Deputy Prime Minister and Minister for Finance, Mr. Heng Swee Keat delivered the budget for fiscal year April 2020 to March 2021 in Parliament on 18 February 2020. The theme of the budget this year is “Advancing As One Singapore”. In this budget, the Government has announced a series of economic and social policies that address both short-term challenges arising in particular from the on-going COVID-19 outbreak and longer-term transformational changes.
The 4 key thrusts of the budget include growing our economy and transforming our enterprises, caring for and nurturing Singaporeans at every stage of their lives, building and securing our nation and working together with Singaporeans.
Apart from COVID-19 related measures, the main transformational proposals for businesses include support for businesses to strengthen partnership with the rest of the world, support packages for start-up enterprises, measures to support domestic businesses with expansion and continued investment to increase the productivity and skills of the workforce.
We summarize below the tax changes announced in budget 2020:
To help companies with cash flow, a corporate income tax rebate of 25% of tax payable, capped at S$15,000 will be granted for YA 2020 with an additional 2-month of interest-free installments for ECI filings from 19 February 2020 to 31 December 2020. For comparison, we append below the rebate rates and caps applicable since YA 2013:
YA | Rebate Rate | Cap |
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 |
Apart from the above, there will be no change to the corporate tax rate or the partial tax exemption scheme.
As such the corporate tax rates since YA 2010 have remained at 17% with the partial tax exemption scheme applying to the first $200,000 of a company’s normal chargeable income.
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 | 25 |
Indonesia | 25 | Japan | 30.62 |
Malaysia | 24 |
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2.1 Enhancement of the Capital Allowance (“CA”) and Loss Carry Back Scheme
Currently, the current year unabsorbed CA and trade loss for a YA may be carried back to offset against a taxpayer’s assessable income for the immediate preceding YA, capped at $100,000. The carry-back relief scheme will be enhanced to allow qualifying deductions to be carried back up to 3 immediate preceding YAs.
2.2 Option to accelerate the write-off of the cost of acquiring plant and machinery
Taxpayers who incur capital expenditure on the acquisition of plant and machinery during YA2021 will 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. No deferment of capital allowance is allowed under this irrevocable option.
2.3 Option to accelerate the deduction of Renovation and Refurbishment (“R&R”) Expenses
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. Under the budget measures, for YA 2021, taxpayers will have an option to claim R&R deduction in 1 YA with the same $300,000 cap over 3 consecutive years remaining unchanged.
2.4 Extending the Double Tax Deduction for Internationalisation (“DTDi”) Scheme
Under the DTDi scheme, businesses are allowed a tax deduction of 200% on qualifying market expansion and investment development expenses, subject to approval for amounts above $150,000. This scheme has been extended till 31 December 2025 with enhancements in the scope of covered expenses in respect of overseas business development and overseas business missions.
2.5 Extending the Merger& Acquisitions (“M&A”) Scheme
Under the M&A scheme, businesses that engage in acquisition activities can claim an M&A allowance based upon 25% of the value of the acquisition subject to a cap of $40 mil per YA, stamp duty relief capped at $80k per annum and a 200% tax deduction on transaction costs. This scheme has been extended for acquisitions made on or before 31 December 2025 with removal of the stamp duty relief for acquisitions executed after 1 April 2020.
2.6 Extending the treatment of Gains on Disposal of Ordinary Shares as Non-Taxable
Currently, gains derived from the disposal of ordinary shares will be exempt from tax if the divesting company holds a minimum shareholding of 20% in the company whose shares are being disposed for a minimum period of 24-months immediately prior to the disposal. This arrangement will be extended to cover disposals made from 1 June 2022 to 31 December 2027, subject to some revision.
2.7 Extending the Land Intensification Allowance (“LIA”) Scheme
Under the LIA Scheme, subject to conditions, an initial allowance at 25% and annual allowance at 5% can be claimed on capital expenditure incurred on the construction or renovation/ extension of an approved LIA building. This scheme which was scheduled to lapse after 30 June 2020 has been extended to 31 December 2025.
2.8 Extending the Writing Down Allowance Scheme for Indefeasible Right of Use (“IRU”)
Currently businesses that incur capital expenditure on the purchase of an IRU for purposes of its trade, business or profession can claim writing down allowance on the amount incurred, subject to conditions. This scheme which was scheduled to lapse after 31 December 2020 has been extended until 31 December 2025.
2.9 Further Tax Deduction Scheme for Research and Development expenditure under Section 14E Incentive to Lapse
Currently, Section 14E provides a further tax deduction for R&D expenditure incurred on approved R&D projects conducted in Singapore subject to a cap of 200%. This incentive will lapse after 31 March 2020. In future businesses can continue to rely on Section 14D/DA which provides for up to 250% tax deduction on broad based qualifying R&D expenditure.
