Singapore announced its Budget 2018 in February this year with measures introduced to ensure a sustainable and competitive future for the country. What does this mean for corporations? KhaiJuat Chek, TMF Singapore Director of Client Services shares the top 10 things you need to know if you are planning to or already run a business in Singapore.
Singapore has one of the most vibrant and competitive business capitals in Asia Pacific. With a steady growth in its economy and latest infrastructure, more companies from overseas are flocking into this country as a starting point to venture into ASEAN and Asia.
With the new budget in place, companies should take note of these 10 things from the Singapore Budget 2018 summary and capitalise on the benefits that can come from doing business in the country.
10 Things Singapore Budget 2018 could impact corporations
1. Wage credit scheme
Wage credit scheme was introduced in 2013 and extended to 2015 and now will get a further extension till 2020. This will significantly help business to save money as the government co-funds 20% of the wage increases for Singaporean employees earning a gross monthly wage of S$4,000 and below. This gives more space to businesses for resources allocation and the ability to share the productivity gains with their employees.
This scheme will provide co-funding of 20% for 2018, 15% for 2019 and 10% for 2020. However, Singapore employees must earn a gross monthly wage of up to S$4,000 and receive monthly pay increases of at least S$50 to be qualified under the scheme.
2. Corporate income tax rebate
Following the announcement of the Singapore Budget 2018, corporations are cheering as the corporate income tax rebate for year of assessment 2018, has increased to 40% of payable and capped at S$15,000. The rebate will l be extended for year of Assessment of 2019 however at 20% payable and capped at S$10,000. These measures will help businesses to lift up significant financial pressures for both years of assessment of 2018 and 2019.
3. Productivity solutions grant
The new productivity solutions grant provides financial support up to 70% to sector specific solutions in the food, logistics, precision engineering, retail, wholesale and landscaping industries. In addition, companies that offer wider solutions, such as digital customer relationship and human resource management systems, will have access to this grant as well.
Capability Voucher, the National Parks Board's Landscape Productivity Grant, and the Infocomm and Media Development Authority's support for pre-scoped solutions under the SMEs Go Digital Programme. The government is expecting to launch more grants under the new grant structure.
4. Tax deductions for IP Licensing Payments, IP Registration Fees, and Qualifying Expenses on local research and development
Corporations can enjoy further tax deductions of up to 250% from the initial 150% by undertaking measures that are qualified under research and development projects in Singapore.
As long as the aim of the project is acquiring new knowledge, creating new products or processes or improving existing products or processes, corporations can take one step forward and look at the requirements to enjoy this enhance tax deduction.
5. Enterprise Development Grant (EDG)
The existing Capability Development Grant (CDG) and Global Company Partnership (GCP) Grant, will be harmonised to form Singapore's EDG. This harmonisation will see a common eligibility criteria and application platform for companies who seek such grants.
The latest Budget announced that financial support of 70% through both CDG and GCP grants will go on for another two years and then transition into EDG until end of 2019. On the other hand, the financial support for non-SMEs will be revised to 50% under EDG. Prior to the announcement, non-SMEs can only apply for financial support up to 50% under GCP and up to 30% under CDG.
6. Double Tax Deduction Scheme for Internationalisation (DTDi)
The government of Singapore has also raised the expenditure cap for claims under DTDi to S$150,000 on year of assessment 2019 and onwards from S$100,000 before Budget 2018.
Singapore launched DTDi to give help to businesses as they venture into the international markets. Under this scheme, businesses can claim up to 200% tax deduction on qualifying expenses capped at $150,000 per year of assessment:
On that note, businesses requiring larger funding support than S$150,000 or on qualifying expenditure incurred on other qualifying activities can apply to IE Singapore.
7. Adjustments to broad-based tax schemes
Two tax schemes to help small and medium enterprises are updated in the latest Budget 2018: The Startup Tax Exemption (SUTE) and The Partial Tax Exemption (PTE) schemes.The SUTE scheme, applicable to new startup companies, will exempt 75% (instead of 100% now) on the first S$100,000 of a startup's normal chargeable income. Under the revised SUTE scheme, a startup will enjoy 50% exemption on the next S$100,000 (instead of S$200,000 now) of its normal chargeable income.
PTE scheme (applicable to all companies excluding those that qualify under the SUTE scheme) was also revised. A startup still can get an unchanged 75% tax exemption on the first S$10,000 of normal chargeable income, however, only S$190,000 of the startup's next chargeable income will get a 50% tax exemption instead of the current S$290,000.
8. ASEAN leadership programme
The Government of Singapore will launch a new ASEAN leadership programme to help local executives and business leaders to understand the markets and develop skills to network in this region.
Placed under SkillsFuture Leadership Development Initiative, more companies are expected to take part in this programme and hopefully bring transformation to their existing business models.
9. Increase of goods and services tax (GST) to 9%
The government plans to raise GST by two percentage points, from 7% to 9%, between year 2021 to year 2025. Despite the negative news, there is enough gap for corporations and consumers to react and adapt into the change. Hence, the impact from the GST increase is expected to be minimal.
10. Imposition of GST on digital imported services including apps and Netflix
The tax imposed on all digital imported services will be effective from 1 Jan 2020. This will bring an increase in cost for both business and consumers.
At the moment, GST is only applied on imported services offered by an overseas provider that has a presence in Singapore, but not if the provider does not have a registered presence here. Digital companies will need to consider this before venturing into Singapore, especially in 2020 and onwards.
Talk to TMF Group
Singapore has elevated itself in the eyes of investors from all around the world with the latest budget. However, a corporation setting up or growing its business in Singapore can save a lot of cost and time with the help from experts that have local experience and in-depth knowledge.
TMF Singapore offers everything from company set up to on-going accounting and tax compliance, including VAT compliance, corporate secretarial services, human resources and payroll, structured finance, trust fund administration, private client wealth management and escrow services.
For more information about the services or TMF Singapore, talk to us.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
