So, the Budget Speech took place on 18th February 2020. As a business owner or executive, you should really know what the changes will be applied in this year, especially tax related ones.
Therefore, BBCIncorp will guide you through an overview of tax changes in 2020 to make sure that you are updated with the latest policies, and thus adjust your business’s strategies accordingly.
For all the in-depth detail of Budget Statement, we recommend you visit the official Singapore Budget website.
All Businesses Support Measures
1. GST staying the same
The GST rate will not increase in 2021 as planned, remaining at 7% like the previous years. However, it is expected to rise to 9% by 2025.
When the event takes place, a rise in GST rate, there will also an Assurance Package of S$6 Billion to ease the impact of increased GST on Singapore businesses.
2. Jobs Support Scheme (JSS)
This is a temporary scheme that supports businesses to retain local staff during this period of uncertainty.
Employers will receive an 8% cash grant on the gross monthly wages of each employee who is Citizen or Permanent Resident from October 2019 to December 2019, subject to a monthly wage cap of $3,600/employee.
3. Enhancement to Wage Credit Scheme (WCS)
There are 2 enhancements to the scheme:
The government co-funding ratios for wage increases in 2019 and 2020 will be raised from 15% and 10%, to 20% and 15% respectively;
The monthly wage ceiling will be raised from $4,000 to $5,000 for qualifying wage increases given in 2019 and 2020.
4. An increase in Corporate Income Tax (CIT) Rebate
For YA 2020, companies will be granted a CIT tax rebate of 25% of the corporate tax payable, capped at $15,000 (compared to 20% in the previous YA)
5. Extension to months of interest-free instalment for CIT payment on Estimate Chargeable Income (ECI)
Companies that are on GIRO file ECI on time (within 3 months from the end of the financial year) will automatically get an additional 2 months of interest-free instalment, if the ECI is filed as following:
- during the period from 19 Feb 2020 to 31 Dec 2020 (both dates inclusive); or
- before 19 Feb 2020 and the company has an ongoing instalment payment to be made in Mar 2020.
6. Enhancement to the Loss-Carry-Back Relief
The number of Year of Assessment (YA) to which unutilised Capital Allowances (CA) and trade losses from YA 2020 can be carried back will be increased from one YA to three YAs immediately preceding YA 2020, which are YA 2017, YA 2018 and YA 2019. The carried-back deduction for YA 2020 is capped at $100,000.
7. Option to accelerate the write-off of the cost of acquiring plant and machinery (“P&M”)
Businesses are given an option to accelerate the write-off over two years, instead of three years, on the cost incurred in acquiring the asset during the basis period for YA 2021 (FY 2020). The rates of accelerated capital allowance allowed are as follows:
- 75% of the cost incurred to be written off in the first year (i.e. YA 2021); and
- 25% of the cost incurred to be written off in the second year (i.e. YA 2022).
No deferment of capital allowance claim is allowed under this option.
8. Streamlining the working life of assets in the Sixth Schedule under Section 19 of the Income Tax Act (ITA)
To simplify capital allowance claims, the prescribed working life of assets in the Sixth Schedule will be streamlined to 6, 12 and 16 years, in the following manner:
- For 12 years of assets’ working life or less, businesses may make an irrevocable election to claim capital allowance over either 6 or 12 years;
- For 16 years of assets’ working life, businesses may make an irrevocable election to claim capital allowance over 6, 12 or 16 years.
The above change will apply to assets acquired in the periods relating to YA 2023 and subsequent YAs. However, it will also apply to assets acquired in basis periods relating to YA 2022 and prior YAs, if the business had deferred and yet to start its capital allowance claims for the assets.
9. Extension to the Writing-down Allowance (“WDA”) Scheme under Section 19D of the ITA
For the acquisition of an indefeasible right to use an international submarine cable system, WDA will be allowed on qualifying capital expenditure until 31 December 2025.
10. Option to accelerate the deduction of expenses incurred on renovation and refurbishment (“R&R”)
For qualifying R&R expenditure which is incurred during the basis period for YA 2021 (FY 2020), businesses have the option to claim the deduction in one year (instead of over three years). All other conditions remain the same, including the cap of $300,000 for every relevant 3-year period.
