Singapore Budget 2014

Executive Summary

The DPM and Finance Minister delivered the Government Budget for fiscal year 2014 in the Parliament on 21 February. The theme for the budget this year is “Opportunities for the Future, Assurance for our Seniors”. The unique feature of this budget is the introduction of the “Pioneer Generation Package”. The package provides additional outpatient fee rebates, topping up of Medisave accounts and rebate for Medishield Life for all citizens aged 65 and older in 2014. The Government has set aside S$8 billion to finance the package.

The other key changes include the 1% increase in employer CPF contribution from January 2015 and increase in CPF contribution for workers aged 50 and above. The Government has extended the Productivity & Innovation Credit scheme for another 3 years to YA 2018. Under the new PIC+ scheme, the maximum expenditure cap for SMEs has been increased to S$600,000 per qualifying activity from the YA 2015. There are new measures introduced to increase the productivity of the construction industry. Finally and as the Minister has pointed out, the budget is complete with the increase in duties for tobacco, liquor and betting. We summarize below the changes in fiscal and tax policy as announced in the budget.

  1. Key Features
  2. Tax Changes for Businesses
  3. Tax Changes for Financial Sector
  4. Changes to Individual Income Tax
  5. Changes to Stamp Duties
  6. Changes to Other Taxes
  7. Other Changes
  8. Year of Assessment 2014 tax filing due dates

 


    1. Key Features

1.1 No change to Corporate Tax Rate and GST Rate

There will be no change to the tax rate for corporate tax and GST. The corporate tax rate remains at 17% with partial tax exemption for the first S$300,000 chargeable income. GST rate will remain at 7%.

For corporate tax, a partial tax exemption is applicable to the first S$300,000 chargeable income. After deducting the partial tax exemption, the effective tax rate for the first S$300,000 chargeable income is only 8.36% for the year of assessment 2014. Qualifying newly incorporated companies will enjoy an effective tax rate of only 5.67% for the first S$300,000 chargeable income for their first 3 years of assessment after incorporation.

The corporate tax rates for the current ten years are as follows:

Year of Assessment
Corporate Tax Rate (%)
2005
20
2006
20
2007
20
2008
18
2009
18
2010
17
2011
17
2012
17
2013
17
2014
17

 

For comparison, we append below corporate tax rates for selected jurisdictions:

Jurisdiction
Corporate Tax Rate (%)
Hong Kong
16.5
Taiwan
17
Thailand
20
South Korea
22
Indonesia
25
Malaysia
25
Vietnam
22
China
25
The Philippines
30
India
30
Japan
25.5

 

1.2 The Wage Credit Scheme (WCS)

Introduced in 2013 and for a period of 3 years, the Government will co-fund 40% of the wage increment for Singaporean workers with monthly wages of below S$4,000. The qualifying conditions are:

1. Singapore citizen;
2. Gross monthly wage of up to S$4,000;
3. He / she was employed for at least 3 months in 2012; and
4. He / she continues to work for the employer in 2014 and 2015.

1.3 Tax Rebate for Corporate Taxpayers for YA 2013 to YA 2015

Tax rebate was introduced last year and available to corporate taxpayers for the YA 2013 to YA 2015. The tax rebate is 30% of the tax payable and capped at S$30,000 per tax year.

1.4 Extension of Productivity and Innovation Credit (PIC) Scheme for 3 years

The Government will extend the PIC scheme beyond YA 2015, for another 3 years up to YA 2018. Taxpayer can combine their PIC claims for 3 tax years from YA 2016 to 2018. The six types of qualifying activities under the PIC scheme are:

(i) R&D expenditure.
(ii) Investment in design.
(iii) Acquisition of Intellectual Property (IP) rights.
(iv) Registration of IP rights.
(v) Investment in automation.
(vi) Staff Training.

1.5 The New PIC+ Scheme

Under this new scheme, SMEs are allowed to claim PIC tax allowance up to a new cap of S$600,000 per qualifying activity from the YA 2015. Taxpayers can also combine their claim for 3 tax years within the window period of YA 2015 to YA 2018.

 

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    1. Tax Changes for Businesses

2.1 No change to capping for PIC Cash Payout

There are no changes to the existing qualifying criteria and maximum expenditure cap of S$100,000 per tax year.

2.2 Extension of PIC Claim for Staff Training

Taxpayer can now claim for PIC qualifying staff training expenditures incurred for workers deployed to their organization. The extension is effective from the YA 2014.

2.3 Changes to Conditions for PIC Cash Payout from the YA 2016

Effective from the YA 2016, taxpayers applying for PIC cash payout must employ at least 3 local employees for a consecutive period of 3 months in the basis period to qualify for the application.

2.4 The Tax Deferral Option under the PIC Scheme

The above option will be lapsed from the YA 2015.

