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Singapore Budget - Overview of Tax Changes

Productivity and Innovation Credit (PIC) - Tax Deferral Option New! 


To help businesses, especially SMEs, with their cash flow and investments in productivity, the Minister for Finance has announced on 2 Mar 2011 a Tax Deferral option for businesses to defer a dollar of current Year of Assessment (YA) tax for every dollar of PIC qualifying expenditure incurred for the current financial year, up to a cap of $100,000. The tax will be deferred and is due for payment when the first assessment for the following YA is raised. This tax deferral allows businesses to enjoy their PIC benefits one year in advance.

Budget 2011 Tax Changes

The following tax changes were announced by Minister for Finance, Mr. Tharman Shanmugaratnam in his Budget Statement for the Financial Year 2011 which was delivered in Parliament on Friday, 18 Feb 2011.

 For Individuals

Tax Changes Summary FAQ / Related Information
One-off Personal Income Tax Rebate for Resident Individual Taxpayers All resident individual taxpayers will be given a one-off personal income tax rebate of 20%, capped at $2,000 per taxpayer, for the tax  payable for Year of Assessment (YA) 2011. Tax Calculator  
Changes to Personal Income Tax Rate Structure for Resident Individual Taxpayers The new personal income tax rate structure will take effect from YA 2012. Income tax rates

Tax Calculator  
Tax Deduction of 2.5 times the Amount of Donation The tax deduction of 2.5 times the amount of donation will be extended for another five years for donations made from 1 Jan 2011 to 31 Dec 2015. All existing criteria to qualify for tax deduction remain unchanged. Donations 
Tax Exemption on Alimony and Maintenance Payments With effect from YA 2012, alimony or maintenance payments are tax-exempt in the hands of female taxpayers and not allowable to male taxpayers as spouse relief.  Charge (alimony/maintenance payments)

Spouse/handicapped spouse relief 
Supplementary Retirement Scheme (SRS) - Increase in contribution cap With effect from 1 Jan 2011, annual SRS contribution cap will be increased to $12,750 for Singaporean/SPR and $29,750 for foreigner. SRS contributions 
Higher Central Provident Fund (CPF) Employer's Contribution Rate and Salary Ceiling With effect from 1 Sep 2011, employer’s compulsory CPF contribution rate will be increased to 16%, and current CPF monthly salary ceiling of $4,500 will be increased to $5,000.
 
Tax benefits for third party contributors of the Voluntary Cash Contributions to Medisave Account The voluntary cash contributions by companies (e.g. taxi companies) to Medisave account of self-employed persons (eg. taxi drivers) on or after 1 Jan 2011 will be exempt from tax in the hands of the self-employed persons. FAQ 

 
For All Businesses

Tax Changes Summary FAQ / Related Information
One-off Corporate Income Tax (CIT) Rebate or SME Cash Grant

Companies will receive a CIT Rebate or SME Cash Grant for Year of Assessment (YA) 2011.

Companies will automatically receive the higher of the tax rebate or the grant when IRAS assesses their YA 2011 corporate income tax returns.

CIT Rebate is 20% of YA 2011 corporate income tax payable, capped at $10,000.

SME Cash Grant will be based on 5% of the company’s revenue for YA 2011, subject to a cap of $5,000. To enjoy the SME Cash Grant, companies must have made CPF contributions in YA 2011. 

More information on Corporate Income Tax Rebate and SME Cash Grant

Calculator for Corporate Tax Rebate and SME Cash Grant

FAQ 
Enhancement of the Productivity and Innovation Credit (PIC) Scheme To further encourage pervasive innovation and raise productivity efforts, the PIC scheme is simplified and enhanced in 4 main areas:

a) The quantum of tax deduction or allowance is increased to 400% of expenditure, for the first $400,000 spent on each qualifying activity;

b) PIC benefits will be made available to R&D done abroad;

c) Businesses will be allowed to combine the $400,000 expenditure cap per year for YA 2013 to YA 2015 into a new ceiling of $1,200,000 over the three years;

d) A simpler and enhanced cash conversion option where taxpayers can opt to receive, in lieu of tax deduction benefits, a cash payout of 30% of the first $100,000 of qualifying expenditure, up to $30,000.

