Singapore Budget 2019: Overview of Tax Changes for Business

Singapore Budget 2019 Overview of Tax Changes for Business

Tax Change	Current Treatment	New Treatment	Remarks
Extend the Writing Down Allowance (“WDA”) for acquisition of qualifying Intellectual Property Rights (“IPRs”) under section 19B of the Income Tax Act (“ITA”)	WDA is granted to companies and partnerships on capital expenditure incurred in respect of qualifying IPRs acquired on or before the last day of the basis period for YA 2020. The expenditure can be written down over five, 10 or 15 years.	The WDA will be extended to cover capital expenditure incurred in respect of qualifying IPRs acquired on or before the last day of the basis period for YA 2025.	Singapore is keen on enhancing its competitiveness and strengthening its position as a knowledge-based economy with high innovation potential. Hence this move will act as an enabler for companies that require IPR for seizing growth opportunities.
Extend the 100% Investment Allowance (“IA”) under the Automation Support Package (ASP)	The package provides 100% IA support on the amount of approved capital expenditure, capped at S$10 million per project (net of grants), on projects approved by Enterprise Singapore during 1 April 2016 to 31 March 2019.	The 100% IA will be extended by two years, for projects approved by Enterprise Singapore from 1 April 2019 to 31 March 2021. The ceiling of S$10 million remains on the approved capital.	The economic transformation that the government envisioned is yet to be realized. Such concessionary tax treatments need to be essentially extended to drive companies to automate and scale up productivity.
Extend the income tax concessions for Singapore-listed Real Estate Investment Trusts (“S-REITs”)	If 90% of their taxable income is distributed by the trustees to unitholders in the same year in which the income is derived by the trustee, the S-REITS are granted tax transparency. The following concessions enjoyed by S-REITS will lapse on 31 March 2020: Tax exemption on distributions received by individuals, excluding individuals who derive any distribution: through a partnership in Singapore; or from the carrying on of a trade, business or profession; Tax exemption on qualifying foreign-sourced income received by S- REITs and wholly-owned Singapore resident subsidiary companies of S-REITs, that is paid out of qualifying income or gains in respect of overseas property acquired on or before 31 March 2020 by the trustee of the S-REITs or its wholly-owned Singapore resident subsidiary company. A reduced withholding tax rate of 10% applies to distributions made to qualifying non-resident non-individual unit holder during the period from 18 Feb 2005 to 31 Mar 2020.	The existing tax concessions for S-REITs will be extended till 31 December 2025. The sunset clause for the tax exemption on S-REITs distributions received by individuals will be removed. Notably, the reduced withholding tax is extended to distributions made by a REIT to qualifying non-resident non-individual unit holders during the period from 1 Apr 2020 to 31 Dec 2025.	Singapore is gaining traction as a REITS hub, in order to further reinforce its position in the region and to promote the listing of REITS in Singapore it is essential to maintain the concessions granted to the sector.
Extend the income tax concessions for Singapore-listed Real Estate Investment Trusts Exchange-Traded Funds (“REITs ETFs	The following concessions extended to REITS ETF are set to lapse on 31 March 2020: Tax transparency on the distributions received by REITs ETFs from S-REITs, which are made out of the latter’s specified income; Tax exemption on such REITs ETFs distributions received by individuals, excluding individuals who derive any distribution: i) through a partnership in Singapore; or ii) from the carrying on of a trade, business or profession; and 10% concessionary withholding tax rate on such REITs ETFs distributions received by qualifying non- resident non-individuals.	The current concessionary tax treatment will be extended until 31 December 2025. The sunset clause will be removed for the tax exemption on REITs ETFs distributions received by individuals. All other conditions for the income tax concessions remain the same.	The move will further strengthen Singapore’s position as a REITS hub and act as an impetus for the growth of exchange-traded funds in Singapore.
Extend the GST remission for S-REITs and Singapore-listed Registered Business Trusts (“RBTs”) in the infrastructure business, ship leasing and aircraft leasing sectors	GST Remission is granted to S-REITS and RBT, whereby they can recover GST on expenses incurred without the funds having to register for GST. Subject to condition, they can claim GST on the following: Their business expenses, regardless of whether they hold underlying assets directly or indirectly through multi-tiered structures such as special purpose vehicles (“SPVs”) or sub-trusts; Their business expenses incurred to set up SPVs that are used solely to raise funds for the S-REITs or RBTs, and that do not hold qualifying assets of the S-REITs or RBTs, directly or indirectly; and business expenses of financing SPVs mentioned in (b). The GST remission is scheduled to lapse after 31 March 2020.	The existing GST remission will be extended till 31 December 2025. All conditions for the GST remission remain the same.	S-REITS and RBT enjoy the certainty of input tax recovery, and for this they do not need to go through the hassle of GST registration. This eases the compliance cost. Singapore is keen on making doing business easy and businesses value the city for such pro-business environment. The move will further reinforce Singapore as a hub for S-REITS and RBT.
Extend and Refine Tax Incentive Schemes for Funds Managed by Singapore-based Fund Managers.	Subject to conditions, Qualifying Funds are granted the following tax concessions: a) Tax exemption on specified income (“SI”) derived from designated investments (“DI”); and b) Withholding tax exemption on interest and other qualifying payments made to non-resident persons (excluding Permanent Establishments in Singapore). The schemes for Qualifying Funds are scheduled to lapse after 31 March 2019.Qualifying Funds comprise the following: a) Basic tier funds (sections 13CA and 13R schemes); and b) Enhanced tier funds (section 13X scheme). Among other conditions to qualify as a basic tier fund, a fund must not have 100% of the value of its issued securities beneficially owned, directly or indirectly, by Singapore persons;For enhanced tier funds approved as a collective structure, the master fund in the approved structure can have up to two tiers of SPVs. Such SPVs must be wholly-owned (directly or indirectly) by the master fund and can only take the form of companies.Separately, for real estate, infrastructure and private equity funds applying to be enhanced tier funds, the minimum fund size requirement to be met at the point of application may be determined based on the amount of committed capital (“committed capital concession”).	The tax concessions relating to Qualifying Funds will be extended till 31 December 2024. The 13CA, 13R and 13X schemes will also be refined as follows: Effective YA 2020, the condition that Singapore persons must not directly or indirectly own 100% of the value of its issued securities will be removed; Effective 19 February 2019, the enhanced tier fund scheme will be enhanced to (i) include co-investments, non-company SPVs and more than two tiers of SPVs, (ii) allow debt and credit funds to access the “committed capital concession”, and (iii) include managed accounts. Effective 19 February 2019, the list of DI will be expanded by removing the counter-party and currency restrictions. It will now include credit facilities and advances, and Islamic financial products that are commercial equivalents of DI. Effective 19 February 2019, the list of SI will be enhanced to include income in the form of payments that fall within the ambit of section 12(6) of the ITA; and Qualifying non-resident funds under sections 13CA and 13X will be able to avail themselves of the 10% concessionary tax rate applicable to qualifying non-resident non- individuals when investing in S- REITs and REITs ETFs.	The extension of concessionary tax treatment and refinements to the scheme will fortify Singapore as a fund management hub of Asia. More funds will qualify for the scheme and would also draw more funds to be managed in Singapore. It also eases the compliance burden on the fund managers.
Recovery of GST for Qualifying Funds	Qualifying Funds that are managed by prescribed fund managers in Singapore are allowed, by way of remission, to claim GST incurred on expenses at a fixed recovery rate. The concession is scheduled to lapse after 31 March 2019.	The concession will be extended till 31 December 2024.	Qualifying Funds will enjoy the certainty of input tax recovery at fixed rates every year. Reduces the compliance burden. Strengthens Singapore’s Position as a fund management hub.
Lapse the Designated Unit Trust (“DUT”) scheme	Specified income derived by a unit trust with the DUT status is not taxed at the trustee level, but is subjected to tax upon distribution in the hands of investors. Qualifying foreign investors and individuals are exempt from tax on distributions made by a DUT.	The DUT scheme will lapse after 31 March 2019. Existing DUTs will continue to receive the tax deferral benefits under the DUT scheme, on and after 1 April 2019, if they continue to meet all the conditions.	Funds in the form of unit trusts may apply for other tax incentives for funds.
Lapse the Approved Unit Trust (“AUT”) scheme	The trustee is taxed on its investment income, and 10% of the gains derived from the disposal of securities. The remaining 90% of the gains from the disposal of securities become taxable in the hands of the unit holders when distributed. However, such distribution is exempted from tax, if the unit holder is: a) an individual resident in Singapore; or b) a person who is not resident in Singapore and has no permanent establishment in Singapore.	The scheme will lapse after 18 February 2019. Existing AUTs will continue to receive the tax concession under the AUT scheme for a period of five years from YA 2020 to YA 2024.	The existing AUTs will have sufficient time to adjust to the lapsed scheme. Any new AUTs will have to look for relevant alternative concessions.
Lapse the Property Tax (Tourist Projects) Order	Under the concession scheme introduced in 1987, the Minister may grant approval for new tourist projects to have their Annual Value computed based on 6% of the preceding year’s gross receipts, for the first five years from the completion of the buildings.	The scheme will lapse after 18 February 2019.	The tourism industry is strongly supported by the government through the various sector-specific scheme. Though this particular scheme is lapsed the sector, as a key enabler of economic growth will continue to get support from the government through other schemes.

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