2.5 Extending the Research and Development (R&D) Tax Measures

The enhanced tax deduction scheme under Section 14DA(1) will be extended to YA 2025 whereas the scheme under Section 14E will be extended to 31 March 2020. Taxpayers can continue to claim for PIC enhanced deduction for qualifying R&D expenditure for R&D conducted in Singapore.

2.6 Extending and Refining the Section 19B Written Down Allowance (WDA)

The current 5 years write-off allowance for qualifying expenditure incurred for intellectual properties rights will be extended to YA 2020. The accelerated WDA for Media and Digital Entertainment (MDE) will be extended to YA 2018. To provide clarity, the IRAS will publish a list to exclude two categories of information from the WDA. These relate to information on “customers based intangibles” and “documentation of work processes”.

2.7 Extending the Section 14A Tax Deduction for Registration Costs of Intellectual Property

The current 100% tax deduction for registration costs incurred for Patents, Trademarks, Designs and Plant Varieties will be extended to YA 2020. Besides, taxpayers can continue to claim for PIC for qualifying costs incurred up to YA 2018.

2.8 Extending and Enhancing the Land Intensification Allowance (LIA) Scheme

The current scheme will be extended to 30 June 2020 and expanded to include logistic sector, and businesses carrying out activities on airport and port land. However, a new criterion of minimum incremental Gross Plot Ration of 10% is added to the existing conditions from 22 February 2014.

2.9 Waiver of Withholding Tax for Payment to Singapore Branch

Currently, payment made to Singapore Branch of a foreign company is subject to withholding tax, with the exception of payment made to Singapore Branch of foreign banks. To reduce cost of compliance, the Government has decided to waive the withholding tax requirements for payments due to Singapore Branch on and after 21 Feb 2014.

 

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    1. Tax Changes for Financial Sector

3.1 Tax Treatment for Basel III Additional Tier 1 Instruments

Tax treatment has been introduced in the budget for the above new instrument. The instrument will be regarded as Debt for tax purposes. Distributions from such instrument are deductible for the issuers and taxable for the investors, from the YA 2015.

3.2 Extending and Refining Tax Incentive Schemes for Qualifying Funds

To continue growing the fund management industry, various schemes under Sections 13CA, 13R and 13X will be extended to 31 March 2019 and Section 13C will lapse after 31 March 2014. Enhancements are also made to trust funds managed by resident trustees, investor ownership level and the list of designated investments.

3.3 Recovery of GST for Qualifying Funds

The current treatment of allowing qualifying funds that are managed by prescribed fund managers in Singapore to claim GST input tax will be extended for another 5 years up to 31 March 2019.

3.4 Tax Incentive for Listed Infrastructure Registered Trust (RBT)

The existing tax incentive of foreign sourced income exemption under Section 13(12) will be expanded to include foreign sourced dividend income so long as it relates to qualifying offshore infrastructure project. Interest income will automatically be granted with exemption under Section 13(12), instead of on a cases-by-case basis.

3.5 Refining the Designated Unit Trust (DUT) Scheme

The scheme will be limited to unit trusts offered to retail investors from 21 Feb 2014. Existing non-retail unit trust will retain their DUT status obtained prior to 21 Feb 2014. From 1 Sep 2014, unit trusts do not have to apply for DUT scheme to enjoy the benefits of the scheme.

3.6 Investment Allowance (IA) for Aircraft Rotables

The above scheme will lapse after 31 March 2015 without renewal.

 

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    1. Changes to Individual Income Tax

4.1 Enhancing the Parent and Handicapped Parent Relief

The above personal reliefs will be enhanced from the YA 2015. The changes are highlighted as follows:

Type of relief

Staying with dependant

Not staying with dependant

Parent relief $9,000 $5,500
Handicapped parent relief $14,000 $10,000

In addition, more than one child is allowed to claim for the relief for the same parent, on a sharing basis. If the children cannot agree on the basis of sharing, the Comptroller will divide the relief equally amongst the claimants.

4.2 Enhancing the Handicapped Spouse, Handicapped Siblings and Handicapped Child Relief

The above personal reliefs will be enhanced from the YA 2015. The changes are highlighted as follows:

Type of relief

Relief Quantum

Handicapped spouse relief $5,500
Handicapped sibling relief $5,500
Handicapped parent relief $7,500

4.3 Removing Transfer of Qualifying Deductions, and Deficits Between Spouses

Under current tax treatment, spouses are allowed to transfer unabsorbed trade losses, capital allowances and donations amongst themselves. This treatment will be terminated effective from the YA 2016. Taxpayers are allowed to continue with existing claims up to YA 2017.

4.4 Removing the Section 40 Relief

The above relief will be removed with effect from the YA 2016.

