Singapore Finance Minister Heng Swee Keat announced a series of tax changes for businesses in his Budget Statement for the Financial Year 2017, which was delivered in Parliament on Monday, 20 Feb 2017.
The following is an overview of the important tax changes:
|Granting a Personal Income Tax Rebate for Resident Individual Taxpayers||To provide relief to individuals who pay income tax, a Personal Income Tax Rebate of 20% of tax payable will be granted to all individual tax residents for YA 2017 (i.e. for income earned in 2016). The rebate will be capped at $500 per taxpayer.|
|Withdrawing the GST Tourist Refund Scheme (“TRS”) for tourists departing by international cruise||Due to the very low transaction volume at the cruise terminals for tourist refunds, the GST TRS will be withdrawn for tourists who are departing by international cruise from the cruise terminals and whose purchases are made on or after 1 Jul 2017. Tourists who are departing by international cruise from the cruise terminals will have until 31 Aug 2017 to claim refunds on purchases made before 1 Jul 2017.
The eTRS facilities at the cruise terminals will be removed after 31 Aug 2017.
IRAS will release further details of the change by April 2017.
For All Businesses
|Enhancing and Extending the Corporate Income Tax (“CIT”) Rebate||To help companies cope with the economic uncertainty and continue restructuring, the CIT Rebate will be enhanced and extended:
a. The CIT Rebate cap will be raised from $20,000 to $25,000 for YA 2017 (with the rebate rate unchanged at 50% of corporate tax payable); and
b. The CIT Rebate will be extended for another year to YA 2018, at a reduced rate of 20% of tax payable and capped at $10,000.
|Introducing an Intellectual Property (“IP”) Regime that encourages the exploitation of IP arising from research & development (“R&D”) activities of the taxpayer||To encourage the use of IPs arising from taxpayer’s R&D activities, IP income will be incentivised under a new IP Regime named the IP Development Incentive (IDI). The IDI incorporates the BEPS-compliant modified nexus approach.
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 Jul 2017. Existing incentive recipients will continue to have such income covered under their existing incentives awards till 30 Jun 2021.
|Withdrawing the Tax Deduction for Computer Donation Scheme||As the objective of the scheme has been achieved, the scheme will be withdrawn after 20 Feb 2017.|
|Withdrawing the Accelerated Depreciation Allowance for Energy Efficient Equipment and Technology (“ADA-EEET”) scheme||To streamline incentives promoting energy efficiency that have been introduced over the years, the ADA-EEET scheme introduced in 1996 will be withdrawn after 31 Dec 2017. No ADA-EEET will be granted for equipment installed on or after 1 Jan 2018.|
|Allowing the Approved Building Project (“ABP”) scheme to lapse||The ABP scheme will be allowed to lapse after 31 Mar 2017.|
|Introducing a safe harbour rule for payments under Cost Sharing Agreements (“CSAs”) for R&D projects||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 subjecting the CSA payments to specific restriction rules which disallow certain categories of expenditure.
The change will apply to CSA payments made on or after 21 Feb 2017.
|Extending the Withholding Tax (“WHT”) exemption on payments for international telecommunications submarine cable capacity under an Indefeasible Rights of Use (“IRUs”) agreement||In line with the Government’s thrust to grow the digital economy and continue to be a key hub for data flow, the WHT exemption on payments for international telecommunications submarine cable capacity under an IRU agreement will be extended till 31 Dec 2023.|
For Financial Sector
|Extending the Withholding Tax exemption on payments made to non-resident non-individuals for structured products offered by Financial Institutions||The qualifying period for exemption from Withholding Tax on payments made to non-resident non-individuals for structured products will be extended till 31 Mar 2021.
All other conditions of the scheme will remain the same.
|Refining the Finance and Treasury Centre (“FTC”) scheme||To help ease the compliance burden of approved FTCs, the qualifying counterparties for certain transactions of approved FTCs will be streamlined.
The change will apply to new or renewal incentive awards approved on or after 21 Feb 2017.
EDB will release further details of the change by May 2017.
|Extending the Tax Incentive Schemes for Project and Infrastructure Finance||The remission of stamp duty payable on the instrument of transfer relating to qualifying infrastructure projects/assets to qualifying entities listed, or to be listed, on the SGX, will be allowed to lapse after 31 Mar 2017.
Apart from the remission of stamp duty above, the existing package of tax incentive schemes for Project and Infrastructure Finance will be extended till 31 Dec 2022.
All other conditions of the schemes remain the same.
MAS will release further details of the extension by May 2017.
Other Tax Changes for Businesses
|Enhancing the Global Trader Programme (“GTP”)||To facilitate and encourage more trading activities in Singapore and to simplify the GTP, the GTP will be enhanced as follows:
a. The requirement for qualifying transactions to be carried out with qualifying counterparties will be removed. Consequently, concessionary tax rate will be granted to approved global trading companies on income derived from qualifying transactions with any counterparty;
b. Concessionary tax rate 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 Singapore;
c. Concessionary tax rate 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); and
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 Feb 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 Feb 2017.
IE Singapore will release further details of the change by May 2017.
|Extending and refining the Aircraft Leasing Scheme (“ALS”)||To continue encouraging the growth of the aircraft leasing sector in Singapore, the ALS will be extended and refined as follows:
a. The ALS will be extended till 31 Dec 2022;
b. The scope of qualifying ancillary activities for approved aircraft lessors will be updated to cover incidental income derived from the provision of finance in the acquisition of aircraft or aircraft engines by any lessee; and
c. The concessionary tax rate on income derived from leasing of aircraft or aircraft engines and qualifying ancillary activities will be streamlined from 5% and 10% to a single rate of 8%.
The enhancement for (b) will apply to income derived on or after 21 Feb 2017 for all incentive recipients.
The refinement in (c) will apply to new or renewal incentive awards approved on or after 1 Apr 2017.
The automatic withholding tax exemption regime will be extended to qualifying payments made on qualifying loans entered into on or before 31 Dec 2022.
EDB will release further details of the change by May 2017.
|Extending and refining the Integrated Investment Allowance (“IIA”) scheme||The IIA scheme will be extended till 31 Dec 2022.
In addition, one of the requirements is liberalised in that the qualifying productive equipment may be used by the overseas company primarily (instead of solely) to manufacture products for the qualifying company under an approved project.
The above liberalisation in the qualifying requirement will apply to expenditure incurred on a qualifying productive equipment for a project approved on or after 21 Feb 2017.
|Allowing the International Arbitration Tax Incentive (“IArb”) to lapse||As part of the Government’s regular review of tax incentives, the IArb will be allowed to lapse after 30 Jun 2017.|
|Allowing the accelerated Writing-Down Allowances (“WDA”) for acquisition of Intellectual Property Rights (“IPRs”) for Media and Digital Entertainment (“MDE”) content scheme to lapse||As the scheme is assessed to be no longer relevant and to simplify our tax regime, the accelerated WDA for the MDE content scheme will be allowed to lapse, in respect of IPRs acquired for MDE content after the last day of the basis period for YA 2018.
MDE companies or partnerships may elect to claim WDA over a writing-down period of 5, 10 or 15 years on the capital expenditure incurred to acquire the qualifying IPRs under Section 19B or the ITA.
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