Singapore Budget 2018: Brief Highlights

The following are some selected highlights of the Singapore Budget 2018. 

Individuals and Businesses 

a) Singapore’s personal income tax rates for resident individual taxpayers are progressive, ranging from 2% to the current highest personal tax rates of 22%. A non-resident individual is generally subject to tax at flat rates, depending on the type of income. For employment income, tax is charged at a flat rate of 15% or at the resident rates, whichever is higher. Other income of a non-resident individual such as director’s fees and rental earned are generally taxed at 22% 

b) The 250% tax deduction for qualifying donations will be extended for donations made on or before 31 December 2021, to continue to encourage Singaporeans to give back to community. 

Businesses 

a) There is no change to the Singapore corporate tax rate of 17% since YA 2010, and continues to be one of the lowest headline corporate tax rates in the world. 

b) The Corporate Income Tax Rebate for **Year of Assessment (“YA”) 2018 will be enhanced to 40% of tax payable, with enhanced cap of $15,000. It is an increase from the previously announced rebate of 20% of tax payable, capped at $10,000. It will be extended to YA 2019 at a rate of 20% of tax payable, capped at $10,000. 

c) Tax exemption scheme for new start-up companies (where any of the first 3 YAs falls in or after YA 2020) will be as follows:-

d) Tax exemption scheme for companies (from YA 2020) will be as follows:- 

# Chargeable income refers to taxable income less deductible expenses and other allowances. With the above tax exemptions and enhanced corporate tax rebates, the effective corporate tax rate for some companies can be lower than the headline tax rate of 17%. 

e) The tax deduction for staff costs and consumables on qualifying research and development (“R&D”) projects performed in Singapore will be increased from 150% to 250%, which will take effect from YA 2019 to YA 2025. 

f) The tax deduction for qualifying intellectual property (“IP”) registration cost will be enhanced from 100% to 200% for the first $100,000 per year till YA 2025. 

g) The tax deduction for qualifying IP in-licensing cost incurred will be enhanced from 100% to 200% for the first $100,000 each YA, which will take effect from YA 2019 to YA 2025.

h) The tax deduction cap for qualifying expenses without prior approval from International Enterprise Singapore or Singapore Tourism Board will be raised from $100,000 to $150,000 per YA. It will apply to qualifying expenses incurred on or after YA 2019. 

** Year of Assessment (YA) refers to the preceding financial year in which income tax is calculated and charged. In tax terms, using the example, income earned in the financial year 2017 will be taxed in YA 2018. 

OTHER TAX CHANGES:- 

Good and Services Tax (GST) 

As from 01 Jan 2020, the following regimes will be implemented to tax imported services:- 

a) Reverse charge regime for Business-to-Business (“B2B”) supplies* of imported services; and 

b) Overseas vendor registration regime for Businessto-Consumer (“B2C”) supplies* of imported digital services. 

*B2B supplies refer to supplies made to GST-registered persons, including companies, partnerships and sole proprietors. Whereas B2C supplies refer to supplies made to non-GST registered persons, including individuals and companies that are not registered for GST.

Enhance the Enhanced-Tier Fund Scheme 

Tax exemption under the Enhanced-Tier Fund Scheme is for companies, trusts and limited partnerships, subject to qualifying conditions. To cater for more diverse fund structures, it will be extended to all fund vehicles constituted in all forms if they meet qualifying conditions. 

Income derived by primary dealers from trading in Singapore Government Securities (SGS) 

Tax exemption granted on income derived by primary dealers from trading in SGS which is scheduled to lapse after 31 December 2018, will be extended till 31 December 2023. 

Capital expenditure incurred on submarine cable systems landing in Singapore

Investment allowance will be extended to capital expenditure incurred between 20 February 2018 and 31 December 2023, inclusive of both dates on newly constructed strategic submarine cable systems landing in Singapore, subject to qualifying conditions. 

Withholding Tax (WHT) exemptions on container lease payments made to non-resident lessors 

WHT exemption is allowed on lease payments to nonresident lessors (excluding permanent establishment in Singapore) for the use of qualifying containers for the carriage of goods by sea. Unless the scheme is extended, such payments accruing to a non-resident lessor under any lease or agreement entered into on or after 01 January 2023 will be subject to WHT. 

Withholding tax (WHT) exemptions for the financial sector 

The WHT exemptions will be withdrawn for the following payments:- 

a) Interest from approved Asian Dollar Bonds; and 

b) Payment made under over-the-counter financial derivative transactions by companies with Financial Sector Incentive-Derivatives Market awards that were approved on or before 19 May 2007. 

The change will take effect for payments under agreements entered into on or after 01 January 2019.

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