Singapore Budget 2015

Executive Summary

The Singapore Government Budget for fiscal year 2015 was delivered by the DPM and Finance Minister in the Parliament on 23 February. The theme for the budget this year is “Building our future, strengthening social security”. The key features of the budget include developing our people, investing in innovation and internationlisation, assurance in retirement and supporting families, strengthening community.

The changes introduced include the increase in monthly CPF contribution ceiling from S$5,000 to S$6,000 from January 2016 and increase in CPF contribution rate for workers aged 50 and above from January 2016. The other changes include the increase of highest marginal tax rate for personal income tax from the current 20% to 22% effective from the YA 2017, introduction of the “SkillsFuture Credit” for all adult Singaporeans to promote lifelong learning, introduction of the “Silver Support Scheme” to take care of senior citizens aged 65 and above, and policy fine-tuning for the Wage Credit Scheme and Foreign Workers Levy. New tax policies include the introduction of the “Capability Development Grants” to assist SMEs in their R&D efforts and the “International Growth Scheme” to promote overseas expansion. The new tax incentive will provide reduced corporate tax rate at 10% on incremental income for the qualifying company. The new incentive will take effect from April 2015 and it is administered by the IE Singapore.

  1. Key Features
  2. Tax Changes for Businesses
  3. Tax Changes for Financial Sector
  4. Tax Changes for Insurance and Maritime Sectors
  5. Changes to Goods and Services Tax (GST)
  6. Changes to Individual Income Tax
  7. Changes to Central Provident Fund (CPF) Contribution
  8. Changes to Vehicle Taxes
  9. Other Changes
  10. Year of Assessment 2015 tax filing due dates

 


    1. Key Features

1.1 No change to Corporate Tax Rate and GST Rate

There will be no change to the tax rate for corporate tax and GST. The corporate tax rate remains at 17% with partial tax exemption for the first S$300,000 chargeable income. The tax rate of 17% has been introduced since the year of assessment 2010 and remained competitive compared to other jurisdictions in the Asia Pacific region. GST rate remains at 7%.

For corporate tax, a partial tax exemption is applicable to the first S$300,000 chargeable income. After deducting the partial tax exemption, the effective tax rate for the first S$300,000 chargeable income is only 8.36% for the year of assessment 2014. Qualifying newly incorporated companies will enjoy an effective tax rate of only 5.67% for the first S$300,000 chargeable income for their first 3 years of assessment after incorporation.

The corporate tax rates for the current ten years are as follows:

Year of Assessment
Corporate Tax Rate (%)
2006
20
2007
20
2008
18
2009
18
2010
17
2011
17
2012
17
2013
17
2014
17
2015
17

 

For comparison, we append below corporate tax rates for selected jurisdictions:

Jurisdiction
Corporate Tax Rate (%)
Hong Kong
16.5
Taiwan
17
Thailand
20
South Korea
22
Indonesia
25
Malaysia
25
Vietnam
22
China
25
The Philippines
30
India
30
Japan
25.5

 

1.2 The Wage Credit Scheme (WCS)

Introduced in 2013, the WCS will be extended for 2 more years for 2016 and 2017. For these 2 years, the Government will co-fund 20% of the wage increment for Singaporean workers with monthly wages of below S$4,000. The ratio for co-funding is currently at 40% of the incremental monthly wage for 2013 to 2015.

1.3 Tax Rebate for Corporate Taxpayers for YA 2016 and YA 2017

Tax rebate introduced in YA 2013 will be extended beyond YA 2015. The tax rebate remained at 30% of the tax payable for the YA 2016 and 2017, but the capping is reduced to S$20,000 per tax year for these 2 years.

1.4 Temporary Employment Credit (TEC) and Special Employment Credit (SEC)

The Government will fine-tune the TEC as follows:

Year
TEC
2015
1% of wages up to the CPF salary ceiling of $5,000
2016
1% of wages up to the CPF salary ceiling of $6,000
2017
0.5% of wages up to the CPF salary ceiling of $6,000

Employers who employ Singaporean workers aged 65 and above will receive a 3% SEC for monthly wages up to S$4,000 for 2015. The SEC is capped at S$345 per Singaporean worker per month. Examples of SEC are as follows:

