Singapore Budget 2013 key changes

Here are some of the key tax changes in the Budget 2013. To help businesses through this period of restructuring, significant government support with a 3-Year Transition Support Package are as follows:

a) Wage Credit Scheme (“WCS”); 

b) Productivity Innovation Credit (“PIC”) Bonus; 

c) Corporate Income Tax (“CIT”) Rebate; 

Wage Credit Scheme (“WCS”) 

Businesses will have to restructure in a tight labour market in the coming years, and wages will have to rise. Government will provide support to help businesses raise their employees’ wages. This will incentivize employers to share productivity gains with their employees. 

The Government will co-fund 40% of wage increases for Singaporean employees given in year 2013 to year 2015. This co-funding will apply to wage increases for Singaporean employees earning up to a gross monthly wage of $4,000. The Wage Credits will be automatically paid out to eligible employers annually. The WCS will cost the government about S$3.6 billion over 3 years. 

Productivity Innovation Credit (“PIC”) Bonus 

There are six qualifying activities covered under PIC Scheme: 

a) Acquisition or leasing of PIC Information Technology (IT) and Automation Equipment (“qualifying equipment”); 

b) Acquisition and In-licensing of intellectual property rights (“IPRs”); 

c) Registration of patents, trademarks, designs and plant varieties; 

d) Research and development (“R &D”) activities; 

e) Training of employees and; 

f) Design projects; 

The PIC Bonus encourages more companies to take advantage of the PIC Scheme to invest in productivity. Businesses that invest a minimum of $5,000 per financial year in PIC qualifying expenditure or activities will receive a dollar-for-dollar matching cash bonus. The bonus will be up to $15,000 over three years, financial year 2012 to 2014. This PIC Bonus cost the Government about S$450 million over 3 years.

This is in addition to existing PIC Benefits of 

i) 400% PIC tax deductions up to $400,000 in expenditure for each PIC qualifying activity; or 

ii) Cash Payout at 60% on up to $100,000 of the qualifying expenditure; 

Corporate Income Tax (“CIT”) Rebate 

Besides higher manpower costs, businesses face other cost pressures such as higher rentals. To help companies cope during this period of transition, the government has announced a special Corporate Income Tax rebate from the financial year 2012 to year 2014. A rebate of 30% of tax payable up to $30,000 will be granted per financial year. The rebate will help the companies to relieve business costs. This is expected to cost the Government $1.3 billion over three years. 

Other Budget Highlights 

i) Personal Income Tax Rebate 

A personal Income Tax Rebate will be granted to all resident individual taxpayers for income earned in calendar year 2012: 

a) Resident-individual taxpayers below 60 years old as at 31 December 2012 will be granted a rebate of 30% of tax payable up to S$1,500 per taxpayer; 

b) Resident-individual taxpayers aged 60 years old and above as at 31 December 2012 will be granted a rebate of 50% of tax payable up to S$1,500 per taxpayer; 

The personal Income Tax Rebate will benefit 1.3 million resident taxpayers. 

ii) Financial Sector Incentive (“FSI”) Scheme 

To continue growing high value financial sector activities, the FSI scheme will be extended for 5 years to 31 December 2018. 

iii) Maritime Sector (“MS”) Scheme 

To support the growth for Singapore maritime sector, the MS Scheme for international shipping enterprises will be extended from 30 years to 40 years. 

iv) Start-Up Tax Exemption (“SUTE”) Scheme 

The SUTE Scheme will no longer applicable to property developers and investment holding companies incorporated after 25 February 2013. 

v) Taxation of Employment Perquisites – Housing, Hotel and Furniture and Fittings Benefits 

Basis period for the year ending 2014, housing and hotel accommodation provided to employees will be taxed based on the Annual Value of the premises, less rent paid by the employee and the actual cost of the hotel accommodation incurred by employers respectively. The taxable value of furniture and fittings provided to employees will be based on a percentage of the Annual Value of housing accommodation.