Singapore Budget 2018
Executive Summary

The Government Budget for April 2018 to March 2019 fiscal year was announced by Finance Minister Heng Swee Keat in Parliament on 19 February 2018. The theme of the budget this year is “Together, A Better Future”. Riding on the exceptional GDP growth rate of 3.6% and productivity growth rate of 4.5% in 2017, the Government has announced key measures to further strengthen our economy and to build sustainability for long-term growth. Main features of the budget this year include the proposed increase to the Goods and Services Tax (GST) rate from 7% to 9%, implementation of the carbon tax from 2019 and increase of 1% in Buyer’s Stamp Duty from 20 February 2018. The Government has announced a one-off SG bonus of S$100 to S$300 for all eligible Singaporeans in view of the budget surplus achieved for fiscal year 2017. 
The corporate tax rebate for the YA 2018 will be adjusted to 40% of the tax payable and capped at S$15,000. For the YA 2019, the tax rebate will be 20% and capped at S$10,000.The Government has made adjustment to the partial tax exemption scheme for corporate tax.The full tax exemption for the first S$100,000 chargeable income for qualifying startup-company will be modified from the YA 2020. 
We summarize below the tax changes announced in budget 2018:

1. Key Features

1.1 Changes to Corporate Tax

There will be no change to the tax rate for corporate tax. The corporate tax rate remains at 17% with partial tax exemption for the first S$300,000 chargeable income. With effect from the YA 2020, the partial tax exemption scheme will be modified to first S$200,000 of the chargeable income. The full tax exemption for the first S$100,000 for qualifying start-upcompanies will be replaced by 75% tax exemption.   
With the adjustment, the effective tax rate for the first S$200,000 chargeable income will be 8.28% from the YA 2020. Qualifying start-up companies will enjoy an effective tax rate of 6.37% for the first S$200,000 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 (%)

2009

18

2010-2018

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

24

Vietnam

20

China

25

The Philippines

30

India

30

Japan

23.9

1.2 Tax Rebate for Personal Income Tax for the YA 2018

There was no personal tax rebate announced for resident individual taxpayers for the YA 2018. 

1.3 Tax Rebate for Corporate Taxpayers for the YA 2018 and YA 2019

The tax rebate for the YA 2018 will be increased to 40% of the tax payable from 20% and the capping increased to S$15,000 from S$10,000. There will also be a tax rebate at 20% of the tax payable for the YA 2019, capped at S$10,000.

1.4 Implementation of Carbon Tax from 2019

As announced in the budget for 2017, the carbon tax will be implemented from 2019. The tax rate will be S$5 per tonne of greenhouse gas emissions from 2019 to 2023. The tax rate will be reviewed in 2023 with a potential increase in tax rate to S$10 to S$15 per tonne by 2030.

1.5 Increase in Buyer’s Stamp Duty

The buyer’s stamp duty for residential property transacted from 20 February 2018 will be adjusted with an additional 1% tax for property value above S$1 million. The revised buyer’s stamp duty from 20 February 2018 is as follow:

Rates

Tiers

(Residential properties)

1%

First S$180,000

2%

Next S$180,000

3%

Next S$640,000

4%

Amount above S$1,000,000


2. Tax Changes for Businesses
 
2.1 Research & Development Expenses

Approved research and development (“R&D”) activities undertaken by companies in Singapore will be accorded with a 250% tax deduction on expenses incurred, up from 150%. The changes will take effect from YA 2019 to YA 2025.      
2.2 Enhancement to Tax Deduction for Intellectual Property 

Under current law, qualifying registration costs incurred for intellectual property (“IP”) will be allowed with 100% tax deduction. The scheme will be enhanced to 200% tax deduction on first S$100,000 registration cost from YA 2019 to YA 2025. 

2.3 Enhancement to Tax Deduction on IP In-licensing Cost

Tax deduction for IP in-licensing costs will also be increased to 200% for the first S$100,000 incurred from the YA 2019 to YA 2025.  

2.4 Enhancement to Double Tax Deduction Scheme

The current double tax deduction (“DTD”) scheme will be enhanced from YA 2019 to increase the maximum pre-approved amount to S$150,000, from the current S$100,000. 

2.5 Extension of Business and IPC Partnership Scheme

Under current treatment, businesses can partner with institutes of public character (“IPC”) for provisions of services by employees to the IPCs or secondment of their employees to the IPC. The businesses will enjoy 250% tax deduction on wages incurred in the arrangement. The scheme will be extended to 31 December 2021.

