2015 - Singapore Budget 2015 - Key Changes Every Company Should Take Note

On the 23rd February 2015 the Singapore Government unveiled its Jubilee Budget, Budget 2015 for the financial year 1 April 2015 – 31 March 2016. The Singapore government aspires to take the nation in its 50th year towards the next phase of economic growth.
To achieve this, the focus is on skill development, economic restructuring through innovation, internationalization and infrastructure development. The budget for the year is regarded by some business sections as bittersweet for it brings in some relief in the form of tax rebates, enhanced support for internationalization, deferral of hike in labor levy etc but the cut in the cap of tax rebate, phasing out of the PIC scheme etc., are challenging and calls for swift measures from the SMEs. The budget in general is deemed to build a stronger and far reaching innovative and value creating economy for the future. The following is a snapshot of the key changes, which will impact the Singapore companies.

 

 

EXISTING NEW
TRANSITION SUPPORT PACKAGE
Wage Credit Scheme
For the period 2013 to 2015 the government co-funded 40% of wage increases given to each Singaporean employee earning a gross monthly wage of up to $4,000. To be extended for another two years for YA 2016 and YA 2017.

 

However co-funding is slashed to 20% of the wage increase given to Singaporean workers.

Corporate Income Tax Rebate (CIT)
Companies received a 30% Corporate Income Tax (CIT) rebate that is subject to a cap of $30,000 for each year for the YAs 2013 to 2015 To be extended for another two years for YA 2016 and YA 2017.
But the rebate is capped at S$20,000 for each year.
Productivity and Innovation Credit Bonus (PIC)
The Productivity and Innovation credit (PIC) Bonus was a rider scheme along with PIC. Under PIC Bonus businesses were given a dollar-for-dollar matching cash bonus for YAs 2013 to 2015. This cash bonus was subject to an overall cap of $15,000 for all three YAs combined.  The PIC Bonus will lapse after YA 2015.
DONATIONS
Qualifying donations made during the years 2009 to 2015 to approved charities were given 250% tax deduction. The 250% tax deduction on donations has been extended to donations made from 2016 to 2018.
As part of the nation’s 50th jubilee celebrations qualifying donations made in 2015 will enjoy 300% tax deduction.
MERGERS AND ACQUISITIONS
Qualifying Singapore companies can claim a deduction of 5% of the cost of acquisition.
The claim is capped at S$5 million for all qualifying shares acquisitions during the basis period.  The value of acquisition can be up to S$100 million per YA to enjoy the allowance.Stamp duty relief of $200,000 per YA

 

Shareholding condition requires more than 50% ownership (where original shareholding was less than 50% in target company) or 75% (where original shareholding in the target company was more than 50% but less than 75%).

 
Acquiring company can elect to consolidate shares acquired across 12-month period.

Now the M&A allowance rate is increased to 25% of the cost of acquisition. The revisions apply for acquisitions made from1 April 2015 to 31 March 2020.

 

The cap remains the same, at S$5 million. This means the allowance is available only for an acquisition value of up to S$20 million per YA.
Stamp duty relief capped at $40,000 per YA

Revised shareholding condition requires at least 20% ordinary shareholding in the target company (where original ownership in the target company was less than 20%) or more than 50% ordinary shareholding (where the original shareholding was 50% or less).

75% shareholding eligibility tier removed. Therefore any acquisition where the existing ownership is already above 50% no longer qualifies for the scheme.
Consolidation of acquisitions made across 12 months removed.

INTERNATIONALIZATION SUPPORT
Double Tax Deduction
Under the Double Tax Deduction for internationalization companies can claim a 200% tax deduction on qualifying expenditures incurred for qualifying market expansion and investment development activities. Qualifying expenses did not cover qualifying manpower expenses. The scheme enhanced to include qualifying manpower costs incurred from 1 July 2015 to 31 March 2020 for Singaporean manpower posted to new overseas entities.

 

Qualifying manpower expenses capped at $1million per approved entity per YA incurred from 1 July 2015 to 31 March 2020.

Prior approval from IE Singapore required.

Market Readiness Assistance
IE Singapore co-funds up to 50% of the eligible third-party professional fees, capped at $20,000 per company per year. Professional fees are fees paid to approved service providers for market assessment, market entry and business restructuring. The support has been increased from 50% to 70% for qualifying activities from from 1 April 2015 to 31 March 2018.

 

 

Global Company Partnership
For Qualifying companies IE Singapore co-funds up to 50% of the expenses towards business capability building aimed at four areas capability building, market access, manpower development and access to financing. The support has been increased from 50% to 70% for qualifying activities from from 1 April 2015 to 31 March 2018.
WITHHOLDING TAX
Tax exemption or concessionary tax rates provided on interest payments for qualifying loans under Approved Foreign Loan (AFL) scheme. Under the scheme the minimum loan quantum must be at least S$200,000.