Income of Employee in a Given Month ($)
SEC for Month ($)
$500
$57.50
$1,000
$115.00
$1,500
$172.50
$2,000
$230.00
$2,500
$287.50
$3,000
$345.00
$3,500
$172.50
$4,000
$0

 

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    1. Tax Changes for Businesses

2.1 Extension and Enhancement to the M&A Tax Allowance Scheme

The above scheme was first introduced in 2010 and is expiring in 2015. The scheme will be extended up to 31 March 2020. The following enhancements to the scheme will apply to M&A deals take place from April 2015:

- The qualifying amount of M&A acquisition cost per year will be capped at S$20 million, reduced from the current S$100 million;
- The M&A allowance per year will be increased from 5% to 25%;
- At least up to 20% shareholding in the target company (from 50% currently); and
- Tax deduction for M&A costs remained at 200% of the expenses and capped at S$100,000 per year.

2.2 Double Tax Deduction (DTD) for Internationalisation Scheme

DTD will be allowed to qualifying companies for manpower costs incurred in sending Singaporean employees for overseas posting with effect from 1 July 2015 to 31 March 2020. The scheme is capped at qualifying cost of S$ 1 million per year and it is subject to approval from the IE Singapore.

2.3 Tax Deduction for Approved Donations

Approved donations made to the Institutes of Public Character in 2015 will be granted with 300% tax deduction. Tax deduction will remain at 250% from 2016 to 2018.

2.4 The Writing Down Allowance for Acquisition Cost for Indefeasible Right to Use

A review date on 31 Dec 2020 will be legislated for the above scheme.

2.5 The New International Growth Scheme (IGS)

The new scheme will be administered by the IE Singapore and it takes effect from 1 July 2015 to 31 March 2020. Under the IGS, concessionary tax rate of 10% for 5 years will be applied to incremental income derived by qualifying companies engaging in internationalisation activities.

2.6 Extension and Enhancement to Angel Investors Tax Deduction Scheme (AITD)

The above was introduced in 2010 to allow 50% tax deduction on the cost of qualifying investment, capped at S$500,000 per year. The scheme will be extended to 31 March 2020 and to include projects co-funded by the Government under SEEDS and BAS from 24 Feb 2015.

2.7 Venture Capital Fund (VCF) Management Companies

The current pioneer service status (tax exemption) for VCF management companies will be terminated and replaced by a 5% concessionary tax rate effective from 1 April 2015.

2.8 Fine-tuning to Investment Allowance – Energy Efficiency (IAEE) Schemes

The current 2 schemes will be combined into one scheme from 1 March 2015 and the effective date will be extended to 31 March 2021. The scheme will be administered by the EDB.

2.9 Development and Expansion Incentive for International Legal Services Scheme

Currently, qualifying law practice enjoys a concessionary tax at 10% under the above scheme. The scheme will be extended to 31 March 2020.

2.10 Tax Incentives for Real Estate Investment Trusts (REITs)

The current income tax incentive for REITs will be extended to 31 March 2020 whereas the incentive for Stamp Duty will lapse on 31 March 2015.

2.11 Approved Foreign Loan Incentive

A review date on 31 Dec 2023 will be legislated for the above incentive. Under this incentive, withholding tax exemption will be given for interest paid on foreign loan obtained to purchase productive equipment.

2.12 Approved Royalties Incentive

A review date on 31 Dec 2023 will be legislated for the above incentive. Under this incentive, withholding tax exemption will be given to royalty payments made to non-residents for usage of cutting-edge technology or know-how.

2.13 Withdrawal of Approved Offshore Leasing Incentive

Under this incentive, approved companies enjoyed a concessionary tax rate of 10% on income derived from offshore leasing of equipment. The incentive will be withdrawn from 1 Jan 2016.

2.14 Withdrawal of Approved Headquarter Incentive

Under this incentive, approved headquarter companies enjoyed a concessionary 10% tax rate on qualifying income. The incentive will be withdrawn from 1 Oct 2015.

2.15 Withdrawal of Tax Incentive for Royalty Payments on Intellectual Property

Under this incentive, qualifying taxpayer will be assessed on 10% of gross royalty income from approved intellectual property or innovation. The concession will be withdrawn from the YA 2017.

 

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    1. Tax Changes for Financial Sector

3.1 Extension of Tax Deduction for Impairments for Banks

Financial institutions are granted with tax deduction on impairment provisions on lending. These concessions will lapse in YA 2016 and YA 2017. The Government has extended the concessions to YA 2019 and YA 2020, respectively.

