Singapore Budget 2010 - Summary of Key MeasuresThe Singapore Government released its budget on for the year 2010 on February 22. An analysis of the budget by GuideMeSingapore.com shows that the country has weathered the financial crisis very resiliently and it now seeks to build upon this success by ushering an era of higher productivity. Budget 2010 is an expansionary budget that builds on Budget 2009 and includes tax measures that serve to enhance Singapore's position as an attractive investment destination. Summarized below are Budget 2010's key tax initiatives for business and individuals. Related Topic: Singapore Tax 2010 - Facts & Figures Tax initiatives for businessesTax deductions for qualifying expenditure incurred in relation to investing in and upgrading of business operations Currently, businesses enjoy up to 150% deduction on Research and Development conducted in Singapore and 100% deduction for expenditure incurred on employee training, automation equipment, designs, IP acquisition and IP registration. According to the 2010 Budget, under the newly introduced Productivity and Innovation Credit Scheme, all businesses will be allowed to deduct 250% of their expenditure incurred on qualifying activities, from their taxable income. The tax deductions are capped at S$300,000 for each activity. The qualifying activities include Research & Development; Intellectual Property registration; Intellectual Property acquisition; Design activities, Automation through technology or software; and training of employees. Businesses with a low taxable income, can choose to convert up to S$300,000 of the tax deductions and allowances credited to them into a cash grant, up to a maximum of S$21,000 each year. The Productivity and Innovation Credit will be available for all businesses from YA 2011 to YA 2015. Tax Incentive for law firms' international legal services Approved law firms in Singapore will enjoy a 10% concessionary tax rate on incremental income from qualifying international legal services for 5 years. The incentive is valid from 1 April 2010 to 31 March 2015. Proposed enhancements to the Financial Sector Incentive (FSI) Scheme The Monetary Authority of Singapore will introduce certain changes to the FSI Scheme to help simplify the rules of the scheme and to lower compliance costs for financial institutions. Review of existing tax incentives for futures members of the Singapore Exchange (SGX) and members of the Singapore Commodity Exchange Limited (SICOM) Currently, futures members of the Singapore Exchange (SGX) and members of the Singapore Commodity Exchange Limited (SICOM) are entitled to a 10% concessionary tax rate on income derived from qualifying transactions. With effect from January 2011, the members will no longer be eligible for the concessionary tax rate and will have to apply for tax incentives under the Financial Sector Incentive (FSI) scheme instead. Review of tax concession for offshore insurance business Currently, approved insurers in Singapore enjoy a 10% concessionary tax rate on qualifying income derived from offshore insurance business conducted from Singapore. According to the 2010 Budget, with effect from April 2010 the incentive will be subject to a sunset clause of 5 years until 31 March 2015; the incentive will be awarded to an approved recipient for a period of 10 years; and a new headcount requirement will be imposed for incentive recipients. Extension of Maritime Finance Incentive (MFI) Scheme Currently, under the MFI Scheme, an approved MFI entity enjoys either a 10% tax exemption or a 5% tax concession on its qualifying leasing income; and an approved manager of the MFI entity enjoys a 10% tax concession on qualifying income. According to the 2010 Budget, the MFI Scheme will be extended until 31 March 2016. Tax incentive for ship brokers and Forward Freight Agreement (FFA) traders In order to promote Singapore's position as an International Maritime Center, ship brokers and FAA traders will be entitled to a concessionary tax rate of 10% on their taxable income, subject to conditions. The incentive applies until 31 March 2010. Ship management fees to be classified as "income exempt from tax" Ship management fees derived from rendering ship management services to related Special Purpose Vehicles (SPV) will be treated as qualifying income to be exempted from tax, subject to certain conditions. Ease in GST compliance for businesses that support the maritime industry With effect from 1 July 2010, the GST zero-rating will be expanded to include pleasure and recreational ships that are wholly used for international