3. Tax Changes for Financial Sector
 
3.1 A New Singapore Variable Capital Companies Scheme

The new scheme will regard Singapore Variable Capital Companies (“S-VACC”) as a single entity for tax purpose. These S-VACC will be accorded with tax exemption under Sections 13R and 13X of the Income Tax Act and a 10% concessionary tax rate will be granted to approved fund managers who manage S-VACC. Monetary Authority of Singapore (“MAS”) will announce the details of this new scheme in October 2018. 

3.2 Changes to Enhanced-Tier Fund Scheme

The current tax exemption under Section 13X for approved companies, trusts and limited partnerships will be extended to all fund vehicles constituted in all forms. The changes will take effect from awards approved on or after 20 February 2018. MAS will announce more details of this scheme in May 2018. 

3.3 Tax Transparency Treatment for Singapore Listed REITs
 
Under current practice, distributions from Singapore exchange listed real estate investment trusts (“REIT”) to exchange-traded funds (“ETF”) are taxable at 17%.Subsequent distribution by ETF will be tax exempt in the hands of the investors. The scheme will be refined to allow:
- Tax transparent treatment for distribution received by ETF from REIT;
- Tax exemption for individual for distribution received from ETF (except partnership); and
- 10% concessionary tax for non-resident non-individual for distributions received from ETF. 

3.4 Enhancement to Financial Sector Incentive (“FSI”)
 
The FSI provides concessionary tax rates from 5% to 13.5% for qualifying banking and financial activities including headquarter, corporate service, fund management and investment advisory. The scheme will be extended to 31 December 2023. MAS will announce details of the changes in May 2018.

3.5 Tax Incentive for Insurance Industry
 
The current tax incentives for the insurance industry include concessionary tax rates of 5% or 10% for approved insurance and reinsurance brokers for commission, fees, broking and advisory services. The scheme will be extended to 31 December 2023. MAS will announce details of the changes by May 2018.  

3.6 Extending Tax Deduction Scheme for Banks for Impairment

Under Section 14I, banks and financial institutions are allowed to claim for impairment on non-credit impaired financial assets under financial reporting standard (“FRS”) 109 and MAS Notices. The current scheme will be extended to YA 2024 for December year-end cases and YA 2025 for non-December cases. MAS will announce details of the changes by May 2018. 

3.7 Rationalize the Withholding Tax Exemption for Financial Sector
 
Currently, interest payment made to non-resident of Singapore is subject to withholding tax (“WHT”) at 15% of the gross amount payable. Tax exemption is granted to payment made to Singapore branches of foreign banks. The current scheme will be refined to include:
- A review date of 31 December 2022 has been set to review payment made under cross currency swap transactions, interest rate swap by financial institutions and MAS, and payment made under securities lending or repurchase agreement;
- The WHT exemptions will be legislated with a review date of 31 December 2022 for interest payment for margin deposit for transactions in futures and interest for spot foreign exchange; and
- Withdrawal of tax exemption for payment of interest from approved Asian Dollar Bonds and payment made under over-the-counter financial derivative transactions. 
MAS will announce details of the changes by May 2018.

3.8 Extending the Tax Incentive for Approved Special Purpose Vehicle
 
The Approved Special Purpose Vehicle (“ASPV”) scheme provides tax incentive in 4 areas including tax exemption for corporate tax, 76% recovery rate for GST, WHT exemption for payment to non-resident and stamp duty remission on qualifying transaction. The scheme will be extended to 31 December 2023, except stamp duty remission which will be allowed to lapse after 31 December 2018. MAS will announce details of the changes by May 2018.

3.9 Refinement to Qualifying Debt Securities Incentives
 
The current Qualifying Debt Securities (“QDS”) incentives provide concessionary tax at 10% for qualifying companies and tax exemption for qualifying individuals. The current scheme will be extended to 31 December 2023 and the QDS+ scheme will be allowed to lapse after 31 December 2018. MAS will announce details of the changes by May 2018.

4. Other Tax Changes

4.1 Tax Exemption for Primary Trader at SGS
 
Currently, primary trader is granted with tax exemption on income derived from trading in Singapore Stock Exchange (“SGS”). The scheme will be extended to 31 December 2023. MAS will announce details of the changes by May 2018.

4.2 Investment Allowance for Submarine Cabling Landing in Singapore
 
Currently, capital expenditure incurred on submarine cable system does not qualify for investment allowance (“IA”). The new incentive will grant IA on expenditure incurred from 20 February 2018 to 31 December 2023.

4.3 Introduction of Review Date for WHT Exemption on Container Leasing Payment
 
Withholding tax exemption is currently granted to payment of container lease rental made to non-resident. A review date of 31 December 2022 is set to review the incentive.

4.4 Adjustment to Excise Duty for Tobacco Product
 
To discourage consumption of tobacco product, a 10% increase in excise duty will be imposed from 19 February 2018 for all products including cigarettes, manufactured tobacco and other tobacco related products.

