The current corporate income tax rate is 18%.
The Minister has proposed to reduce the corporate income tax rate by one percentage point from 18% to 17% from the Year of Assessment 2010.
This 1% tax cut, taken together with Singapore’s partial tax exemption system, will mean that income up to S$5m (approx US$ 3m) will be taxed at a lower rate than in Hong Kong, which has a flat tax rate of 16.5%.
This reduction in corporate tax will also mean a lower withholding tax on certain payments (except for royalties, interest and rent for moveable properties) to non-resident persons other than non-resident individuals.
Tax in Singapore is imposed on the income, if it is accrued in or derived from Singapore (Singapore-sourced income) or when income is received or deemed to be received in Singapore from outside Singapore (foreign-sourced income) except income in the nature of
The Minister has proposed expanding the scope of foreign-sourced income exemption scheme to cover all foreign-sourced income and lift the current conditions to qualify for tax exemption when remitted in Singapore. This proposed change is effective from 22 January 2009 to 21 January 2010.
With these proposed changes, companies would be exempt from Singapore tax on their remittance on all foreign-sourced income earned or accrued outside on or before 21 January 2009, and remitted to Singapore between 22 January 2009 to 21 January 2010 (both dates inclusive), without fulfilling any conditions as set above for availing the tax exemption.
The proposed change will help businesses to bring into Singapore their foreign-sourced income in offshore accounts and alleviate their current liquidity crises thus meeting their finance needs in Singapore without getting taxed in Singapore.
Inland Revenue Authority of Singapore (IRAS) will issue further details by April 2009.
Under the existing one year loss carry-back relief scheme, any person may carry back their current year’s unutilised capital allowances and trade losses (collectively referred as ‘qualifying deduction’) up to a limit of S$ 100,000, to set-off against assessable income of the Year of Assessment immediately preceding the Year of Assessment in which the qualifying deduction arose. However businesses have to meet the ’substantial shareholding test’ and ’same business test’ in order to qualify for the Scheme.
With the view to help businesses with their cash-flow and aid businesses which are making losses in this recession, the Minister has proposed to temporarily enhance the existing loss carry-back relief scheme for Years of Assessment 2009 and 2010 as follows:
With the above it is also proposed that, IRAS will allow provisional claims of tax refunds based on estimated losses (instead of waiting for finalisation of chargeable income and tax assessments). This will allow businesses to obtain their refund much earlier, thereby ease cash flow constraints during this financial crisis.
IRAS has issued a circular in January 2009 which sets out the detailed rules
Under the current start-up exemption scheme, a newly incorporated company can claim full tax exemption on the first S$100,000 of chargeable income and 50% exemption for next S$ 200,000 of chargeable income. A company that qualifies should have been incorporated and tax resident in Singapore, and have no more than 20 shareholders of which at least one individual holds at least 10% of total number of issued ordinary shares. The full tax exemption is available for the first 3 consecutive Years of Assessment.
The Minister has proposed the start-up exemption scheme to be extended to companies limited by guarantee, subject to same conditions imposed on companies limited by shares, with effect from Year of Assessment 2010.
Under the current regime capital expenditure incurred on provision of plant and machinery for the purpose of a trade, profession or business, is granted capital allowance over a three year period on a straight line basis.
The Minister has proposed accelerated capital allowance for capital expenditure incurred on plant and machinery acquired in the basis years 2009 and 2010 respectively. Under this proposed change, capital expenditure incurred on plant and machinery acquired for the purpose of trade, profession or business can be written down within two years and 75% of the writing down can take place in the first year.
The proposed changes would not affect the current rules on the one year writing down allowance in case of certain types of computerised and automated equipment as well as assets worth less than $1,000 (subject to a cap of S$30,000 per annum).
R&R deduction was introduced in the 2008 Budget. Under the newly introduced provision, expenses incurred on R&R (except those expenses relating to structural works and expansion of space) during the period from 16 February 2008 to 15 February 2013, which do not qualify as revenue deduction or capital allowance claim, is allowed to be written-off over a three year period on straight line basis, and is subject to expenditure cap of S$ 150,000 for every three years per business entity.
To encourage business, especially business in service sector establishments, to use the period of the downturn to refit their business premises in preparation for the recovery, the Minister has proposed temporary enhancement of deduction by allowing accelerated writing down of R&R expenses fully within one year, from the current three-year period.
The concession applies to expenses incurred in the basis period 2009 and 2010. The proposed change would not affect the cap of S$ 150,000 for every three-year period per business entity.
The change will help business by having a direct impact of reducing the income tax payable, in the respective Years of Assessment.
Under the current treatment, all donations to Institutions of Public Character (IPCs) and other approved recipients (such as approved museums, prescribed schools, etc) qualify for double tax deduction, subject to meeting certain conditions.
To encourage greater charitable giving in Singapore, the Minister of Finance proposed enhancement of tax deduction on these donations made during the period 1 January 2009 to 31 December 2009 from 200% to 250%. All existing rules to qualify for the enhanced tax deduction will remain the same.
