Singapore: Singapore Budget 2017

Last Updated: 6 March 2017
Article by Sivakumar Saravan

Foreword

How can Singapore adapt and thrive in a rapidly changing world? Addressing this question was one of the main focuses of this year's Budget Statement. While this theme has been the thread running through the Budgets since 2010 when the Government started the restructuring of the Singapore economy to achieve quality growth on the basis of skills, innovation and productivity, this year's Budget seeks to keep Singapore relevant and adaptable amidst the swirling global changes.

Keeping Singapore relevant requires developing the capabilities of both businesses and workers so that Singapore's economy is able to weather unexpected disruptions and take advantage of the opportunities in the new international economy. This necessitates a mid to long term strategic view rather than measures to address short term cyclical challenges faced by businesses.

Hence, instead of introducing major business-friendly tax changes in this year's Budget, the Minister for Finance, Mr Heng Swee Keat, has opted to provide additional support to companies restructuring to meet the challenges of the new economic landscape by enhancing the Transition Support Package introduced in Budget 2013 as follows:

  • The Corporate Income Tax (CIT) rebate cap will be raised from $20,000 to $25,000 for Year of Assessment (YA) 2017 (but the rebate rate will remain unchanged at 50%). The CIT rebate will also be extended for another year to YA 2018 with a reduced rate of 20% of tax payable, capped at $10,000.
  • The Additional Special Employment Credit (ASEC) that provides wage offsets of up to 3% to employers hiring older Singaporean workers earning up to $4,000 a month will be extended for two and a half years, from 1 July 2017 to 31 December 2019. The ASEC together with the Special Employment Credit (SEC) will provide employers support of up to 11% of the wages of their eligible older workers.

The CIT rebate will only benefit companies that have taxable income. Companies facing losses due to cyclical headwinds will not benefit. Thus, it would have been better if the Government had been more generous as in 2011 when the small and medium enterprise (SME) cash grant was introduced to provide a cash payout equivalent to 5% of turnover capped at $5,000 for companies that were unable to benefit from the CIT rebate.

Nevertheless, it should be noted that the Wage Credit Scheme, which is a component of the Transition Support Package, will continue to support businesses in 2017. For example, the Government will co-fund 20% of wage increases given in 2017 to Singaporean employees earning a gross monthly wage of $4,000 and below. In addition, employers will continue to receive co-funding at 20% in 2017 for wage increases given to their employees in 2015 and 2016 that are sustained in 2017.

The second aspect of this year's Budget is the continuation of the move towards more targeted measures rather than broad-based measures. Although the economy achieved a gross domestic product (GDP) growth of 2% in 2016, the Minister acknowledged that the performance across different sectors had been uneven and it requires a targeted approach to address the specific issues faced by certain sectors. The targeted measures are grouped into two.

In the first group are measures to address continued cyclical weaknesses in certain sectors. For example, levy increases for Work Permit holders will be deferred for one year for the Marine and Process sectors that are facing cyclical weaknesses.

The second group of measures aim to help firms with good prospects to scale up and internationalise. A few notable measures in this category are:

  • The introduction of a "SMEs Go Digital Programme" to help SMEs build digital capabilities. Under this programme, SMEs will be able to obtain step-by-step advice on the technologies to use at each stage of their growth as well as receive advice and funding support if they are ready to pilot emerging information and communications technology (ICT) solutions. Initially, the focus will be on sectors where digital technology can significantly improve productivity such as retail, food services, wholesale trade, logistics, cleaning and security.
  • Under a new Tech Access Initiative, the Agency for Science, Technology and Research (A*STAR) will support companies in the use of advanced machine tools for prototyping and testing by providing access to costly specialised equipment (such as robotised three-dimensional (3D) scanners), user training and advice.
  • The Government will commit up to $600m in capital for a new International Partnership Fund that will co-invest with Singapore-based firms to help them scale up and internationalise. This will allow Singapore-based firms to partner other promising Asian companies to extend product lines, brands or value chains, or to gain access to markets, channels and technologies.

In last year's Budget, the Productivity and Innovation Credit (PIC) scheme was allowed to lapse, which means that the scheme will not be available from YA 2019. The SMEs Go Digital Programme will be a welcomed alternative for SMEs to obtain targeted funding and technical assistance in deploying digital solutions in their businesses. As it appears that the type of ICT solutions that will be funded are those that are relevant to a specific sector, there should be a better outcome in terms of productivity as compared to the PIC scheme.

While there is no increase in the goods and services tax (GST) rate and the personal income tax rates this year, the Minister has said that, due to rising Government spending over the long term especially in healthcare and infrastructure, the Government is studying carefully the options to raise revenues through new taxes or increased tax rates. As the Minister is expecting a Budget surplus of $1.9 billion in financial year (FY) 2017, it remains to be seen as to how soon changes to the tax rates will be announced. If the Singapore economy continues to achieve good quality growth, such changes could be made sooner than later.

This year's Budget also affirms Singapore's commitment in supporting the key principle of the Base Erosion and Profit Shifting (BEPS) project that businesses should be taxed where substantive economic activities are performed. In line with this commitment, existing tax incentives will be refined. For example, in this year's Budget, intellectual property (IP) income has been removed from the scope of Pioneer-Services/Headquarters Incentive and the Development and Expansion Incentive- Services/Headquarters for new incentive awards approved on or after 1 July 2017. Such IP income will be incentivised under a new IP regime that will adopt a BEPS-compliant approach.