 

Likewise for royalty payments made to non-tax resident, withholding tax may be waived or subjected to concessionary tax rate under Approved Royalties Incentive (ARL) scheme.

The minimum loan quantum under the AFL incentive would be increased to $20 million from 24 February 2015. A review date of 31 December 2023 has been announced to examine the relevance of the incentive scheme.

 

Like AFL a review date of 31 December 2023 has been set to examine the relevance of the scheme.

ANGEL INVESTOR TAX DEDUCTION
The scheme provides for tax deduction against individuals’ taxable income provided the individual is an approved angel investor who also meets other qualifying conditions.

 

50% of the cost of qualifying investments is deductable against the individuals’ taxable income. It is capped at $500,000 of investments a year.

Investments that are co-funded by the Government under the SPRING Start-up Enterprise Development Scheme (“SEEDS”) or the Business Angel Scheme (“BAS”) do not qualify.

New qualifying investments made from 24 February 2015 to 31 March 2020 that are co- funded under SEEDS or BAS may also qualify.

 

The AITD scheme will be extended for a period of 5 years till 31 March 2020.

OFFSHORE LEASING
Income accruing in or derived in Singapore from the offshore leasing of plant and machinery are subjected to a concessionary tax rate of 10%. Effective 1 January 2016 income accruing in or derived in Singapore from the offshore leasing of plant and machinery will be subject to the prevailing corporate tax rate.
GST PRE REGISTRATION CLAIMS
Presently businesses can only claim pre-registration GST on the portion of goods and services used or to be used to make taxable supplies after GST registration. Where the GST incurred straddles across pre and post registration, the GST incurred must be properly apportioned. With effect from 1 July 2015, the government will allow a newly GST-registered business to claim pre-registration GST in full on the qualifying goods and services that are acquired within the six months before the GST registration date. Input GST incurred on goods held at the point of GST registration and property rental, utilities and services are claimable.
OPERATIONAL HEADQUARTERS INCENTIVE
Under this scheme foreign companies setting up the HQ in Singapore and providing management technical and supporting services enjoy concessionary tax rates or waivers. Since the HQs have evolved over time and the activities entitle them for tax incentives under other provisions of the IT Act it has been proposed to withdraw the OHQ incentive scheme with effect from 1 October 2015.
FOREIGN WORKERS LEVY
 
 

Levy for S Pass Holders 
Basic Tier workers all sectors –S$315
Tier 2 workers – S$550

Levy for Work Permit Holders
Construction Sector:
Levy for R1 category workers – S$300
Levy for R2 category workers -S$550

 

 

The Man-year Entitlement (“MYE”)
Waiver levy rate for R1 workers S$700
Waiver levy rate for R2 workers S$950

Manufacturing Sector
Basic Tier R1/R2 workers – S$ 250/$370
Tier 2 R1/R2 workers – S$350/$470
Tier 3 R1/R2 workers – S$550/ 650

Service Sector
Basic Tier R1/R2 workers – S$ 300/$420
Tier 2 R1/R2 workers – S$300/$550
Tier 3 R1/R2 workers – S$600/ $700

 
Marine Sector
Basic Tier R1/R2 workers  – S$300/$400

Process Sector
Basic Tier R1/R2 workers – S$300/$450
MYE Waiver R1/R2 workers – S$600/750

Levy increases for both S Pass and Work Permit Holders that were previously scheduled for 1 July 2015 will be deferred by one year, to 1 July 2016.

 

Levy for S pass holders
From 1 July 2016 it will rise as below
Basic Tier workers all sectors – S$330
Tier 2 workers – S$650

Levy for Work Permit Holders
Construction Sector:
Levy for R1 category workers remain unchanged
Levy for R2 category workers
From 1 July 2016 – S$650
From 1 July 2017 – S$700

The Man-year Entitlement (“MYE”) waiver levy rate for R1 workers will be lowered from $700 to $600 from 1 July 2015 onwards

Manufacturing Sector
The Levies will remain frozen at July 1, 2014 rates until 2017.

Service Sector
From 1 July 2016
Basic Tier R1/R2 workers – S$300/$450
Tier 2 R1/R2 workers – S$300/$600
Tier 3 R1/R2 workers – S$600/$800

Marine Sector
From 1 July 2016
Basic Tier Workers – S$350/$500

Process Sector
From 1 July 2016
Basic Tier R1/R2 workers – S$300/$500
MYE Waiver R1/R2 workers – S$600/800

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