3.2 Enhanced Tier Fund Tax Incentive Scheme

The current tax incentive for approved fund vehicles will be extended to include Special Purpose Vehicle (SPV) held by the master fund, subject to conditions. The enhanced feature will be effective from 1 Apr 2015.

 

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    1. Tax Changes for Insurance and Maritime Sectors

4.1 Tax Incentive for Insurance Business

Under this incentive, approved insurers and reinsurers are granted with concessionary tax rate of 10% on qualifying insurance and reinsurance business. The incentive will lapse after 31 March 2015. To promote Singapore as the Asian insurance centre, the scheme will be extended to 31 March 2020.

4.2 Maritime Sector Incentive (MSI)

The existing tax incentive for ship operators, maritime lessors and shipping-related service providers will be enhanced as follows:

- The automatic withholding tax exemption will be extended to cover finance lease obtained to purchase or construction of vessels, containers and intermodal equipment;
- The definition of qualifying ship management activities for the purposes of MSI will be updated to keep pace with industry changes;
- The incentive will now cover mobilization fees, demobilization fees, holding fees and container rental from qualifying shipping operations;
- Qualifying profits remitted from overseas branch will also enjoy tax exemption;
- Existing incentive holders can apply for a new 5 year incentive period, subject to higher economic commitments; and
- The incentive will now cover finance lease treated as sale.

The above changes take effect from 24 Feb 2015.

 

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    1. Changes to Goods and Services Tax (GST)

5.1 Simplifying Pre-GST Registration Claim Rule

Under existing rule, registered GST traders are required to apportion their claim of pre-GST registration input tax paid on business expenses. With effect from 1 July 2015, the rule will be simplified to allow 100% claim of input tax paid for goods held at registration, property rental and utilities which are not directly attributable to supply made prior to the GST registration.

5.2 GST Incentive for Listed REITs and Listed Registered Business Trusts (RBT)

The existing GST concession for listed REITs and listed RBT will be extended to 31 March 2020.

 

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    1. Changes to Individual Income Tax

6.1 Changes to Personal Income Tax Rates from the YA 2017

The tax rates for personal income tax will be adjusted from the YA 2017 with the increase of the highest marginal tax rate from the current 20% to 22%. The existing tax rate table and the new tax rate table from the YA 2017 are shown as follows:

Current tax structure
Chargeable Income($) Tax Rate (%) Gross Tax Payable ($)
On the first
On the next
20,000
10,000
0
2
0
200
On the first
On the next
30,000
10,000
-
3.5
200
350
On the first
On the next
40,000
40,000
-
7
550
2,800
On the first
On the next
80,000
40,000
-
11.5
3,350
4,600
On the first
On the next
120,000
40,000
-
15
7,950
6,000
On the first
On the next
160,000
40,000
-
17
13,950
68,00
On the first
On the next
200,000
120,000
-
18
20,750
21,600
On the first
In excess of
320,000
320,000
-
20
42,350
 

Tax structure with effect from Year of Assessment (“YA”) 2017
Chargeable Income($) Tax Rate (%) Gross Tax Payable ($)
On the first
On the next
20,000
10,000
0
2
0
200
On the first
On the next
30,000
10,000
-
3.5
200
350
On the first
On the next
40,000
40,000
-
7
550
2,800
On the first
On the next
80,000
40,000
-
11.5
3,350
4,600
On the first
On the next
120,000
40,000
-
15
7,950
6,000
On the first
On the next
160,000
40,000
-
18
13,950
7,200
On the first
On the next
200,000
40,000
-
19
21,150
7,600
On the first
On the next
240,000
40,000
-
19.5
28,750
7,800
On the first
On the next
280,000
40,000
-
20
36,550
8,000
On the first
In excess of
320,000
320,000
-
22
44,550
 

6.2 Personal Income Tax Rebate

A one-off 50% tax rebate will be given to all resident individual taxpayers for the YA 2015, capped at maximum rebate of S$1,000.