travel. Additionally, it will apply to all goods (including stores and merchandises) supplied for use on board or installation on a qualifying ship, regardless of whether the ship calls on a port outside Singapore. Zero rating of GST also extends to the transport of goods or passengers via a ship to or from international waters, regardless of whether the ship calls on a port outside Singapore. Extension of qualifying listed Registered Business Trusts (RBT) concession The GST remission for listed RBTs in infrastructure, ship leasing and aircraft leasing, will be renewed for the period from 18 February 2010 to 31 March 2015. Extension and enhancement of Investment Allowance (IA) Scheme for aircraft rotables The IA Scheme for aircraft rotables that grants qualifying companies an investment allowance of 50% of the qualifying costs of aircraft rotables has been extended until 31March 2015. The government will also enhance the IA scheme by removing the “non-swapping condition”, which helps to remove the administrative difficulties of having to track specific aircraft rotables. Deferring import GST Currently, import GST is payable on all goods brought into Singapore at the point of entry, unless import GST relief has been granted or the goods are imported under import GST suspension schemes such as the Major Exporter Scheme. According to the 2010 Budget, with effect from 1 October 2010, approved GST-registered businesses will be allowed to defer import GST that is payable on their goods at the point of entry into Singapore. The import GST is deferred for at least one month and declared as a payable amount in the corresponding GST return. Simplifying GST Accounting Rules The Inland Revenue Authority of Singapore proposes to ease GST accounting rules, with effect from 1 January 2011. Mergers and Acquisitions (M&A) Allowance and stamp duty remission for qualifying M&A deals Qualifying M&As executed from 1 April 2010 to 31 March 2015 will be eligible for a M&A allowance of 5% of the value of the acquisition, subject to a cap of S$5 million for all qualifying deals executed per YA. Stamp duty on the transfer of unlisted shares for qualifying M&A deals will also be remitted. This remission is capped at S$200,000 of stamp duty per year. Phase out of Industrial Building Allowance (IBA) Scheme The IBA Scheme that allows businesses to claim an allowance on qualifying capital expenditure on the construction or purchase of a building that is to be used for a qualifying trade, is phased out with immediate effect. Land Intensification Allowance With effect from July 2010, businesses will be allowed to claim a Land Intensification Allowance on qualifying capital expenditure incurred in the construction of a qualifying building or structure. The qualifying business will be granted an initial allowance of 25% and an annual allowance of 5% on the qualifying capital expenditure. Removal of Approved Start-up Fund Manager Scheme In view of the recent tax incentives accorded to Singapore's fund management industry, the Approved Start-up Fund Manager Scheme that was introduced in 2005 will be allowed to lapse on its expiry in February 2010. Extension of and enhancements to listed Real Estate Investment Trust (REIT) concessions Until 17 February 2010, listed REITs were eligible for a 10% concessionary tax rate; stamp duty remission, subject to certain conditions; and qualified GST concessions. According to the 2010 Budget, the income tax, stamp duty and GST concessions for listed REITs will be renewed until 31 March 2015. Other enhancements to REITs have also been proposed. Tax initiatives for individualsIncrease in parent relief A tax-resident individual may claim tax relief if (s)he supported his/her's spouse's parents, grandparents or great grandparents in the previous year. Currently, a relief of S$5,000 is granted if the taxpayer lives with the dependent, or S$3,500 if the taxpayer does not live with the dependent. Under handicapped parent relief, relief of S$8,000 is provided if the taxpayer lives with the handicapped dependent, or S$6,500 if the taxpayer does not live with the handicapped dependent. According to the 2010 Budget, with effect from YA 2010, a relief of S$7,000 is granted if the taxpayer lives with the dependent, or S$4,500 if the taxpayer does not live with the dependent. Under handicapped parent relief, relief of S$11,000 is provided if the taxpayer lives with the handicapped dependent, or S$8,000 if the taxpayer does not live with the handicapped dependent. Expansion of wife relief to spouse relief Currently, a S$2,000 relief is granted to male resident taxpayers