Singapore Budget 2017
Executive Summary

Finance Minister Heng Swee Keat delivered his budget speech on 20 February 2017 for the fiscal year from April 2017 to March 2018. The theme of the budget this year is “Moving Forward Together”. Against the backdrop of sluggish global economy outlook, the government has announced several measures in the short and longer term to grow our economy. The main features of the budget this year include the proposed increase to the price of water from 1 July 2017, the introduction of carbon tax from 2019 and the increase in expensive motorcycle taxes. Other aspects include social measures to provide better support for people with disabilities and measures to build a caring and inclusive society. The changes announced in the budget include the increase of capping for corporate tax rebate from S$20,000 to S$25,000 for the YA 2017, at 50% of the tax payable. There will be a tax rebate at 20% of the tax payable, capped at S$500 for resident individual taxpayer for the YA 2017. The Government has decided to defer the increase in foreign worker levy for the marine and process sectors for one more year. To provide support to the businesses, the Government has continued with the various wage supplement schemes until 2019. We summarize below the tax changes announced in budget 2017:

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. The tax rate of 17% has been introduced since the year of assessment 2010 and remained competitive compared to other jurisdictions in the Asia Pacific region. GST rate remains 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 2017. Qualifying newly incorporated resident 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:

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

Year of Assessment

Corporate

Tax Rate (%)

2008

18

2009

18

2010

17

2011

17

2012

17

2013

17

2014

17

2015

17

2016

17

2017

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

24

Vietnam

22

China

25

The Philippines

30

India

30

Japan

23.9

1.2 Tax Rebate for Personal Income Tax for the YA 2017
A tax rebate at 20% of the tax payable, capped at S$500 will be allowed to resident individual taxpayers for the YA 2017.

1.3 Tax Rebate for Corporate Taxpayers for the YA 2017 and YA 2018
The capping for the tax rebate will be increased from S$20,000 to S$25,000 for the YA 2017. There will also be a tax rebate at 20% of the tax payable for the YA 2018, capped at S$10,000.

1.4 Increase in Price of Water
The price of water will be increased by 30% from 1 July 2017. The increase will be introduced in two phases and completed by 1 July 2018. The Government will introduce measures for lower income households to cope with the increase in cost of living.

1.5 Introduction of Carbon Tax
The Government has targeted to introduce the new carbon tax in 2019 with the objective of controlling the emission of greenhouse gases. The tax rate will be between S$10 and S$20 per tonne of greenhouse gas emissions. The new tax will be applied to power stations and not to electricity users.

2. Tax Changes for Businesses

2.1 Intellectual Property Regime
A new Intellectual Property (“IP”) regime will be introduced to encourage the use of IPs arising from the research and development (“R&D”) activities undertaken by companies. The IP Development Incentive (‘IDI”) will be introduced from 1 July 2017 and administered by the EDB. The current incentive for IP under Pioneer Service will be replaced by the IDI.     

2.2 Withdrawing of Tax Deduction for Computer Donation Scheme
The scheme is no longer relevant and is withdrawn from 20 Feb 2017.

2.3 Withdrawing of Accelerated Depreciation for Energy Efficient and Saving Equipment
The current scheme which allows one year write off for costs incurred on qualifying equipment will be withdrawn after 31 December 2017.
 
2.4 Allowing the Approved Building Project (“ABP”) Scheme to Lapse  
The current property tax exemption under the ABP scheme will be lapsed after 31 March 2017 without extension.

2.5 Cost Sharing Agreement for Research &Development (“R&D”) Projects
A new safe harbor rule will be introduced from 21 Feb 2017 for claim of R&D expenses under a Cost Sharing Agreement (“CSA”). Currently, the costs included in a CSA are subject to restrictions. With the new safe harbor rule, taxpayer will be allowed to claim for 75% of the R&D costs incurred under Section 14D of the Income Tax Act.

2.6 Withholding Tax Exemption for Submarine Cable under Indefeasible Right of Use
Under the scheme, payment made for the use of submarine cable capacity is exempted from withholding tax. The tax exemption scheme will be extended to 31 December 2023.
  
3. Tax Changes for Financial Sector

3.1 Extending Withholding Tax Exemption for Structured Products
Under current treatment, withholding tax exemption is granted to payment made to non-resident non individuals for structured products offered by financial institutions. The scheme will be extended to 31 March 2021.

3.2 Refining the Finance and Treasury Centre (“FTC”) Scheme
Changes will be made to the qualifying counterparties for certain transactions under the scheme to help ease compliance. EDB will announce the details of the changes by May 2017.  

3.3 Tax Incentive for Project and Infrastructure Finance
The scheme grants tax incentives to qualifying income from project debt securities, qualifying projects undertaken by listed companies and 10% tax on approved infrastructure trustees. The scheme will be extended to 31 December 2022.

4. Changes to Specific Tax Incentives

4.1 Global Traders Program (“GTP”)
The current scheme will be expanded to include the following activities undertaken by a GTP approved company:

- To include income from qualifying transactions with any counterparty;
- To include income from physical commodity purchased for consumption in Singapore or for supply of fuel to aircraft or vessel within Singapore;
- To include income from activities carried out in Singapore which adds value to the commodity; and
- The qualifying threshold for the GTP scheme will be raised.

The above changes take effect from 21 February 2017.
  