 

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    1. Changes to Stamp Duties

5.1 Tax Rebate for the YA 2013

A one-off tax rebate will be granted to resident taxpayers as follows:

Lease Period

Stamp Duty Rates

Up to four years 0.4% of the total rent for the entire period of the lease
Exceeding four years or for any indefinite term 0.4% of four times of the average annual rent for the entire period of the lease

5.2 Streamlining Stamp Duty for Land Premium and Property Purchase

Stamp Duty for land premium and purchase of property will be streamlined from 22 Feb 2014, as follows:

Purchase Price or Market Value (whichever is higher)

Buyer’s Stamp Duty Rates

First $180,000 1%
Next $180,000 2%
Remainder 3%

5.3 Streamlining Stamp Duty Rate for Share Transfer and Mortgages

Stamp Duty for share transfer and mortgages executed from 22 Feb 2014 will be streamlined as follows:

Type of Instrument

Stamp Duty Rates

Transfer of stock or shares 0.2% of the purchase price or market value of the stock or shares transferred whichever is higher
Mortgage instruments 0.2% or 0.4% of the relevant amount (depending on the type of mortgage instrument) subject to maximum duty of $500)

 

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    1. Changes to Other Taxes

6.1 Changes to Vehicle Tax

The Carbon Emission-based Vehicle Scheme (CEVS) and Green Vehicle Rebate (GVR) schemes are currently under review. The existing CEVS scheme will be extended by 6 months from 1 January 2015 to 30 June 2015, and the GVR scheme will be extended by 6 months from 1 January 2015 to 30 June 2015.

Property tax rates table for Owner-occupied residential properties:

6.2 Increase in Betting Duties

The current betting duty will be increased by 5% to 30% with effect from 1 July 2014.

6.3 Increase in Excise Duties for Tobacco Products

The excise duty for tobacco products will be increased by 10% with effect from 21 February 2014.

6.4 Increase in Excise Duties for Liquor Products

The excise duty for liquor products will be increased by 25% with effect from 21 February 2014.

 

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    1. Other Changes

7.1 Changes in CPF Contribution Rates from January 2015

The CPF contribution rates for employer and employee will be adjusted with effect from January 2015. The new contribution rates are summarized as follows:

Date

Employee Age (Years)
Contribution Rate (% of wage)
Contribution by Employer
Contribution by Employee
Total
With effect from 1 Jan 2015 35 and below
17
(+1)
20
37
(+1)
Above 35 to 45
Above 45 to 50
Above 50 to 55
16
(+2)
19
(+0.5)
35
(+2.5)
Above 55 to 60
12
(+1.5)
13
25
(+1.5)
Above 60 to 65
8.5
(+1.5)
7.5
16
(+1.5)
Above 65
7.5
(+1)
5
12.5
(+1)

7.2 Changes to CPF Contribution Rates for Self-employed

The CPF contribution rates for self-employed persons will also be adjusted from January 2015. The new contribution rates are summarized as follows:

Date

Age of Self-Employed Person as at 1 January
Medisave Contribution Rates (% of Net Trade Income)
With effect from 1 Jan 2015
Below 35 Years
8
(+1)
35 to below 45 years
9
(+1)
45 to below 50 years
10
(+1)
50 years and above
10.5
(+1)

7.3 Special Employment Credit (SEC) and Temporary Employment Credit (TEC)

To help employer adjusting to the new CPF contribution rates, The SEC will be increased by 0.5 % for one-year in 2015 for each Singapore workers aged 50 and above earning income of up to S$4,000. The employer will also receive a one-off TEC of 0.5% in 2015 for Singaporean and PR workers up to the CPF contribution ceiling of S$5,000.

7.4 Service and Conservancy Charges (S&CC) Rebates

The S&CC rebates for 2014 will benefit the HDB households as follows:

HDB Flat Type

S&CC Rebates (Months)

1-Room 3
2-Room 3
3-Room 2
4-Room 2
5-Room 1.5
Executive 1

7.5 GST Voucher (GSTV) – U-Save Special Payment

The U-save special payment will be paid out on top of the regular GSTV U-save payments. The details of both GDTV regular payment and U-save special payment as announced in the budget are summarized as follows:

HDB Flat Type

% of Regular Payment
GSTV – U-Save Regular Payment GSTV – U-Save Special payment
1-Room
100%
$260 $260
2-Room
100%
$260 $260
3-Room
75%
$240 $180
4-Room
50%
$220 $110
5-Room
50%
$220 $100
HDB Executive
50%
$180 $90

7.6 GSTV – Cash: Seniors Bonus

Eligible senior citizens with annual income of up to S$26,000 in YA 2013 will receive a one-off cash bonus of either S$100 or S$250, depending on the annual value of the home they live in.

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    1. Year of Assessment 2014 tax filing due dates

We wish to take this opportunity to remind our clients of the tax filing due dates for the Year of Assessment 2014:

Personal Tax

Filing due on 18 April 2014
(By e-filing)

Partnerships,Clubs,
Associations and
Management Corporations

Filing due on 15 April 2014
Corporate Tax Filing due on 30 November 2014

 

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Mr Chng Chung Hing
Tax Director
Accredited Tax Advisor
Loke Lum Consultants Pte Ltd
Compiled on 24th February 2014

 

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