Singapore Budget 2013 – 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 2013, which was delivered in Parliament on Monday, 25 Feb 2013.
For Individuals
| Tax Changes | Summary |
|---|---|
| Personal Income Tax Rebate | All resident individual taxpayers will be given a personal income tax rebate for the tax payable for Year of Assessment (YA) 2013. The amount of rebate granted depends on the age of the resident individual as at 31 Dec 2012, subject to a cap of $1,500:
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| Simplifying the Taxation of Accommodation Benefits | With effect from YA 2015, the accommodation benefits enjoyed by employees (including company directors) will be taxed according to the market value, as follows:
IRAS will release further details of the changes by October 2013. |
| Phasing Out the Equity Remuneration Incentive Schemes (“ERIS”) | The ERIS (Start-ups) has expired on 15 Feb 2013 and will not be renewed. The ERIS (All Corporations) and ERIS (SMEs) will expire with effect from 1 January 2014.However, employees who are granted stock options or shares before the expiry of the above schemes will continue to enjoy partial tax exemption on the gains from these stock options/shares, if these gains are derived on or before 31 December 2023. |
For All Businesses
| Tax Changes | Summary |
|---|---|
| Wage Credit Scheme (WCS) | The Government will co-fund 40% of wage increases given to Singaporean employees earning a gross monthly wage of up to $4,000. Wage increases that are given in 2013 to 2015 will be eligible for WCS. Eligible employers will receive the Wage Credits from IRAS automatically. The first payout will be in the second quarter of 2014 and the last payout will be in 2016. IRAS will release further details by June 2013.For more information, please visit our WCS Page. |
| Corporate Income Tax (“CIT”) Rebate from YA 2013 to YA 2015 | From YA 2013 to YA 2015, companies will receive a 30% CIT rebate capped at $30,000 per YA. |
| Productivity and Innovation Credit (“PIC”) Bonus from YA 2013 to YA 2015 | To encourage businesses to undertake improvement in productivity and innovation, eligible businesses that spend a minimum of $5,000 in qualifying PIC investments in a YA will receive a dollar-for-dollar matching cash bonus.The PIC Bonus is capped at $15,000 for the 3-year period (YA 2013 to YA 2015), and is given in addition to existing PIC benefits of:
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| Liberalising the Scope of PIC Automation Equipment | With effect from YA 2013, more equipment will qualify for PIC benefits through the following changes:a) Liberalised conditions for approving equipment that is not on the prescribed list: i) The equipment automates or mechanises, whether in whole or in part, the work processes, whether core or non-core of the business; and ii) The equipment enhances the productivity of the business.An equipment that is a basic tool will be allowed if:
b) The term “automation equipment” is changed to “IT and automation equipment” to reflect the fact that PIC already supports IT-related software besides automation equipment. |
| Enhancing the Productivity and Innovation Credit (PIC) Scheme to include Intellectual Property (“IP”) in-licensing | To help businesses that license IP rights instead of acquiring the IP for innovation or productivity improvements, the PIC scheme will be enhanced to allow IP in-licensing costs incurred from YA 2013 to YA 2015 to qualify for PIC benefits. The current PIC qualifying activity of “Acquisition of Intellectual Property” will also be renamed to “Acquisition and In-Licensing of Intellectual Property” to reflect the change. IRAS will release further details by Apr 2013. |
| Rationalising the Start-up Tax Exemption (“SUTE”) Scheme | SUTE will no longer be available to the following types of companies incorporated from 26 February 2013:
Property developers and investment holding companies will still be able to enjoy the partial tax exemption generally available to all companies. |
| Allowing the Deduction Scheme for Upfront Land Premium to Expire | As the deduction scheme has been assessed to be no longer relevant, it will be allowed to expire for leases granted on or after 28 Feb 2013. |
| Allowing the Further Tax Deduction Scheme for Expenses incurred in Relocation or Recruitment of Overseas Talent to Expire | As the objective of the scheme no longer merits a tax incentive, the scheme will be allowed to expire on 30 Sep 2013. |
| Extending and Refining the Qualifying Debt Securities (“QDS”) and Qualifying Debt Securities Plus (“QDS+”) Incentive Schemes | To further promote Singapore’s debt market, the QDS scheme will be extended for five years to 31 Dec 2018. For debt securities issued during the period of 1 Jan 2014 to 31 Dec 2018, the requirement that the QDS be substantially arranged in Singapore will be rationalised to ease compliance for issuers.The QDS+ scheme will also be extended for five years to 31 Dec 2018 and refined to allow debt securities with standard earlytermination clauses to qualify, subject to conditions. The other existing conditions of the schemes remain unchanged. MAS will release further details by end Jun 2013. |
For Financial Sector
| Tax Changes | Summary |
|---|---|
| Extending and Enhancing the Financial Sector Incentive (“FSI”) scheme | To continue the growth of financial sector activities in Singapore, the FSI scheme (excluding the FSI-IF award) will be extended for five years to 31 Dec 2018.The FSI scheme will also be refined. Unless otherwise specified, the changes will take effect from 1 Jan 2014. Existing award recipients can continue with their awards till the end of their award tenures. For further details, please visit our Singapore Tax Incentives page. |