All other existing conditions of the current concession apply.

IRAS will release further details by end June 2011.
More information on Productivity and Innovation Credit (PIC) 
Foreign Tax Credit (FTC) Pooling system FTC pooling is introduced to give businesses greater flexibility in their claim of FTCs, reduce their Singapore taxes payable on remitted foreign income (“FI”), as well as to simplify tax compliance.

Under the FTC pooling system, FTC is computed on a pooled basis, rather than on a source-by-source and country-by-country basis for each particular stream of income. The amount of FTC to be granted will be based on the lower of the pooled foreign taxes paid on the FI and the pooled Singapore tax payable on such FI.

This will take effect from YA 2012.
More information on Foreign Tax Credit Pooling System 
Streamlining of the section 14B and section 14K Tax Deduction Schemes The sections 14B and 14K tax deduction schemes will be merged into a single scheme given their common objective of assisting businesses to internationalise and expand overseas. The merged scheme will also be simplified to allow more businesses to benefit from the scheme. For instance, businesses can now submit their applications up to the day of their overseas marketing trip, instead of seven days before the trip.

A sunset clause will be introduced for this scheme – 31 Mar 2016.

These changes will apply to applications submitted and approved on or after 1 April 2011.

IE Singapore will release further details by end Mar 2011.
Excerpts from Budget 2011 Annex 2 
Enhancement of the concession for enterprise development - enhancing the claim of pre-commencement expenses To facilitate the starting up of businesses, business will be allowed to claim pre-commencement revenue expenses incurred in the accounting year immediately preceding the accounting year in which they earn the first dollar of trade receipts.

The change is effective from YA 2012. Businesses can claim pre-commencement revenue expenses incurred from accounting year 2010 (YA 2011) if the first dollar of trade receipts is earned in or after accounting year 2011 (YA 2012). 

All other existing conditions of the current concession apply.

IRAS will release further details by end Jun 2011.
More information on concession for enterprise development - enhancing the claim  of pre-commencement expenses 
Facilitate  Employee Equity-Based Remuneration (EEBR) schemes by extending tax deduction to cover cost of  parent company’s shares acquired through a Special Purpose Vehicle (SPV) set up to administer EEBR scheme

In recognition that a company may set up SPVs to act as trustees to acquire its parent company’s shares for its EEBR scheme, company will be allowed tax deduction for the cost incurred to acquire its parent company’s shares through a SPV for the fulfillment of its EEBR obligations.

This will take effect from the YA 2012.
 
IRAS will release further details by end Jun 2011.

More information on Employee Equity-Based Remuneration (EEBR) Scheme 
Renewal of Tax Exemption Scheme for Income Derived from Structured Products The existing tax exemption scheme for income derived from structured products will be extended to 31 Mar 2017. 

All other existing conditions of the current scheme will apply.
Excerpts from Budget 2011 Annex 2 
Tax Benefits for Voluntary CPF Medisave Contributions by Eligible Companies to Self-employed Persons (SEPs)

Eligible companies that make voluntary contributions to SEPs’ CPF Medisave Accounts from 1 Jan 2011 will be given tax deduction.  

Such contributions will be tax-exempt in the hands of SEPs.

More information on Voluntary Cash Contribuions to Medisave Account  

 FAQ 

Enhancement to deductions on donations The tax deduction of 250% will be extended for another five years for donations made during 1 Jan 2011 to 31 Dec 2015.

All existing criteria to qualify for tax deduction remain unchanged.
More information on Donations 

 

For Banks 

Tax Changes Summary FAQ / Related Information
Liberalisation of the Withholding Tax Exemption Regime for Banks To facilitate access to a wider range of funding sources for their lending business and strengthen our position as a regional funding centre, enhancements will be made to the WHT exemption regime for banks, finance companies and investment banks with effect from 1 Apr 2011.

Monetary Authority of Singapore will release further details of the changes by end Mar 2011.
More information on Liberalisation of the Withholding Tax Exemption Regime for Banks 
Extension of Tax Incentive Schemes for Project Finance With the exception of the FSI-PF, the existing package of tax incentive schemes for Project Finance will be extended till 31 Mar 2017.
 