4.2 Extending and Refining the Aircraft Leasing Scheme (“ALS”)
Changes are proposed to the above tax incentive to refine the scheme. These include:

- The scheme will be extended to 31 December 2022;
- To include income derived by lessors from financing of aircraft purchase or aircraft engine acquisition by the lessees. The change will take effect from 21 February 2017;
- To streamline the concessionary tax rate to 8% from the current 5% or 10%. This will be applicable to new incentive awarded from 1 April 2017; and
- To extend withholding tax exemption for payments made on qualifying loan prior to 31 December 2022.   

4.3 Extending and Refining the Integrated Investment Allowance (“IIA”) Scheme
The scheme allows additional allowance on costs incurred on qualifying equipment used by overseas company for approved projects. The scheme will be extended to 31 December 2022. The scheme will also be refined to include the manufacturing of products for the qualifying company from 21 February 2017.
  
4.4 Allowing the International Arbitration Tax Incentive (“IArb”) to Lapse
The above incentive will be expiring on 30 June 2017 and it will not be extended.

4.5 Allowing the Writing Down Allowance for IPR and MDE to Lapse
The writing down allowance for Intellectual Property Rights (“IPR”) and Media and Digital Entertainment (“MDE”) contents scheme will be allowed to lapse after the basis period for the YA 2018.  
 
5. Goods and Services Tax (GST)

5.1 Withdrawal of Tourist Refund Scheme for Tourists Departing by International Cruise
Due to low volume, the tourist refund scheme at cruise terminals will cease to operate from 1 July 2017. Tourists with purchase of goods prior to 1 July 2017 are allowed up to 31 August 2017 to file their tax refund claims.

6. Changes to Individual Income Tax

6.1 Personal Income Tax Rates from the YA 2017
New personal tax rates have been implemented from the YA 2017. We append below the new tax rate table for resident taxpayers:

 

Tax structure with effect from Year of Assessment (“YA”) 2017

 

 

Chargeable Income

 ($)

Tax Rate

(%)

Gross Tax Payable

($)

 

On the first

On the next

20,000

10,000

0

2

0

200

 

On the first

On the next

30,000

10,000

-

3.5

200

350

 

On the first

On the next

40,000

40.000

-

7

550

2,800

 

On the first

On the next

80,000

40,000

-

11.5

3,350

4,600

 

On the first

On the next

120,000

40,000

-

15

7,950

6,000

 

On the first

On the next

160,000

40,000

-

18

13,950

7,200

 

On the first

On the next

200,000

40,000

-

19

21,150

7,600

 

On the first

On the next

240,000

40,000

-

19.5

28,750

7,800

 

On the first

On the next

280,000

40,000

-

20

36,550

8,000

 

On the first

In excess of

320,000

320,000

-

22

44,550

 


6.2 Personal Income Tax Rebate
A tax rebate at 20% of the tax payable, capped at S$500 will be allowed to resident individual taxpayers for the YA 2017.

7. Tax Changes for Vehicles

7.1 Restructure Diesel Taxes
A diesel duty will be introduced from 20 February 2017 in addition to the current lump sum Special Tax on diesel cars and taxis. The duty is calculated at S$0.10 per litre. The annual Special Tax levied on diesel usage will be reduced by S$100 for diesel cars and S$850 for taxi. 

7.2 Exclusion of Diesel from Industrial Exemption Factory Scheme (“IEFS”)
Currently, duty exemption is granted to diesel used as raw material for manufacture of non-dutiable goods under the IEFS. The exemption will be removed from 20 February 2017.

7.3 Offset Measures for Commercial Diesel Vehicles
Due to the introduction of Diesel Duty, road tax rebates will be given to diesel vehicles for 3 years from 1 August 2017 to 31 July 2020. Cash rebates will also be given to diesel school buses for 3 years from S$1,400 for the first year to S$350 for the third year. Diesel private hired buses and diesel excursion buses will also be given cash rebate for 3 years from S$1,500 for the first year to S$450 for the third year. The cash rebates will be given from 1 August 2017 to 31 July 2020.

7.4 Tiered Additional Registration Fee (“ARF”) for Motorcycles

Open Market Value (“OMV”)

ARF Rates

First S$5,000 of the OMV

15%

Next S$5,000 to S$10,000 OMV

50%

Remaining OMV

100%


8. Transfers to Households

8.1 GST Voucher – Cash
The following GST voucher – Cash will be given to eligible Singaporeans in 2017:



8.2 GST Voucher – U-Save
The following GST vouchers – U-save will be given to eligible households in 2017:


                           
8.3 GST Voucher – Medisave
Older Singaporeans will continue to receive GSTV – Medisave in 2017 as follows:



8.4 Service and Conservancy Charges (S&CC) Rebate
Eligible HDB households will receive S&CC Rebate to offset between 1.5 to 3.5 months of S&CC charges. Details of the S&CC rebate are as follows: 



9. Year of Assessment 2017 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 2017:

Personal Tax                  filing due on 18 April 2017 (By e-filing)

Partnerships, Clubs,        filing due on 15 April 2017
Associations and
Management Corporations

Corporate Tax                filing due on 30 November 2017


Mr Chng Chung Hing
Tax Director
Accredited Tax Advisor
Loke Lum Tax Advisory Pte Ltd
Compiled on 21st February 2017

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