| Extending and Refining the Qualifying Debt Securities (“QDS”) and Qualifying Debt Securities Plus (“QDS+”) Incentive Schemes | To further promote Singapore’s debt market, the QDS and QDS+ schemes will be extended for five years to 31 Dec 2018.For debt securities issued during the period of 1 Jan 2014 to 31 Dec 2018, the requirement that the QDS has to be substantially arranged in Singapore will be rationalised to ease compliance for issuers.The QDS+ scheme will be refined to allow debt securities with standard early termination clauses to qualify, subject to conditions.The other existing conditions of the schemes remain unchanged. MAS will release further details by end Jun 2013. |
| Extending the Tax Exemption on Income Derived by Primary Dealers from Trading in Singapore Government Securities | To continue encouraging trading in Singapore Government Securities, the tax exemption on income derived by primary dealers from trading in Singapore Government Securities will be extended for five years to 31 Dec 2018. |
| Extending the Tax Incentive Scheme for Approved Special Purpose Vehicle (“ASPV”) engaged in securitisation transactions (“ASPV Scheme”) | To continue developing the structured debt market, the ASPV scheme will be extended for five years to 31 Dec 2018.All existing conditions of the scheme remain unchanged. MAS will release further details by end May 2013. |
| Enhancing the Tax Exemption Scheme to include Underwriting of Offshore Specialised Insurance Risks | With effect from 25 Feb 2013, tax exemption will be granted on qualifying income derived from offshore Catastrophe Excess of Loss (“CAT-XOL”) reinsurance layers to encourage the underwriting of severe and volatile catastrophe risks from Singapore.All existing conditions of the scheme remain unchanged. MAS will release further details by end April 2013. |
| Extending and Enhancing the Tax Incentive Scheme for Offshore Insurance Broking Business | To support Singapore’s position as a major regional insurance and reinsurance hub, the scheme will be extended for five years to 31 Mar 2018. Insurance brokering activities will be incentivised if the risks being insured or reinsured are offshore risks. Advisory services will continue to be incentivised for services provided to clients not based in Singapore.With effect from 1 April 2013, a new 5%-tier award for the offshore specialty insurance brokering business will be introduced to accelerate the development of the specialty insurance cluster in Singapore. Brokers granted the new award can enjoy a 5% concessionary tax rate on fees and commissions derived from the provision of qualifying specialty insurance brokering and advisory services. MAS will release further details by end April 2013. |
| Allowing the Offshore Insurance Business Scheme for Islamic Insurance and Reinsurance to Expire | As the objective of the Offshore Insurance Business Scheme for Islamic Insurance and Reinsurance no longer merits a tax incentive, the scheme will be allowed to expire on 31 Mar 2013.Insurers which conduct offshore Islamic insurance and reinsurance activities may apply to MAS for the existing 10% Offshore Insurance Business Scheme. |
For Maritime
| Tax Changes | Summary |
|---|---|
| Extending the Maximum Tenure of the Maritime Sector Incentive – Approved International Shipping Enterprise (“MSI-AIS”) Award | To promote the growth of our maritime industry, the maximum tenure of the MSI-AIS award will be increased from 30 to 40 years.Companies can be granted the MSI-AIS award for a 10-year period, with the possibility of renewal up to a maximum tenure of 40 years, subject to conditions. |
Other Tax Incentives for Businesses
| Tax Changes | Summary |
|---|---|
| Allowing the Tax Incentive Scheme for Family-Owned Investment Holding Companies to Expire | As the objective of the Tax Incentive Scheme for Family-Owned Investment Holding Companies no longer merits a tax incentive, the scheme will be allowed to expire on 31 March 2013. |
| Withdrawing the Overseas Enterprise Incentive (“OEI”) Scheme | With broad-based changes to our tax regime for foreign-sourced income in past years, the OEI scheme is assessed to be no longer relevant and will be withdrawn from 25 February 2013. |
| Withdrawing the Approved Cyber Trader (“ACT”) Scheme | As the objective of the ACT scheme no longer merits a tax incentive, the scheme will be withdrawn from 25 February 2013. |
Property Tax
| Tax Changes | Summary | |||||||||||||||||||||||||||||||||||||||||||||||||||
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| More Progressive Property Tax Structure for Residential Properties | From 1 Jan 2014, the property tax rates for owner-occupied homes will be made more progressive over two years:
Non-owner-occupied residential properties will be taxed at the following new progressive tax rates:
The property tax rate for land and non-residential properties remains unchanged at 10%. |
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| Removal of the Property Tax Refund Concession for Vacant Properties | With effect from 1 Jan 2014, the property tax refund concession for vacant properties (whether residential or not) will be removed. The tax treatment of all vacant properties will be streamlined as follows:
The property tax treatment for residential properties undergoing demolition and reconstruction remains unchanged. |