supporting their wives who earn a maximum income of S$2,000 per annum. According to the 2010 Budget, with effect from YA 2010, the relief will be expanded to female resident taxpayers who support their husbands who earn a maximum income of S$4,000 per annum. Note that the maximum income threshold of S$4,000 will be applicable to both spouses. Increase in course fees relief Currently, tax-resident individuals are entitled to claim course fees relief of up to S$3,500 per year of assessment. According to the 2010 Budget, the course fees relief will be increased from S$3,500 to S$5,500 with effect from YA 2011. Extension of tax deduction on donations Currently, donations that are made to an approved Institution of a Public Character (IPC) or other approved recipients qualify for a tax deduction. According to the 2010 Budget, the tax deduction of 250% will be extended for another year for donations made from 1 January 2010 to 31 December 2010. Removal of income threshold condition for handicapped-dependent-related reliefs and increase in income threshold condition for all other dependent-related reliefs Currently, the income of the dependent cannot exceed S$2,000 in the preceding year if a tax-resident individual wishes to claim dependent-related reliefs. According to the 2010 Budget, the income threshold condition will be removed for handicapped-dependent-related reliefs, while the income threshold of S$2,000 will be increased to S$4,000 for all other dependent-related reliefs. Other tax initiativesMove from flat property tax rate system to progressive property tax rates system based on the Annual Values (AVs) of properties Currently, owner-occupied residential properties are taxed at a concessionary 4% rate while all other residential properties are subject to a property tax rate of 10%. With effect from January 2011, a 3-tier tax rate will apply for owner occupied residential property. A tax rate of 0% for the first S$6000 of AV; 4% for the next S$59,000 of AV; and 6% for the balance of AV in excess of S$65,000. The Annual Value (AV) of a property is the estimated annual rent of the property (determined by the tax department every year, by analysing rents of comparable properties), excluding the rent for furniture, fittings and service charge. Non-owner-occupied residential properties and other properties will continue to be subject to 10% property tax. Tax deductions for angel investors Angel investors who commit a minimum of S$100,000 of equity investment in a qualifying start-up in a given year can claim 50% tax deduction on their investment at the end of a two-year holding period. The deduction is subject to a cap of S$500,000 of investments in each Year of Assessment (YA). Reduce withholding tax rate for non-resident public entertainers Currently, a non-resident public entertainer (NRPE) is subject to tax at a withholding tax rate of 15% on his/her gross income derived in respect of services performed in Singapore. According to the 2010 Budget, the withholding tax rate of 15% will be reduced to 10% until 31 March 2015. Duty-free allowance for additional one litre of wine or beer in lieu of one litre of spirits
Currently, duty-free allowance for bottled liquor is one litre each of spirit, wine and beer. According to the 2010 Budget, travelers may purchase one additional litre of duty-free wine or beer in lieu of one litre of duty-free spirits with effect from from 1 April 2010. Enhanced Transport Technology Innovation Development Scheme (TIDES) Currently, under the TIDES, taxes and duties for vehicles brought into Singapore for the purpose for R&D and test-bedding are waived for an initial two-year period. According to the 2010 Budget, the two-year waiver period has been extended to a six-year waiver period. In addition, the quota of vehicles under this scheme will be expanded from 300 electric vehicles up to 1,300 vehicles. Extension of Green Vehicle Rebate (GVR) to imported used green vehicles
Currently, only brand new green vehicles qualify for the Green Vehicle Rebate (GVR). According to the 2010 Budget, the scope of the GVR scheme will be extended to include imported used green vehicles with effect from from 1 July 2010. On a final note:In view of the recently announced tax measures, Singapore demonstrates that it has an internationally competitive tax regime. The continued tax breaks will undeniably attract foreign investment and help the economy expand. The full text of the Minister Shanmugaratnam's 2010 budget speech is available at http://www.singaporebudget.gov.sg/budget_speech.html.
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