4.5 Extension of Wage Credit Scheme
 
Under the current scheme, the Government will subsidy a portion of the wage increment of Singaporean employees with gross monthly wages up to S$4,000. The current scheme will be extended for 3 more years from 2018 to 2020.

4.6 Adjustments to Foreign Domestic Worker Levy
 
The levy for Foreign Domestic Workers (“FDW”) will be adjusted from 1 April 2019. Currently, households with young children below 16 years of age and elderly person pay a monthly levy of S$60 for their FDW. Other households pay a monthly levy of S$265. Effective from 1 April 2019, the monthly levy for households without young children and elderly person will be increased to S$300. The monthly levy for second FDW will be adjusted to S$450 from 1 April 2019.

5. Goods and Services Tax (GST)
 
5.1 Introduction of GST on Imported Services

A reverse charge system will be introduced to impose GST on imported services. At the same time, businesses can claim the imported GST as input tax incurred. The imported GST will only be applicable to services. Overseas suppliers should register themselves via an Overseas Vendors Registration (“OVR”) if they make significant supply of digital services to local customers. The GST on imported services will be implemented from 1 January 2020. 

6. Changes to Individual Income Tax

6.1 Personal Income Tax Rates

The personal tax rateshave been implemented from the YA 2017. No changes to personal tax rate were introduced in this budget. We append below the tax rate table for resident taxpayers:

 

Tax rate 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 Approved Donations made to Institutes of Public Character

Approved donations made to institutes of public character (IPC) were granted with a 250% tax deduction under the current tax treatment. The scheme will be extended to approved donations made on or before 31 December 2021.

7. Transfers to Households 

7.1 SG Bonus

A one-off SG bonus will be given to all Singaporeans aged 21 and above in 2018 based on their assessable income in YA 2017. The details are as follows:

 

Singaporeans aged 21 years and above in 2018

 

Up to $ 28,000

$ 28,001 to $ 100,000

Above $ 100,000

 

$ 300

$ 200

$ 100

 

7.2 GST Voucher – Cash 

The GST cash voucherof up to S$300 will be given to eligible Singaporeans in 2018:

 

Singaporeans aged 21 years and above in 2018 Assessable Income for YA 2017 $28,000 and below

Annual Value of Home as at 31 Dec 2017

 

Up to $13,000

$ 13,001 to $ 21, 000

GSTV – Cash payment

$ 300

$ 150



7.3 GSTVoucher – U-Save 

The following GST vouchers – U-savewill be given to eligible households in 2018: 

 

HDB Flat Type

Annual U-Save

for 2018

Annual U-Save from 2019 – 2021

(after $20 increase)

 

1- and 2-Room $380
$400

3-Room $340 $360
4-Room $300 $320
5-Room $260 $280
Executive / Multi-Generation $220 $240


7.4 GST Voucher – Medisave

Older Singaporeans will continue to receive GSTV – Medisave in 2018 as follows:


 

Age in 2018

Annual Value of Home as at 31 Dec 2017

 

Up to $13,000

$ 13,001 to $ 21, 000

65 to 74 years

$ 250

$ 150

75 to 84 years

$350

$ 250

85 years and above

$ 450

$ 350


Together with the Pioneer Generation Medisave / 5-Year Medisave Top-up, eligible older Singaporeans will receive up to S$1,250 in Medisave Top-up in 2018.
 

Age in 2018

Amount of Medisave Top-up

59 to 64 years

Up to $200

65 to 73 years

Up to $450

74 years

Up to $650

75 to 78 years

Up to $750

79 to 83 years

Up to $950

84 yearrs

Up to $1150

85 years and above

Up to $1250

7.5 Service and Conservancy Charges (S&CC) Rebate

Eligible HDB households will receive S&CC Rebate to offset between 1.5 to 3.5 months of S&CC charges. Details of the S&CC rebate are as follows: 
 
HDB Flat Type

FY 2018 S&CC Rebate (no. of months)

April

2018

July

2018

October

2018

Jan

2019

Total for

FY2018

1- and 2-room

1 1 1 0.5 3.5

3- and 4-room

1 0.5 0.5 0.5 2.5

5-room

0.5 0.5 0.5 0.5 2

Executive /

Multi-Generation

0.5 0.5 0.5 - 1.5

8. Year of Assessment 2018 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 2017:

Personal Tax                  filing due on 18 April 2018 (By e-filing)

Partnerships, Clubs,        filing due on 15 April 2018
Associations and
Management Corporations

Corporate Tax                filing due on 30 November 2018
 

Mr Chng Chung Hing
Tax Director
Accredited Tax Advisor
Loke Lum Tax Advisory Pte Ltd
Compiled on 20th February 2018

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