The FSI-PF scheme will lapse on its expiry date of 31 December 2011. Financial institutions can enjoy similar tax benefits of the FSI-PF under the FSI-Credit Facilities Syndication and FSI-Bond Market tax incentive schemes.

Monetary Authority of Singapore will release further details of the changes by end Apr 2011.
Excerpts from Budget 2011 Annex 2  

For Insurance Companies 

Tax Changes Summary FAQ / Related Information
Extension of Captive Insurance Tax Incentive Scheme

The scheme will be extended until 31 Mar 2018.  An award renewal framework will also be introduced for incentive recipients with effect from 19 Feb 2011.

Monetary Authority of Singapore will release further details of the changes by end Apr 2011.

Excerpts from Budget 2011 Annex 2 
Extension of Marine Hull and Liability Insurance Tax Incentive Scheme The following changes will be made to the scheme:

a) A sunset clause will be introduced for the scheme – 31 Mar 2016; and

b) An award renewal framework will be introduced for incentive recipients with effect from 19 Feb 2011.

Monetary Authority of Singapore will release further details of the changes by end Apr 2011.
Excerpts from Budget 2011 Annex 2 
Extension and Enhancement of Specialised Insurance Tax Incentive Scheme The scheme will be extended till 31 Aug 2016.  In addition, the following enhancements will be made to the scheme with effect from 19 Feb 2011:

a) Agriculture insurance will be included as a new qualifying specialised insurance business line; and

b) An award renewal framework will be introduced for incentive recipients.

Monetary Authority of Singapore will release further details of the changes by end Apr 2011.
Excerpts from Budget 2011 Annex 2 
Withdrawal of withholding tax exemption scheme for Financial Guaranty Insurers This scheme will be discontinued from 19 Feb 2011. Excerpts from Budget 2011 Annex 2  

 
For Shipping Industries 

Tax Changes Summary FAQ / Related Information
Maritime Sector Incentive (MSI) All existing tax incentives for the maritime sector will be streamlined and consolidated under the new Maritime Sector Incentive (MSI) with effect from 1 Jun 2011. New enhancements will also be introduced under the MSI.

Existing incentive recipients will transit automatically to the MSI from 1 June 2011. These changes aim to simplify and enhance tax incentives for the maritime sector, and to promote Singapore as an International Maritime Centre.

The Maritime and Port Authority of Singapore (MPA) will release further details by end May 2011.
Excerpts from Budget 2011 Annex 2 

 
Other Tax Incentives For Businesses 

Tax Changes Summary FAQ / Related Information
Enhancement to the Tax Incentive Scheme for Trustee Company To streamline the scheme and align the administration of the incentive with other tax incentive schemes, the following changes will be made to the scheme:

a) A sunset clause will be introduced for the scheme – 31 Mar 2016; 

b) Award recipients approved on or after 1 Apr 2011 will be offered a 10-year award tenure;

c)  All existing award recipients will automatically transit to the new framework on 1 Apr 2011. They will enjoy the scheme for a period of 10-year ending 31 Mar 2021; and

d) The list of qualifying activities will be expanded to include the provision of trustee and custodian services in respect of the issue of units to foreign Collective Investment Schemes and foreign Business Trusts with effect from 1 Apr 2011.

Monetary Authority of Singapore will release further details of the changes by end Apr 2011.
Excerpts from Budget 2011 Annex 2 
Enhancement of the Global Trader Programme (GTP) To facilitate better risk management amongst GTP companies, the existing list of qualifying derivative instruments under the GTP will be expanded to include all derivative instruments. This enhancement will apply to income from qualifying trades in the new qualifying derivative instruments, derived by a GTP company from YA 2012.

A sunset clause will be introduced for the GTP scheme – 31 March 2021. 

The existing sunset clauses for the GTP enhancements will be aligned to a common sunset clause at the scheme level (i.e. 31 Mar 2021).

Companies can be approved as a GTP company or GTP (Structured Commodity Finance) company on or before 31 Mar 2021. The GTP company can enjoy the benefits under the various enhancements during their award tenure of up to five years.

IE Singapore will release further details by end Apr 2011.
Excerpts from Budget 2011 Annex 2 
Enhancement of the Finance and Treasury Centre Incentive The revenue ratio used to determine the inclusion of Local Network Company (LNC) will exclude related party transactions. This is consistent with the global revenue presented in the consolidated financial statements of the ultimate parent company where intercompany transactions are excluded. The alignment will result in a more accurate and meaningful indicator of the LNCs’ contribution towards the group revenue.