11. Extension and enhancement to the Double Tax Deduction for Internationalism (DTDi)
The scheme is extended to 31 December 2025 and it is also enhanced to cover a new list of qualifying expenses (taking effect from 1 April 2020), including:
- Third-party consultancy costs relating to new overseas business development to identify suitable talent and build up business network; and
- Expenses incurred for overseas business missions for
- speaking spots to pitch products or services at overseas business and trade conferences;
- transporting materials or samples used during the business missions; and
- engaging third party consultants to arrange business networking events to promote products or services.
12. Extension to Mergers & Acquisitions (M&A) Scheme
This scheme is extended to 31 December 2025. However, from 1 April 2020, no more waiver will be granted for share acquisitions in which the acquiring company must be held by an ultimate holding company that is Singapore incorporated and Singapore tax resident.
Stamp duty relief on the instruments for the acquisition of ordinary shares will also lapse as scheduled after 31 March 2020.
13. Extension to the Land Intensification Allowance (“LIA”) scheme
The scheme is extended to 31 December 2025.
14. Allowing tax deduction for Research & Development expenditure under 14E of the ITA to lapse
The Section 14E incentive will end after 31 March 2020. However, existing recipients can continue to enjoy the further tax deduction under Section 14E incentive until their awards expire.
15. No more double incentivisation of recipients through grants and tax deductions or allowances
Tax deductions and allowances (i.e. capital allowances, writing-down allowances and investment allowances) will no longer be given on expenditures funded by capital grants from the Government or Statutory Boards that are approved on or after 1 Jan 2021.
Sector-Specific Support Measures
16. Property tax (PT) rebate
Affected sectors by the Covid-19 outbreak i.e. tourism, transportation, retail and F&B will be provided PT rebate from 1 January 2020 to 31 December 2020.
- 30% PT rebate for hotel buildings, serviced apartment buildings and Meetings, Incentive, Conferences and Events (MICE) venues;
- 15% PT rebate for qualifying commercial properties e.g. premises of international airports, shops of retail and F&B…
17. Extension and enhancement to the Maritime Sector Incentive (MSI)
The MSI scheme is extended to 31 December 2026. Moreover, there are some enhancements:
- Expanding the scope of in-house ship management income exemption under the MSI-AIS Award to include such income derived by MSI-AIS Sister Company and MSI-AIS Local Subsidiary;
- Allowing income derived from operating a ship that is provisionally registered with the SRS (Singapore Registry of Ships) to qualify for tax exemption under the MSI-SRS scheme, regardless of a permanent certificate. When a permanent certificate is not obtained, the tax exemption is only allowed up to 1 year.
Moreover, the stamp duty remission will lapse from 1 June 2021. Further details of the changes will be provided by the Maritime and Port Authority of Singapore (MPA) by May 2020.
18. Extension and changes to Global Trader Programme (GTP)
GTP is extended to 31 December 2026, followed by some changes:
- The qualifying activities of GTP (Structured Commodity Financing – SCF) will be lessened from 19 February 2020.
- The GTP(SCF) will lapse after 31 March 2021. After that, existing recipients of GTP(SCF) awards still continue to enjoy the tax concession under the GTP(SCF) till the expiry of their awards.
- The concessionary tax rate of 5% on qualifying income in liquefied natural gas (LNP) will end after 31 March 2021.
Enterprise Singapore will provide further details of the changes by May 2020.
19. Extension and enhancement to the Finance and Treasury Centre (“FTC”) scheme
The scheme is extended to 31 December 2026 with these enhancements:
- The list of qualifying sources of funds will be expanded to include convertible debt.
- The list of qualifying FTC activities will be expanded to encompass transaction and investment in private equity funds and venture capital funds not structured as companies.
20. Changes of Tax incentive schemes for Insurance Businesses
The Insurance Business Development scheme (IBD) and IBD – Captive Insurance (IBD-CI) scheme are extended to 31 December 2025 with the concessionary tax rate remaining at 10%.
