Singapore Budget 2018: Changes to taxes and schemes

Existing

New

Donations and Tax Deductions

A 250% tax deduction was allowed for qualifying donations.

Tax deductions will continue to be made available for donations made on or before 31 December 2021.

Existing

New

GST on Imported Services

Did not exist.

GST will apply to imported services on or after 1 January 2020.

B2B imported services will be taxed via a reverse charge mechanism, which requires the local business customer to account for GST on the services it imports. This can be claimed as input tax, subject to certain input tax recovery rules.

For B2C imported service providers, they are required to register with IRAS if they make significant supply of digital services to consumers in Singapore.

Existing

New

Corporate Income Tax Rebate (CIT)

Companies could qualify for a 20% Corporate Income Tax (CIT) rebate that is subject to a cap of $10,000 for Year of Assessment (YAs) 2018.

For YA2018, the cap will be raised to $15,000, at a rate of 40% of tax payable.

To be extended one more year to YA2019, but at a reduced rate of 20% of tax payable, capped at $10,000.

Wage Credit Scheme

The government has co-funded 20% of wage increases given to each Singaporean employee earning a gross monthly wage of up to $4,000.

Extended till 2020.

Government co-funding of qualifying wage increases will be 20% in 2018, 15% in 2019 and 10% in 2020.

R&D Tax Deductions

Companies enjoy 150% tax deduction for costs and consumables incurred for R&D projects.

Tax deductions will be increased from 150% to 250% from YA2019 to YA2025.

IP Protection and In-Licensing Tax Deductions

Companies enjoy 100% tax deduction for the incurrence of IP registration and in-licensing costs.

The tax deduction will be raised to 200% for the first $100,000 of each YA from YA2019 to YA2025.

Double Tax Deduction for Internationalisation Scheme (DTDi)

Companies enjoy 200% tax deduction on expenses for market expansion and investment development activities.

The $100,000 cap will be raised to $150,000 per YA.

Start-Up Tax Exemption (SUTE) Scheme

Start-ups enjoyed full exemption on the first $100,000 of normal chargeable income, and a further 50% on the next $200,000.

Start-ups will enjoy 75% exemption on the first $100,000 of normal chargeable income, and a further 50% on the next $100,000.

Partial Tax Exemption (“PTE”) scheme

Companies enjoyed 75% tax exemption on the first $10,000 of normal chargeable income, and a further 50% on the next $290,000.

Companies will enjoy a 75% exemption on the first $10,000 of normal chargeable income, and 50% on the next $190,000.

Business and IPC Partnership Scheme (“BIPS”)

Businesses enjoyed a250% tax deduction when they send employees to volunteer and provide services to Institutions of a Public Character (IPCs).

Scheme will be extended till 31 December 2021.

Investment Allowance Scheme (IA)

Capital expenditure incurred on submarine cable systems does not qualify for IA.

IA will be extended to capital expenditure incurred on newly-constructed strategic submarine cable systems landing in Singapore.

Carbon Tax

Did not exist.

Greenhouse gas emissions will be taxed at $5 per tonne from 2019 to 2023.

Existing

New

Tax Framework for Singapore Variable Capital Companies (S-VACCs)

Did not exist.

A tax framework for S-VACCs including tax exemptions, GST remission and a 10% concessionary tax rate for fund managers will be introduced.

Enhanced-Tier Fund Scheme

Companies, trusts and limited partnerships enjoy tax exemptions under the Enhanced-Tier Fund Scheme.

Tax exemptions will be extended to all fund vehicles.

Tax Transparency Treatment

Distributions made by Singapore-listed Real Estate Investment Trusts (S-REITs) to Real Estate Investment Trusts Exchange-Traded Funds (REITs ETFs) are subject to tax.

Tax transparency treatment will be accorded on distributions received by REITs ETFs from S-REITs, as well as a 10% concessionary tax rate on distributions received by non-resident non-individuals.

Financial Sector Incentive (FSI) Scheme

Concessionary tax rates of 5%, 10%, 12% and 13.5% are accorded on income from qualifying banking and financial activities, headquarters and corporate services, fund management and investment advisory services.

Extended till 31 December 2023.

Tax Deduction for Banks and Finance Companies

Banks and finance companies could claim a tax deduction for impairment losses, as well as non-credit-impaired loans and debt securities.

Extended till YA2024 (for companies with December financial year end) and YA2025 (for companies with non-December financial year end).

Withholding Tax (WHT)

Interest payments made to non-tax-residents are subject to WHT at a rate of 15%.

The following WHT exemptions will be legislated:

• Interest on margin deposits paid by members of approved exchanges for transactions in futures
• Interest on margin deposits paid by members of approved exchanges for spot foreign exchange transactions

The following WHT exemptions will be withdrawn:

• Interest from approved Asian Dollar Bonds
• Payments made under over-the-counter financial derivative transactions by companies with FSI-Derivatives Market awards that were approved on or before 19 May 2007

Qualifying Debt Securities (QDS) Scheme

Companies enjoyed a 10% concessionary tax rate for income from QDS, while non-residents and individuals enjoyed tax exemptions.

QDS scheme will be extended till 31 December 2023.

Tax Exemption for Singapore Government Securities (SGS)

Dealers enjoyed tax exemptions on income derived from the trading of SGS.

Extended till 31 December 2023.

Insurance Business Development – Insurance Broking Business (IBD-IBB) scheme

Under the Insurance Business Development – Insurance Broking Business (IBD-IBB) scheme, insurance and reinsurance brokers enjoyed a concessionary tax rate of 10% on commission and fee income derived from insurance broking and advisory services.

Under the Insurance Business Development – Specialised Insurance Broking Business (IBD-SIBB) scheme, specialty brokers enjoyed a concessionary tax rate of 5% on commission and fee income from specialty insurance broking activities.

The IBD-IBB and IBD-SIBB schemes will be extended till 31 December 2023 and 31 March 2018 respectively, after which, specialty insurance broking and advisory services will be incentivised under the IBD-IBB scheme, at a concessionary tax rate of 10%.

Existing

New

Buyer’s Stamp Duty (BSD)

BSD rate was up to 3%.

With effect from 20 February 2018, the top marginal BSD rate will be raised from 3% to 4%, and applies to residential property in excess of $1 million:

• 1% on first $180,000 (no change)
• 2% on next $180,000 (no change)
• 3% on next $640,000 (revised)
• 4% on next $1,000,000 (new)

Approved Special Purpose Vehicle Scheme (ASPV)

APSVs engaged in securitisation transactions enjoyed tax incentives.

Extended till 31 December 2023, with the exception of stamp duty remission.