A sunset clause will be introduced for the FTC Incentive – 31 Mar 2016.

All other existing conditions of the current concession apply.
Excerpts from Budget 2011 Annex 2 


Goods & Services Tax (GST)

Tax Changes Summary FAQ / Related Information
GST changes to marine related supplies

The following GST changes will take effect from 1 Oct 2011:

a) New GST scheme to allow ‘approved marine customers’ to buy or rent goods without having to pay GST, as long as the goods are for use or installation on a commercial ship that is wholly for international travel; and

b) Expanding the scope of zero-rating of repair and maintenance services for ship parts or components under Section 21(3)(p).

GST Information for specific industries - Marine and Shipping 
GST changes for the biomedical industry

The following GST changes will take effect from 1 Oct 2011:

(a) New GST relief for clinical trial materials (CTMs) imported into Singapore

(b) Enhancement of the Approved Contract Manufacturer and Trader (ACMT) scheme for contract manufacturers

GST Information for specific industries - Biomedical 
ACMT scheme 
Zero-rating of specialised storage and other value-added services

A new GST scheme will be introduced for specialised warehouses used in the business of storing certain high-value collectible items (e.g. art, antiques).

With effect from 1 Oct 2010, GST-registered businesses may zero-rate the supply of prescribed services performed on high-value collectible items stored in specialised warehouses approved under the scheme.

GST Information for specific industries
Logistics & Freight Forwarding 


Stamp Duty

Tax Changes Summary FAQ / Related Information
Stamp duty relief for the transfer of assets upon conversion of an existing Company to a Limited Liability Partnership (“LLP”) A Company converting to a Limited Liability Partnership (“LLP”) on or after 19 Feb 2011 will enjoy stamp duty relief  for the transfer of assets. This is an extension of the current stamp duty relief given to  an existing Firm (ordinary partnership).   To be in line with the new relief given to Company, a fourth condition will be imposed for the relief for conversion of an existing Firm (ordinary partnership) to an LLP.  e-Tax Guides
Stamp Duty: Relief for the Transfer of Assets upon Conversion of an Existing Company to a Limited Liability Partnership (LLP) (121KB)

Stamp duty: Relief for the Transfer of Assets upon Conversion of an Existing Firm to a Limited Liability Partnership (LLP) (139KB) 
Extension of stamp duty remission in excess of $50 to  aborted leases The amount of stamp duty to be paid, upon granting of remission, on leases aborted on and after 19 Feb 2011 will be $50. This is an extension of the current stamp duty remission in excess of $50 for aborted Sale and Purchase (S&P) agreements. e-Tax Guide
Stamp Duty: Remission for Aborted Leases (112 KB) 
Removal of most fixed and nominal stamp duties The following stamp duties will be removed on documents executed on or after 19 Feb 2011:

(a) Fixed and nominal stamp duties on prescribed documents

(b) $10 duty payable where remission is given under Stamp Duties (Transfer of HDB Flat Within Family) (Remission) Rules 2007
 
Fixed duty of $10 on Declaration of Trust, where there is no change in beneficial ownership, remains. 
e-Tax Guide
Stamp Duty: Removal of Fixed and Nominal Duties (Second Edition)  (116 KB) 
Extension of Stamp Duties Remission for Project Finance The remission of stamp duty payable on the instrument  relating to the transfer of qualifying infrastructure projects/assets to qualifying entities listed or to be listed on the SGX will be extended from 1 Jan 2012 to 31 Mar 2017 (both dates inclusive).  Excerpt from Budget 2011 Annex 2 


 
Other Changes 

Other Changes Summary FAQ / Related Information
Removal of TV licence fee

IRAS bills and collects TV Licence Fees for owner-occupied residential properties on behalf of Media Development Authority (MDA).

All TV licence fees will be permanently removed from 1 Jan 2011.

For households who have paid the TV licence fees for 2011, MDA will make the refunds to the households directly.

Refer to Media Development Authority for more details.

More information on TV licence fee 
Last Updated on 25 February 2013


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