2.10 Streamlining the number of years of working life of Plant and Machinery for Capital Allowance Claims
Currently, the Sixth Schedule of the ITA specifies the prescribed working life of plant and machinery for computing annual allowance claims. In order to streamline the working life of plant and machinery, the following will apply in respect of plant and machinery purchased in or after FY 2022 or if purchased prior to FY 2022, the claim for capital allowance had been deferred:
Current Prescribed Working Life | Streamlined Prescribed Working Life |
5, 6, 8, 10 or 12 years | Business can choose to claim capital allowance over 6 or 12 years |
16 years | Business can choose to claim over 6, 12 or 16 years |
2.11 Refinement of tax treatment of expenditures funded by capital grants
Currently recipients of capital grants from the Government and statutory boards are not subject to tax on the grant amounts received. At the same time, these recipients are able to claim tax deductions or allowances on the corresponding expenditure incurred. For capital grants approved on or after 1 January 2021, recipients will not be allowed to claim tax deductions or allowances on that part of the expenditure that are funded by such grants.
3.1 Extending the Tax Incentive Schemes for Insurance Businesses
The current tax incentives for Insurance Business Development scheme include tax exemption on specified income derived from designated insurance or reinsurance activities. This scheme which was meant to lapse after 31 March 2020 has been extended to 31 December 2025.
3.2 Extending and Enhancing the Maritime Sector Incentive
The current tax incentives for the Maritime Sector include tax exemption on specified income derived by ship operators, maritime lessors and shipping support services and withholding tax exemptions on payment made in respect of qualifying financing arrangements. This scheme has been extended till 31 December 2026 with some further expansion in the scope of income covered by the incentive.
3.3 Enhancement of Withholding Exemption for Interest on Margin Deposits
The current withholding tax exemption for interest on margin deposits qualify for withholding tax exemption if payments are made by an approved exchange. The scope of covered entities and products subject to this scheme has been expanded.
3.4 Extending and Enhancing the Finance and Treasury Centre (“FTC”) Scheme
The current FTC scheme grants a tax incentive on specified income derived by approved FTCs for qualifying activities or services. This scheme which was scheduled to lapsed after 31 March 2021 has been extended until 31 December 2026 with expansions on the list of qualifying source of funds and activities.
3.5 Extending and Refining the Global Trade Programme (“GTP”)
The current GTP grants a tax incentive on specific income service by approved global trading companies from qualifying transactions. This scheme which was scheduled to lapse after 31 March 2021 has been extended until 31 December 2026 with some refinement.
3.6 Extending and Refining Tax Incentives for Venture Capital Funds and Venture Capital Fund Management Companies
Currently, venture capital funds enjoy a tax exemption on specified income. This incentive which was scheduled to lapse after 31 March 2020 will be extended until 31 December 2025 with some refinements including expansion of the list of investments as well as opening upon the scheme to foreign incorporated companies and Singapore Variable Capital Companies.
The GST rate will remain at 7% in 2021 but will increase to 9% by 2025. When the GST rate is increased, an Assurance Package will be provided, and the government will continue to absorb GST on publicly subsidized healthcare and education.
As part of the Stabilisation and Support Package, qualifying commercial properties will be granted a rebate for property tax payable for the period 1 January 2020 to 31 December 2020. The rebate ranges from 10% to 30% depending upon the type of commercial property.
6.1 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
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6.2 Extend the Withholding Tax Exemption for Non-Resident Mediators (“NRMs”) and Non-Resident Arbitrators (“NRAs”)
Currently, non-resident professionals are subject to withholding tax at a rate of 15% on gross income from the profession. However, they may also elect to be taxed at 22% on net income basis. As concession, the income derived by NRMs and NRAs from mediation and arbitration work carried out in Singapore from 1 April 2015 to 31 March 2020 are exempt from tax, subject to conditions. This exemption will be extended until 31 March 2022.
6.3 Allow the Concessionary Withholding Tax Rate for Non-Resident Public Entertainers (“NRPEs”) to Lapse
NRPEs are subject to withholding tax at a rate of 15% on gross income in respect of services performed in Singapore. As a concession, the withholding tax rate of 15% is reduced to 10% in respect of payments made to FRPEs from 22 February 2020 to 31 March 2020. This concession will be extended until 31 March 2022 and will be scheduled to lapse thereafter.
6.4 Allow the Angel Investors Tax Deduction (“AITD”) Scheme to Lapse
Under the AITD Scheme, an approved angel investor is granted a tax deduction of 50% of the cost of his qualifying investments, subject to conditions. This scheme is scheduled to lapse after 31 March 2020.
In line with the vision to have vehicles run on cleaner energy, road tax schedules for Electric Cars and Hybrid Cars will take place during FY 2020 – 2021, reflecting a reduction in road tax rates as well as the introduction of a lump sum component.
We wish to take this opportunity to remind our clients of the tax filing due dates for the Year of Assessment 2020:
