Deputy Prime Minister and Finance Minister Heng Swee Keat, delivered the 2020 Singapore Budget on 18 February 2020. We have analysed the key tax takeaways to help you understand the changes that have been announced and how they affect both you and your business.
- CIT of 25% of tax payable, capped at $15,000 will be granted for the Year of Assessment 2020.
- Will result in cash saving for companies with chargeable income in YA 2020.
- Maximum saving : $15,000.
- Actual amount : Depending on the chargeable income level.
- For more details, please refer to our write up Cash flow relief measures.
- Automatic extension of instalments by two more months for companies as follows:
- Companies that file their ECI from 19 February 2020 to 31 December 2020.
- Companies that file their ECI before 19 February 2020 and have ongoing instalments to be made in March 2020.
- Straddle across YA 2020 and 2021.
- Added 2 months interest free period to settle the tax assessed on ECI.
- Unabsorbed losses and capital allowances for YA 2020 may be carried back up to 3 immediate preceding YAs.
- The cap remains at $100,000.
- The election can be made before actual filing of YA 2020 tax return.
- Option to obtain cash refund for tax paid previously.
- Tradeoff between carry back and carry forward.
- For more details, please refer to our write up Cash flow relief measures.
- Taxpayer has an additional option to write-off the cost of acquisition of plant and machinery in YA 2021 (FY 2020) over 2 years as follows:
- 75% of cost in the first year (YA 2021); and
- 25% of cost in the 2nd year (YA 2022).
- A timing difference only.
- R&R claim incurred in YA 2021 can be claimed over 1 year.
- This is an additional option in addition to the existing option of claiming over 3 years.
- The cap of S$300,000 for every relevant period of 3 consecutive YAs still applies.
- A timing difference only.
- Businesses claiming annual allowance under Section 19 of the ITA may make an irrevocable election to write down their P&M as follows:
- If the current prescribed working life of the P&M in the Sixth Schedule is 12 years or less, businesses may choose to claim annual allowance over 6 or 12 years; or
- If the current prescribed working life of the P&M in the Sixth Schedule is 16 years, businesses may choose to claim annual allowance over 6, 12 or 16 years.
- The above will apply for P&M acquired in or after FY2022, and in cases where P&M were purchased prior to FY2022.
- To simplify capital allowance claim under Section 19 of the Income Tax Act by limiting the choice on the numbers of prescribed working life.
- The WDA scheme will be extended till 31 December 2025.
- The telecommunication industry remains an important industry in Singapore.
- Extending the WDA claim helps to defray the costs of providing telecommunication services in Singapore.
- The LIA scheme will be extended till 31 December 2025.
- This refers to the last date a building or structure may be approved for LIA.
- To continue to encourage maximising the usage of land in Singapore given the scarcity of land in Singapore.
- The Section 14E incentive will lapse after 31 March 2020
- This is not unexpected with the introduction of section 14DA that allows a total deduction of 250%.
- Going forward, companies may obtain deduction for R&D under section 14DA.
- A major difference is that there was more certainty with Section 14E as it required pre-approval. With 14DA, a company must ensure that it has sufficient records to substantiate the R&D claims.
- DTDi scheme will be extended till 31 December 2025.
- The scope of expenses qualifying for DTDi Scheme will be expanded to include third-party consultancy costs relating to new overseas business and new categories of expenses for overseas business missions.
- Further details will be released by Enterprise Singapore by end March 2020.
- The expansion of the scope is a welcomed move.
- This is to continue to encourage businesss to continue to internationalise.
- The IBD and IBD-CI schemes will be extended till 31 December 2025.
- MHL insurance and reinsurance business will be subsumed and incentivised under the IBD scheme.
- Streamlining of the scheme.
- Align with Singapore’s value proposition as an Asian insurance and reinsurance centre.
- M&A scheme will be extended to include qualifying acquisitions made on or before 31 December 2025.
- The M&A scheme will remain the same except for the following:
- Stamp duty relief will lapse for instruments executed on or after 1 April 2020; and
- No waiver will be granted for the condition that the acquiring company must be held by an ultimate holding company that is incorporated in and is a tax resident of Singapore.
- To support Singapore companies to internationalise and expand their business.
- Lapse in stamp duty remission is probably due to the fact that stamp duty cost is not an impediment to merger and acquisition scheme.
- The removal of the waiver option for non Singapore incorporated and non tax resident of Singapore tighten the scheme and focus it on Singapore incorporated and tax resident company only.
- Section 13Z exemption will be extended till 31 December 2027.
- Conditions for Section 13Z exemption:
- Must be ordinary shares
- Must hold at least 20% in the company whose shares are being disposed
- Must maintain the minimum 20% shareholding for a minimum period of 24 months just prior to the disposal
- Does not apply to insurance company
- The scheme will be refined to exclude disposals of unlisted shares in an investee company that is in the business of trading, holding or developing immovable properties in Singapore or abroad.
- Provide certainty to companies on disposal of ordinary shares acquired on or prior to 1 Jan 2026 (due to the 24 months holding period required).
- Narrowed as disposals of unlisted shares in an investee company that is in the business of trading, holding or developing immovable properties in Singapore or abroad. Previously, Singapore company in the business of developing immovable for sales and ALL overseas companies, regardless of its business model, are covered bythe section 13Z exemption.
- The MSI scheme will be extended till 31 December 2026.
- The withholding tax exemption will be extended for qualifying payments made on qualifying financing arrangements entered into on or before 31 December 2026.
- Stamp duty remission will lapse for instruments executed on or after 1 June 2021.
- Scope of qualifying income included under MSI will be expanded to include the following:
- income derived by MSI-Approved International Shipping Enterprise ("MSI-AIS")'s sister company and MSI-AIS local subsidiary
- income derived from operating a ship that is provisionally registered with Singapore registry of ship.
- Maritime Port Authority of Singapore will provide further details by May 2020.
- To continue developing Singapore as an international maritime centre.
- Lapse in stamp duty remission is consistent with the trend of raising stamp duty collection and/or contingent on the view that stamp duty cost is not an impediment to commercial transactions.
- FTC Scheme will be extended till 31 December 2026.
- List of qualifying funds and activities under the FTC scheme will be expanded to include:
- funds raised via convertible debt issued on or after 19 February 2020;
- income arising from transacting or investing into private equity or venture capital funds that are not structured as companies, on or after 19 February 2020.
- In line with promoting Singapore as a financial hub and as a place for regional headquarters to locate.
- GTP Scheme will be extended till 31 December 2026.
- The GTP (structured commodity financing or "SCF") will be subsumed under GTP and will lapse after 31 March 2021.
- Concessionary tax rate of 5% on income from qualifying transactions in LNG will lapse after 31 March 2021.
- Enterprise Singapore will provide further details of the changes by May 2020.
- Streamline the GTP scheme.
- May have to assess the value of the incentive scheme in attracting new investment in Singapore given the initiatives in many countries to claw back taxes paid in low tax jurisdiction even for substantive activities carried out.
- List of covered entities will be expanded to include:
- members of approved clearing houses;
- approved exchanges; and
- approved clearing houses.
- List of covered products are now expanded to include all other derivative contracts traded or cleared on approved exchanges and approved clearing houses.
- The above enhancements will apply to all agreements entered into on or after 19 February 2020.
- To facilitate the growth of Singapore's derivative market
- Section 13H scheme and Fund Management Incentive will be extended till 31 December 2025.
- The conditions of the two incentives are further refined to make it easier to qualify for them.
- List of investments and income incentivised under Section 13H Scheme will be expanded to include relevant items of specified income - designated investment list applicable for fund incentives.
- Section 13H incentive may now be granted to venture capital funds constituted as foreign-incorporated companies or variable capital companies.
- Statutory sub-limit imposing maximum tenure of 10 years for the first tranche of the tax exemption will be removed
- Add new life to venture capital funds with the enhancements.
- For more details, please refer to our write up: Singapore fund management structuring round-up.
- Recipients of grant should not be allowed to claim tax deduction or allowances on that part of expenditure that are funded by grants
- To remove the double incentivisation of recipients through grants and tax deductions or allowances. To align with the treatment of grants for R&D projects.
- The PT rebate will be granted for the period 1 January 2020 to 31 December 2020. The PT rebate will be as follows:
- 30% on accomodation and function room of hotels or serviced apartment or 3 of MICE space components ie. Suntec Singapore Convention & Exhibition Centre, Singapore EXPO, and Changi Exhibition Centre.
- 15% for other qualifying commercial properties; and
- 10% for Marina Bay Sands and Resorts World Sentosa.
- PT Rebates do not apply to any premises or a part of any premises used for a residential, industrial or agricultural purpose, or as an office, a business or science park, or a petrol station.
- To help the tourism sector tide over business downtown due to Covid-19.