6.3 Simplifying Claim of Expenses for Passive Rental Income from Residential Property

Under the current tax treatment, taxpayers are allowed to claim actual expenses incurred in deriving passive rental income from letting out of residential properties. With effect from the YA 2016, taxpayers are allowed to claim 15% of the gross rental received as a proxy for the actual deductible expenses. Besides, taxpayers can continue to claim for interest expenses incurred in acquiring the property.

6.4 Tax Exemption for Non-Tax Resident Mediators

Non-tax resident mediators who carry out mediation work in Singapore will be given tax exemption from 1 April 2015 to 31 March 2020.

6.5 Tax Exemption for Non-Tax Resident Arbitrators

The tax exemption scheme for non-tax resident arbitrators will be subject to a review for its relevancy by 31 March 2020.

6.6 Raising of CPF Salary Ceiling

In view of the adjustment to the CPF contribution ceiling from Jan 2016, the tax relief cap for CPF contribution for self-employed will be raised to S$37,740 from the YA 2017.

6.7 Adjustment to SRS Contribution Cap

The yearly contribution cap for the Supplementary Retirement Scheme (SRS) will be adjusted from 1 Jan 2016 to:

- S$15,300 (15% x S$102,000) for Singapore citizens or Singapore permanent residents;
- S$35,700 (35% x S$102,000) for non Singapore citizens or Singapore permanent residents.

 

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    1. Changes to Central Provident Fund (CPF) Contribution

7.1 Adjustment to CPF Contribution Rates for Senior Workers

The monthly CPF contribution rates for senior workers will be adjusted from 1 Jan 2016 as follows:The monthly CPF contribution rates for senior workers will be adjusted from 1 Jan 2016 as follows:

Employee’s age (years)
Increase in contribution rates (% of wages)
Contribution by Employer
Contribution by Employee
Total
Above 50 to 55
+1
+1
+2
Above 55 to 60
+1
-
+1
Above 60 to 65
+0.5
-
+0.5

7.2 Adjustment to Monthly CPF Contribution Ceiling

The monthly CPF contribution ceiling will be adjusted from the current S$5,000 to S$6,000 from Jan 2016.

 

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    1. Changes to Vehicle Taxes

8.1 Extension of Carbon Emission-based Vehicle Scheme (CEVS)

The Carbon Emission-based Vehicle Scheme (CEVS) will be extended for another 2 years from 1 July 2015 to 30 June 2017, with refinements made to the scheme.

8.2 Updating Petrol Duty Rates

The current petrol duty rates will be adjusted as follows:

- Premium grade, from S$0.44 per little to S$0.64 per little; and
- Intermediate grade, from S$0.41 per little to S$0.56 per little.

8.3 One-Year Road Tax Rebate

To cushion the impact from the increase in petrol duty, a one-year road tax rebate will be given from 1 Aug 2015 to 31 July 2016 as follows:

- 20% for petrol cars;
- 60% for petrol motorcycles; and
- 100% for petrol commercial vehicles and taxi.

 

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    1. Other Changes

9.1 Deferment for Foreign Workers’ Levy for 2015

The planned levy increase for 2015 for S Pass and Work Permit holders will be deferred for one year to 1 July 2016.

9.2 Adjustment to Work Permit Holders Levies in Manufacturing and Construction

The levy for WP holders for manufacturing sector will be kept unchanged from 1 July 2014 to 30 June 2017. The levy for construction sector will be adjusted slightly as follows:

- Basic tier levy for R2 workers will be raised from S$550 to S$650 from 1 July 2016 and then to S$700 from 1 July 2017; and
- Levy for R1 workers will be reduced from S$750 to S$600 from 1 July 2015.

9.3 GST Voucher – Cash and GSTV Bonus

All eligible citizens will receive a GSTV of S$300 in 2015. In addition, eligible senior citizens aged 55 and above will receive an additional GSTV bonus of S$300 in 2015. The GSTV bonus for eligible citizens aged 65 and above will be S$600.

 

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    1. Year of Assessment 2015 tax filing due dates

We wish to take this opportunity to remind our clients of the tax filing due dates for the Year of Assessment 2015:

Personal Tax
filing due on 18 April 2015 (By e-filing)
Partnerships, Clubs, Associations and Management Corporations
filing due on 15 April 2015
Corporate Tax
filing due on 30 November 2015

 

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Mr Chng Chung Hing
Tax Director
Accredited Tax Advisor
Loke Lum Consultants Pte Ltd
Compiled on 24th February 2015

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