Under the current treatment, capital expenditure incurred by a company or partnership in acquiring legal and economic ownership of IP rights, can automatically be written down over a period of five years. Where only economic ownership of the IP rights is acquired, but not the legal ownership, approval has to be obtained from Economic Development Board (EDB) for WDA to be claimed.
To encourage MDE businesses to actively exploit their IP rights from Singapore, the Minister of Finance has proposed that the writing-down period for WDA, in respect of capital expenditure incurred by a MDE company or partnership to acquire qualifying IP rights for MDE content, be reduced from five years to two years, subject to conditions.
Approval would have to be obtained from the EDB for the accelerated WDA. The approval is required in all instances, including where both legal and economic ownership of the IP are acquired. The concession is applicable to qualifying IP acquired during the period 22 January 2009 to 31 October 2013.
Singapore Company Law was amended in 2006 to allow corporate amalgamations without court sanction. However, tax law has not been amended to align the tax treatment in this area.
Under the existing tax practice, the amalgamating company is treated as having ceased its business and disposed of their assets and liabilities, and the amalgamated company as having acquired or commenced a new business. This practice may lead to additional tax cost for the amalgamating or newly amalgamated company.
With the intention to minimise the tax consequences arising from amalgamation, the Minister proposed a new tax framework for qualifying amalgamations to alleviate the overall tax impact arising from the corporate amalgamation. This framework will apply to qualifying corporate amalgamations where, amongst other conditions, the amalgamated company takes over all assets and liabilities of the amalgamating companies and the amalgamating company ceases to exist.
IRAS will release further details of the new framework in February 2009.
In order to reinforce Singapore’s position as a leading Asian hub in the fund management business, the Minister has proposed a new Enhanced Tier to the fund management incentives for funds with a minimum fund size of S$50 million at the point of application amongst other conditions, with effect from 1 April 2009 to 31 March 2014.
With this proposal:
However, there will be a sunset clause introduced for the Enhanced Tier and existing fund management incentives where both incentives will expire on 31 March 2014. All funds that are on the scheme on or before 31 March 2014 will continue to enjoy the tax exemption after 31 March 2014 subject to them continuing to meet the scheme conditions. This is to allow the Government to review the schemes on a regular basis.
The Monetary Authority of Singapore (MAS) will release further details by April 2009.
Currently, the FSI-HQ scheme allows FSI-qualifying companies to enjoy concessionary tax rate of 10% on qualifying income derived from providing qualifying services to qualifying network companies. This scheme does not extend to income from qualifying services to local network companies. In addition, a company does not qualify as a FSI company if it is not licensed / approved by MAS / exempted from such licensing or approval under any Act and it provides treasury, investment or financial services in Singapore to any of its associated companies.
To encourage financial institutions to manage and control their regional / global operations from Singapore, the Minister has proposed the following enhancements:
The enhancement of FSI-HQ scheme is effective from 22 January 2009 to 31 December 2013.
The MAS will release further details by April 2009.
Presently, the CDT scheme (which will expire on 26 February 2009) provides for a 5% concessionary tax rate on qualifying income derived by an approved commodity derivatives trading company.
The above enhancements are for the period from 27 February 2009 to 31 December 2013.
The MAS will release further details by April 2009.
The Minister has announced enhancement to the FSI Scheme such as Foreign Trust Scheme, Approved Trustee Companies Scheme, FSI-Standard Tier Scheme, FSI-Fund Management Scheme and Fund Management incentives by expanding the list of specified income and designated investment with effect from 22 January 2009.
The MAS will provide further details by April 2009.
To encourage banks, merchant banks and finances companies to continue making adequate loan impairment provisions and bolster their financial strength to underpin continued lending in the downturn, the Government will extend for another three years the tax deduction on loss provisions made pursuant to MAS Notices 612, 1005 and 811 respectively.
Normally, interest payments to non-residents are subject to withholding tax under domestic tax rate or tax treaty rate which ever is more beneficial. However under the Block Transfer Scheme (BTS), withholding tax exemption is granted in respect of interest payable on a loan taken by a shipping enterprise from non-residents to acquire a Singapore-flagged ship that is registered with the Singapore Registry of Ships (SRS) on any date from 1 November 2003 to 31 December 2008, subject to qualifying all prescribed conditions.
To promote Singapore as a maritime hub, the Minister proposed an extension of withholding tax exemption under BTS for another five years to 31 December 2013.
In addition, the Minister also proposed withholding tax exemption under BTS Scheme, subject to terms and conditions, on interest payable on a loan taken to acquire:
The proposed changes are effective from 1 January 2009.
With a view to assist Small and Medium Enterprise engaged in commercial activities within Singapore’s port waters, such as bunkering, towing, dredging and carriage of cargo/passengers, the Maritime and Port Authority of Singapore will implement a 20% port dues concession for harbour craft (excluding pleasure crafts for personal use) for one year from April 2009 to March 2010.
An additional $45 million will be added to the Maritime Cluster Fund to further support Singapore’s development as an International Maritime Centre to support new industry-wide projects that build businesses and manpower capabilities within the cluster.