The IBD- Marine Hull and Liability Insurance Business (IBD – MHL) scheme will lapse after 31 March 2020. The engaged insurers then will be incentivised under the IBD scheme.
All new and renewal IBD scheme awards will be provided 5-year period.
Singapore Monetary Authority (MAS) will provide further details of the changes by May 2020.
21. Enhancement to Withholding Tax exemption for interest on margin deposits
The scope of Withholding Tax exemption for interest on margin deposits will be expanded to cover the new following targets:
- Members of approved clearing houses;
- Members of approved exchanges;
- Approved exchanges; and
- Approved clearing houses.
- Spot foreign exchange except Singapore dollar;
- Financial futures and Gold futures;
- All derivative contracts traded or cleared on approved exchanges and approved clearing houses.
The enhancements will apply for agreements entered into on or after 19 February 2020 and MAS will provide further details of the changes by May 2020.
22. Extension and changes to the tax incentives for Venture Capital Funds and Venture Capital Fund Management companies
The Section 13H scheme is extended to 31 December 2025 with the following changes:
- The list of investments and income incentivised under the Section 13H scheme will be expanded
- The Section 13H incentive may be granted to venture capital funds which are constituted as foreign-incorporated companies or Singapore Variable Capital Companies
- The statutory sub-limit imposing a maximum tenure of 10 years for the first tranche of the tax exemption will be removed, while the 15-year cap on the overall tenure of the tax exemption status remains
- Approved venture capital funds will be allowed, by way of remission, to claim GST incurred on their expenses at a fixed recovery rate to be determined for the industry
The Fund Management Incentive is also extended to 31 December 2025 with the following change:
- Limitations on the total incentive tenure allowed for each venture capital fund management company will be removed. Instead, each Fund Management Incentive award for the fund manager will be set at a maximum tenure of 5 years, and can be renewed subject to conditions.
The above changes will take effect from 1 April 2020. Enterprise Singapore will provide further details of the changes by May 2020.
Above are an overview of tax changes in Singapore. Now, you are good to set off a new promising business year. Should you have any questions, feel free to contact us now! We are always willing to help!
Disclaimer: While BBCIncorp strives to make the information on this website as timely and accurate as possible, the information itself is for reference purposes only. You should not substitute the information provided in this article for competent legal advice. Feel free to contact BBCIncorp’s customer services for advice on your specific cases.
- All Businesses Support Measures
- 1. GST staying the same
- 2. Jobs Support Scheme (JSS)
- 3. Enhancement to Wage Credit Scheme (WCS)
- 4. An increase in Corporate Income Tax (CIT) Rebate
- 5. Extension to months of interest-free instalment for CIT payment on Estimate Chargeable Income (ECI)
- 6. Enhancement to the Loss-Carry-Back Relief
- 7. Option to accelerate the write-off of the cost of acquiring plant and machinery (“P&M”)
- 8. Streamlining the working life of assets in the Sixth Schedule under Section 19 of the Income Tax Act (ITA)
- 9. Extension to the Writing-down Allowance (“WDA”) Scheme under Section 19D of the ITA
- 10. Option to accelerate the deduction of expenses incurred on renovation and refurbishment (“R&R”)
- 11. Extension and enhancement to the Double Tax Deduction for Internationalism (DTDi)
- 12. Extension to Mergers & Acquisitions (M&A) Scheme
- 13. Extension to the Land Intensification Allowance (“LIA”) scheme
- 14. Allowing tax deduction for Research & Development expenditure under 14E of the ITA to lapse
- 15. No more double incentivisation of recipients through grants and tax deductions or allowances
- Sector-Specific Support Measures
- 16. Property tax (PT) rebate
- 17. Extension and enhancement to the Maritime Sector Incentive (MSI)
- 18. Extension and changes to Global Trader Programme (GTP)
- 19. Extension and enhancement to the Finance and Treasury Centre (“FTC”) scheme
- 20. Changes of Tax incentive schemes for Insurance Businesses
- 21. Enhancement to Withholding Tax exemption for interest on margin deposits
- 22. Extension and changes to the tax incentives for Venture Capital Funds and Venture Capital Fund Management companies
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