In summary, while this year's Budget has some temporary relief measures targeted primarily at SMEs to help deal with the immediate challenges, the main thrust is on improving medium term growth via innovation, use of digital technology, building capabilities and internationalisation. As the Minister said, Budget 2017 is an investment in Singapore's economic transformation and social resilience.

Sivakumar Saravan

Head of Tax

20 February 2017

Individual Tax

GENERAL CHANGES

Granting a Personal Income Tax Rebate for resident individual taxpayers

Current

There is no Personal Income Tax Rebate in place for YA 2017.

Proposed

A Personal Income Tax Rebate of 20% of tax payable will be granted to all individual tax residents for YA 2017 (i.e. for income earned in 2016). The rebate will be capped at $500 per taxpayer.

Business Tax

GENERAL CHANGES

Enhancing and extending the Corporate Income Tax ("CIT") rebate

Current

Companies enjoy a 50% CIT rebate for Year of Assessment ("YA") 2016 and YA 2017, with a cap of $20,000 rebate per YA.

Proposed

The CIT rebate will be enhanced and extended as follows:

  1. CIT rebate cap will be raised from $20,000 to $25,000 for YA 2017 (with the rebate rate unchanged at 50%); and
  2. CIT rebate will be extended for another year to YA 2018, but at a reduced rate of 20% of tax payable and capped at $10,000.

Introducing a safe harbour rule for payments under Cost Sharing Agreements ("CSAs") for Research and Development ("R&D") projects

Current

Taxpayers claiming tax deduction for R&D expenditure under Section 14D of the Income Tax Act ("ITA") for payments made under a CSA ("CSA payments") are subject to specific restriction rules for certain categories of expenditure disallowed under Section 15 of the ITA. As such, the breakdown of the expenditure covered by the CSA payments is examined so as to exclude the disallowed expenditure.

Proposed

Taxpayers may opt to claim tax deduction under Section 14D for 75% of the payments made under a CSA incurred for qualifying R&D projects instead of providing the breakdown of the expenditure covered by the CSA payments. The change will apply to CSA payments made on or after 21 February 2017.

NEW TAX INCENTIVES AND CONCESSIONS

Introducing an Intellectual Property ("IP") regime that encourages the exploitation of IP arising from R&D activities of the taxpayer

Current

Currently, the Pioneer-Services/Headquarters Incentive and the Development and Expansion Incentive-Services/Headquarters covers IP income if the IP income arises from qualifying activities.

Proposed

To encourage the use of IPs arising from taxpayer's R&D activities, IP income will be incentivised under a new IP Regime named the IP Development Incentive ("IDI"). The IDI incorporates the Base Erosion and Profit Shifting ("BEPS") compliant modified nexus approach.

Accordingly, such income will be removed from the scope of Pioneer–Services/Headquarters Incentive and the Development and Expansion Incentive-Services/Headquarters for new incentive awards approved on or after 1 July 2017. Existing incentive recipients will continue to have such income covered under their existing incentive awards till 30 June 2021.

The IDI will take effect on or after 1 July 2017, and will be administered by Economic Development Board ("EDB").

EDB will release further details of the change by May 2017.

ENHANCEMENTS AND EXTENSIONS TO EXISTING TAX INCENTIVES AND CONCESSIONS

Extending the Withholding Tax ("WHT") exemption on payments made to non-resident non-individuals for structured products offered by Financial Institutions ("FIs")

Current

WHT exemption is allowed on payments made to non-resident non-individuals for structured products offered by FIs for contracts that take effect, are renewed or extended during the qualifying period from 1 January 2007 to 31 March 2017, subject to conditions.

Proposed

The qualifying period for the WHT exemption on payments made to non-resident non-individuals for structured products will be extended till 31 March 2021. All other conditions of the scheme remain the same.

Extending the Tax Incentive Schemes for Project and Infrastructure Finance

Current

The package of tax incentive schemes for Project and Infrastructure Finance includes:

  1. Exemption of qualifying income from qualifying project debt securities ("QPDS");
  2. Exemption of qualifying income from qualifying infrastructure projects/assets received by approved entities listed on the Singapore Exchange ("SGX");
  3. Concessionary tax rate of 10% on qualifying income derived by an approved Infrastructure Trustee Manager/Fund Management Company from managing qualifying SGX-listed Business Trusts/Infrastructure funds in relation to qualifying infrastructure projects/assets; and
  4. Remission of stamp duty payable on the instrument of transfer relating to qualifying infrastructure projects/ assets to qualifying entities listed, or to be listed, on the SGX.

The scheme is scheduled to lapse after 31 March 2017.

Proposed

With the exception of the stamp duty remission in (d), the existing package of tax incentive schemes for Project and Infrastructure Finance will be extended till 31 December 2022. The stamp duty remission in (d) will be allowed to lapse after 31 March 2017.

All other conditions of the schemes remain the same.

Monetary Authority of Singapore ("MAS") will release further details of the extension by May 2017.

To read this article in full, please click here.

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.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
Similar Articles
Relevancy Powered by MondaqAI
 
Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Related Topics
 
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
 
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions