Singapore Budget 2021

Executive Summary

Deputy Prime Minister and Minister for Finance,Mr.Heng Swee Keat delivered the budget for fiscal year April 2021 to March 2022in Parliament on 16February 2021. The theme of the budget this year is “Emerging Strong Together”.  In this budget, the Government has announced a series of economic and social policies that address Singapore’s immediate need to emerge from the COVID-19 pandemic with resilience.  At the same time, the budget has a long-term vision that focuses on accelerating structural adaptations by building a stronger Singapore that is economically vibrant, socially cohesive and environmentally sustainable.  

The 4 key thrusts of the budget include COVID-19 recovery,emerging stronger with skilled workers and innovative businesses, strengthening our social compact and building a sustainable home.  These key thrusts are based upon a fiscal strategy that balances the need to address Singapore’s immediate and long term structural needs in a responsible manner.  

Apart from the COVID-19 Resilience Package, the main transformational proposals for businesses are based upon three enablers.  First, to grow a vibrant business community, with a strong spirit of innovation and enterprise, deeply connected with Asia and the world.  Second, to catalyse a wide range of capital to enable businesses to transform and scale. Third, to create opportunities and redesign jobs, for our people to develop their skills, creativity, and talents.

On the international tax front, Deputy Prime Minister Heng Swee Keat highlighted the need to maintain a resilient tax system, especially in context of on-going Base Erosion and Profit Shifting discussions.  He underscored that "if and when these international tax rules are changed, consideration will be given as to whether adjustments are required to our corporate tax system accordingly, in consultation with the industry."  Businesses are encouraged to be prepared for these changes – by planning, dissecting and understanding the effects of the new rules, and readying themselves to actively engage in the consultation process.

Finally, on the Goods and Services Tax front, the Budget 2018 announcement of a GST rate increase was reiterated as DPM Heng Swee Keat gave an expectation that the rate change would take effect between 2022 to 2025 (“sooner rather than later”).

We summarise below the tax changes announced in budget 2021:
 

1. Changes to Corporate Tax

There will be no change to the corporate tax rate of 17% or the partial tax exemption scheme which applies to the first $200,000 of the company’s normal chargeable income.  In addition, no corporate income tax rebate will be granted for the Year of Assessment (“YA”) 2021.  

For comparison, we append below the rebate rates and caps applicable since YA 2013:
 
 

YA

Rebate Rate

Cap

2021

N/A

N/A

2020

25%

           15,000

2019

20%

           10,000

2018

40%

           15,000

2017

50%

           25,000

2016

50%

           20,000

2013 - 2015

30%

           30,000


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


Jurisdiction

Corporate

Tax Rate (%)

Jurisdiction

Corporate

Tax Rate (%)

Hong Kong

16.5

Vietnam

20

Taiwan

20

China

25

Thailand

20

The Philippines

30

South Korea

25

India

30

Indonesia

22

Japan

30.62

Malaysia

24

 

 


2. Tax Changes for Businesses

2.1 Extension of the Enhanced Capital Allowance (“CA”) and Loss Carry Back Scheme
The carry-back relief scheme was enhanced during YA 2020 to allow qualifying deductions to be carried back up to three immediate preceding YAs, capped at $100,000.  This scheme has been extended to apply to qualifying deductions for YA 2021.

2.2 Extension of the Option to Accelerate the Write-off of Plant and Machinery Cost
Taxpayers who incur capital expenditure on the acquisition of plant and machinery during YA2021 have an option to accelerate the write-off of the cost of acquiring such plant and machinery over 2 years at 75% in the first year and the remaining 25% in the second year.  This option has been extended to apply to plant and machinery acquired during YA 2022.

2.3 Extension of the Option to accelerate Renovation and Refurbishment (“R&R”) Deductions
Currently, qualifying R&R expenditure is claimable over 3 consecutive YAs, starting from the YA in which the R&R expenditure is incurred with a cap of $300,000 for every period of 3 years.This option was enhanced in YA 2021 giving taxpayers an option to claim R&R deduction in one YA with the same $300,000 cap.  This option has been extended to apply to qualifying expenditure incurred during YA 2022.  

2.4 Enhancement of the Double Tax Deduction for Internationalisation (“DTDi”) Scheme
Under the DTDi scheme which remains valid till 31 December 2025, businesses are allowed a tax deduction of 200% on qualifying market expansion and investment development expenses, subject to approval for amounts above $150,000.  Under the budget measures, enhancements to the scope of the DTDi scheme and qualifying expenses will apply to eligible expenses incurred on or after 17 February 2021.Enterprise Singapore will provide further details of the changes by 28 February 2021.

2.5 Extension of the 250% Tax Deduction for Qualifying donations
The current entitlement to a 250% tax deduction for qualifying donations made to Institutions of a Public Character (“IPC”) has been extended to 31 December 2023.  All other conditions of the scheme remain the same.  

2.6 Extension of the Business and IPC Partnership Scheme (“BIPS”)
Currently qualifying persons can enjoy a total of 250% tax deduction on qualifying expenditure such as wages incurred in respect of the provision of services or secondment of an employee to an IPC.  This scheme which will lapse by 31 December 2021 has been extended till 31 December 2023.  

2.7 Extension of the Investment Allowance for Automation Projects
Currently, companies can claim 100% investment allowance (“IA”) in respect of qualifying capital costs incurred on approved automation projects. The IA is given in addition to the usual capital allowance available for purchase of plant and machinery capped at S$10 million per automation project. This scheme which will lapse by 31 March 2021 has been extended till 31 March 2023.  

2.8 Extension and Enhancement of the Investment Allowance for Emissions Reduction
The Investment Allowance for Emissions Reduction (previously known as IA for Energy Efficiency) improvement projects will be expanded to include projects involving reduction of greenhouse gas emissions with eligibility conditions streamlined and subject to approval.  This scheme which will lapse by 31 March 2021 will be extended till 31 December 2026. EDB will release further details of the changes by 30 June 2021.

2.9 Withdrawal of the Accelerated Depreciation Allowances for Highly Efficient Pollution Control Equipment (“ADA-PCE”) Scheme
The ADA-PCE scheme which accelerates the write-off of the cost of acquiring highly PCE equipment over one year has been withdrawn from 17 February 2021.


3. Goods and Services Tax

3.1 Extension of Goods and Services Tax (“GST”) to Low-value Goods
Currently, low-value goods (below $400) which are imported via air or post are not subject to GST.  Under the budget measures, with effect from 1 January 2023, such low-value goods will be subject to GST.  This will be effected via the Overseas Vendor Registration and reverse charge regimes.  Implementation details are pending industry consultation.

3.2 Extension of GST to Business-to-Consumer (“B2C”) Imported Services
Currently, GST applies to B2C digital services and Business to Business (“B2B”) imported services.  Under the budget measures, GST will apply to B2C imported non-digital services with effect from 1 January 2023.  This will be effected via the Overseas Vendor Registration regime.  Implementation details are pending industry consultation.  

3.3 Change in Basis for Application of Zero-Rating to Supply of Media Sales
Currently, for GST purposes, the basis for determining whether zero-rating applies to a supply of media sales is based on the place of circulation of the advertisement.  With effect from 1 January 2022, the basis for determining whether zero-rating applies to a supply of media sales will be based on the place where the customer and direct beneficiary of the service belong.  


4. Extensions to Financial Sector Deductions and Exemptions

4.1 Extension and Refinement of the Double Tax Deduction (“DTD”) for Costs Attributable to Retail Bonds
Currently, bond issuers who carry on a trade or business in Singapore, are allowed to claim a tax deduction of up to 200% on qualifying upfront costs attributable to retail bonds.  This scheme which was scheduled to lapse in respect of bonds issued after 18 May 2021 has been extended to 31 December 2026 with refined scope to costs incurred attributable to rated retail bonds. MAS will provide further details of the changes by 31 May 2021.

4.2 Extension and Rationalisation of the Withholding Exemption for Financial Sector
The withholding tax exemption applicable to banks (or specified entities) to non-resident persons or Singapore permanent establishments which will lapse in respect of contracts made up to 31 March 2021 has been extended till 31 December 2026.  MAS will release further details of all changes by 31 May 2021.

4.3 Extension of the Withholding Exemption on Payments made for Structured Products
The current withholding tax exemption for payments made from structured products offered by financial institutions in Singapore which was scheduled to lapse in respect of contracts taking effect after 31 March 2021 has been extended to 31 December 2026.  MAS will release further details of the changes by 31 May 2021.

4.4    Extension of the Withholding Exemption on Payments for Over-The-Counter (“OTC”) Financial Derivatives
The current withholding tax exemption for payments made from OTC financial derivatives by financial institutions in Singapore which was scheduled to lapse after 31 March 2021 has been extended to 31 December 2026.  MAS will release further details of the changes by 31 May 2021.


5. Extensions for Not-for Profit Organisations

Extension of the Tax Incentive for Not-for-Profit (“NPO”)
The current tax exemption on income derived by an approved NPOs which was scheduled to lapse after 31 March 2022 has been extended to 31 December 2027.  


6. Tax Changes for Insurance Sector

Lapse of the Insurance Business Development – Specialised Insurance (“IBD-SI”) Scheme

The current IBD umbrella scheme which provides for concessionary tax rates for award recipients on qualifying income derived from carrying on specialized insurance and reinsurance business will be allowed to lapse after 31 August 2021.


7. Other Tax Changes–Vehicles

7.1 Enhancement of the Electric Vehicle Early Adoption Incentive
The current incentive of 45% rebate off the Additional Registration Fee (“ARF”) for electric cars and taxis from January 2021 to December 2023 has a cap of $20,000 and an ARF floor of $5,000.  The ARF floor of $5,000 will be reduced to $0 from January 2022.

7.2 Revision to petrol duty rates with offsetting measures
Petrol duty rates for Premium and Intermediate grade petrol will be increased.  To ease the transition to the revised petrol duty rates, a road tax rebate will be provided for a period of one year.


8. Changes to Individual Income Tax

8.1    Personal Income Tax Rates
The personal tax rates have 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

 


9. Year of Assessment 2021 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 2021: 

Personal Tax

filing due on 18 April 2021 (By e-filing)

Partnerships, Clubs,

Associations and Management Corporations

 

filing due on 15 April 2021

Corporate Tax

filing due on 30 November 2021

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