting company maintains the minimum 20% shareholding for a minimum period of 24 months just prior to the disposal.
For share disposals in other scenarios, the tax treatment of the gains/ losses arising from share disposals will continue to be determined based on a consideration of the facts and circumstances of the case.
|Introducing the Integrated Investment Allowance (“IIA”) Scheme||To keep pace with the evolving business environment, a new IIA scheme will be introduced to provide an additional allowance on fixed capital expenditure incurred for productive equipment placed overseas on approved projects with effect from YA2013. EDB will administer the scheme.
The existing Integrated Industrial Capital Allowance incentive will be withdrawn following the introduction of the IIA scheme on 17 Feb 2012.
|Enhancing the Double Tax Deduction (“DTD”) for Internationalisation Scheme||To further encourage our SMEs to venture abroad, and reduce administrative burden on businesses, tax deduction of up to 200% may be allowed on qualifying expenditure, up to $100,000 per YA, incurred on 4 specified activities on or after 1 Apr 2012, without the need for approval from IE Singapore or STB.
Further details are available on:
|Liberalising the cash distribution requirement for tax transparency for Real Estate Investment Trusts (REITs)||REITs that make distributions to unit holders in the form of units can enjoy tax transparency, subject to certain conditions. Unit holders who elect to receive distributions in units will be taxed in the same manner as if they had received the distribution in cash. This change will take effect for distributions made on or after 1 Apr 2012.|
For Financial Sector
|Enhancing the liberalised withholding tax exemption regime for banks||Specified entities will not need to withhold tax on interest and other payments made to permanent establishments in Singapore. This change will take effect for:(i) payments to be made from 17 Feb 2012 to 31 Mar 2021 (for contracts already in force before 17 Feb 2012); and(ii) all payments arising from contracts effective on or after 17 Feb 2012 to 31 Mar 2021.
Monetary Authority of Singapore will release further details of the change by 29 Feb 2012.
|Extending the withholding tax exemption for Over-The-Counter (“OTC”) financial derivatives payments||The withholding tax exemption on all payments made on qualifying OTC financial derivatives will be extended to 31 Mar 2021.
Monetary Authority of Singapore will release further details of the change by 30 Apr 2012.
|Extending the tax deduction for collective impairment provisions made under MAS Notices||Tax concessions on collective impairment provisions will be extended for 3 years till Year of Assessment (YA) 2016 or YA 2017.|
|Enhancing the designated investment and specified income lists for financial sector tax incentive schemes||With effect from 17 Feb 2012, the list of specified income that is applicable for the various financial sector tax incentive schemes will be revised to an exclusion list. The list of designated investments will be rationalised, and expanded.|
For Maritime and Aviation
|Exempting vessel disposal gains derived by qualifying ship operators and ship lessors from tax||With effect from 1 Jun 2011, qualifying ship operators and ship lessors under the Maritime Sector Incentive (MSI) awards will be granted tax exemption on gains from the disposal of vessels automatically, without the need to opt for the exemption. Gains from the disposal of vessels under construction and new building contracts will also be exempt.|
|Exempting charter fees for ships from withholding tax||With effect from 17 Feb 2012, payers making bareboat, voyage and time charter payments to non-residents for the use of ships will not have to withhold tax.|
|Enhancing the Maritime Sector Incentive – Maritime Leasing (Container) Award [MSI-ML (Container)]||MSI-ML (Container) award recipients will enjoy the following enhancements:(i) Interest and related payments, made on or after 17 Feb 2012, arising from loans taken to finance qualifying containers and intermodal equipment will be granted automatic withholding tax exemption.(ii) With effect from YA 2013, income derived from the leasing of intermodal equipment (e.g. trailers) which is incidental to the leasing of qualifying containers will also enjoy the concessionary tax rate of 5% or 10%.
(iii) With effect from YA 2013, qualifying containers will refer to containers that adhere to the standards defined by the ISO, IICL or any other equivalent organisation.
Maritime and Port Authority of Singapore will release further details of the changes.
|Extending and enhancing the Aircraft Leasing Scheme (“ALS”)||The ALS will be extended to 31 Mar 2017.ALS award recipients will be granted withholding tax exemptions automatically, subject to conditions, on interest and qualifying payments made on or after 1 May 2012 in respect of qualifying foreign loans entered into on or before 31 Mar 2017.|
Goods & Services Tax (GST)
|GST exemption on investment-grade gold and precious metals||With effect from 1 Oct 2012, the import and supply of investment-grade gold, silver and platinum will be exempt from GST. Measures will also be introduced to ease cash flow of qualifying refiners and local consolidators of these precious metals in the payment of input GST on import and purchase of raw materials.IRAS will release further details of the changes by 1 Sep 2012.|
|Extending the GST Temporary Import Period from 3 to 6 months||With effect from 1 Apr 2012, the temporary import relief period of 3 months will be extended to 6 months. All other existing terms and conditions of the scheme apply.Singapore Customs will release further details of the change by 26 Mar 2012.|
|Extending the GST Tourist Refund Scheme (“TRS”) to tourists departing by international cruise||With effect from Jan 2013, the TRS will be available to goods that are brought out of Singapore by international cruise passengers (excluding cruises-to-nowhere, round-trip cruise and regional ferry passengers) via the Singapore Cruise Centre at Harbourfront and the International Cruise Terminal at Marina South (now known as Marina Bay Cruise Centre Singapore).IRAS, Singapore Customs and Singapore Tourism Board will release further details of the changes by 1 Sep 2012.|
|Simplifying GST import relief for incoming travellers||With effect from 1 Apr 2012, the GST import relief for travellers bringing goods into Singapore will be simplified. Inbound travellers, regardless of their ages, who have spent time outside Singapore for at least 48 hours will be given GST import relief of $600, while those who have been away for less than 48 hours will be given GST import relief of $150.|
|Enhancing Stamp Duty Relief for Qualifying Merger & Acquisition (“M&A”)||Stamp duty relief will be extended to M&A deals completed from 17 Feb 2012 to 31 Mar 2015 where:
EDB may waive the condition that the acquiring company must be held by an ultimate holding company that is incorporated in Singapore and a tax resident of Singapore, subject to conditions.
|Extended tax filing and payment deadline for withholding tax||The payer will be allowed one additional month to file and pay the tax, i.e. by the 15th of the second month following the date of payment to the non- resident. This change will take effect for all payments made to non-residents on or after 1 Jul 2012.
E.g., if the payer is liable to make an interest payment to the non-resident on 5 Jul 2012, he has to notify Comptroller of Income Tax and remit the tax withheld by 15 Sep 2012..
|Permanent GST Vouchers Scheme||Lower-income families will receive GST offsets via three components: Cash, Utilities-save rebates, and CPF Medisave top-ups for older Singaporeans. The voucher will fully offset the 7% GST that the lower half of retiree households pay on their expenses.|