Budget 2016 - Overview of Tax Changes

The following tax changes were announced by the Minister for Finance, Mr. Heng Swee Keat, in his Budget Statement for the Financial Year 2016, which was delivered in Parliament on Thursday, 24 Mar 2016.

For full details of the Budget Speech, please refer to the  Singapore Budget website.

For Individuals

 Tax Change Summary  FAQ / Related Information 
Introducing a cap of $80,000 on personal income tax reliefs
To enhance the progressivity of our Personal Income Tax regime, the total amount of personal income tax reliefs that an individual can claim will be capped at $80,000 per Year of Assessment (YA). This change will take effect from YA 2018.  

Personal income tax relief cap

Income tax calculator for tax resident individuals

Removing the tax concession on home leave passages for expatriate employees
The tax concession of taxing only 20% of the value of home leave passages for expatriate employees will be removed with effect from YA 2018. 

Home leave passage


For All Businesses 

Tax Changes  Summary  FAQ / Related Information 
Enhancing the Corporate Income Tax Rebate for YA 2016 and YA 2017
To help companies, especially Small and Medium Enterprises (“SMEs”), the Corporate Income Tax rebate will be raised to 50% for YA 2016 and YA 2017, subject to a cap of $20,000 rebate per YA.

Overview of Corporate Income Tax

Common Tax Reliefs that help Reduce the Tax Bills

Corporate Tax Rates, Corporate Income Tax Rebates, Tax Exemption Schemes and SME Cash Grant

Allowing the Productivity and Innovation Credit ("PIC") Scheme to lapse and lowering the cash payout rateThe cash payout rate will be lowered from 60% to 40% for qualifying expenditure incurred from 1 August 2016. All other conditions of the scheme remain unchanged. The PIC scheme, which has been extended for YA2016 to YA2018, will expire thereafter. It will not be available from YA2019. 

Productivity and Innovation Credit Scheme

How the Productivity and Innovation Credit (PIC) Scheme Benefits You

Six Qualifying Activities under PIC

Acquisition and Leasing of PIC IT and Automation Equipment 

Introducing mandatory electronic-filing (“e-Filing”) for CIT returns (including Estimated Chargeable Income, Form C and Form C-S)

In line with Government’s direction for more effective delivery of public services and to be aligned with the Smart Nation vision to harness technology to enhance productivity, mandatory e-Filing of CIT returns will be implemented in stages as follows:

YA 2018

  • Companies with turnover of more than $10mil in YA 2017

YA 2019

  • Companies with turnover of more than $1mil in YA 2018

YA 2020

  • All companies

Filing Estimated Chargeable Income and Paying Estimated Taxes

Overview of Form C-S/C

e-Filing versus Paper Filing 

Introducing mandatory e-Filing for PIC cash payout applicationTo streamline and expedite processing of PIC cash payout applications, mandatory e-Filing of PIC cash payout applications will be introduced. This is also aligned with the Smart Nation vision to harness technology to enhance productivity. The mandatory e-Filing of PIC cash payout applications will be effective from 1 August 2016.PIC Cash Payout e-Services
100% Investment Allowance (“IA”) under the Automation Support Package

To support firms to automate, drive productivity and scale up, qualifying projects may be eligible for an IA of 100% on the amount of approved capital expenditure, net of grants under the Automation Support Package. This IA is in addition to the existing capital allowance for plant and machinery. The approved capital expenditure is capped at $10 million per project.

The 100% IA is one of the four components in the Automation Support Package. MTI will announce more details of the Automation Support Package at the Committee of Supply.

Excerpt from Budget 2016 Annex A-4 (PDF) 
Enhancing the Mergers & Acquisitions (M&A) scheme

To support more M&As, the existing cap for qualifying M&A deals will be doubled from $20m to $40m, such that:  

  1. Tax allowance of 25% will be granted for up to $40m of consideration paid for qualifying M&A deals per YA; and
  2. Stamp duty relief will be granted for up to $40m of consideration paid for qualifying M&A deals per financial year.  

These changes will apply to qualifying M&A deals made from 1 April 2016 to 31 March 2020.
IRAS will release further details of the change by June 2016.

Mergers and Acquisitions Allowance

Acquisition of Shares of Companies

Extending the upfront certainty of non-taxation of companies’ gains on disposal of equity investments under Section 13Z of the Income Tax Act (“ITA”)  To provide upfront certainty to companies in their corporate restructuring, the scheme under Section 13Z will be extended till 31 May 2022 (to cover disposal of equity investments from 1 June 2017 to 31 May 2022). All conditions of the scheme remain the same.

Excerpt from Budget 2016 Annex A-4 (PDF)
Extending the Double Tax Deduction (“DTD”) for Internationalisation scheme

To support businesses in their internationalisation efforts, the DTD for Internationalisation scheme will be extended for another four years from 1 April 2016 to 31 March 2020. The existing automatic (no need for approval from IES or STB) DTD on expenses up to $100,000 will also be extended to qualifying expenditure incurred during this same period (1 April 2016 to 31 March 2020). All other conditions of the scheme remain the same.

IE Singapore will release further details of the change by June 2016.

Excerpt from Budget 2016 Annex A-4 (PDF)
Enhancing the Land Intensification Allowance (“LIA”) scheme

a) To encourage higher industrial land productivity, the LIA scheme will be extended to buildings used by a user or multiple users, who are related, for one or multiple qualifying trades or businesses, if certain conditions are met. This change will take effect for LIA applications if:

  1. The application for LIA is made from 25 March 2016; and
  2. The application for planning permission or conservation permission for the construction or renovation is made from 25 March 2016.

The qualifying capital expenditure for which an allowance may be made excludes any expenditure incurred before 25 March 2016. 

b) A new criterion requiring LIA applicants to be related to the qualifying user or users of the building will also be introduced. This change will take effect for LIA applications if:

  1. The application for LIA is made from 25 March 2016; and
  2. The application for planning permission or conservation permission for the construction or renovation is made from 25 March 2016.

EDB will release further details of the changes by July 2016.

Land Intensification Allowance (LIA)
Providing an election for the writing-down period for intellectual property rights (“IPRs”) under Section 19B of the ITA

To recognise the varying useful lives of IPRs, while maintaining a simple and certain tax regime, companies or partnerships may elect for their Section 19B WDA to be claimed over a writing-down period of 5, 10, or 15 years.

The election must be made at the point of submitting the tax return of the YA relating to the basis period in which the qualifying cost is first incurred. The election, once made, is irrevocable.

This change will apply to qualifying IPR acquisitions made within the basis periods for YA 2017 to YA 2020.

IRAS will release further details of the change by 30 April 2016.

Writing-down Allowance for Intellectual Property Rights

Six Qualifying Activities under PIC

Minimum Ownership Period for PIC IT and Automation Equipment and Intellectual Property Rights (IPRs)

Introducing an anti-avoidance mechanism for IPR transfers under Section 19B of the ITA

To ensure that Section 19B writing down allowances are granted based on transacted values that are reflective of the open market value (“OMV”) of an IPR, an anti-avoidance mechanism for IPR transfers will be included under Section 19B to empower the Comptroller to make the following adjustments to the transacted price of the IPR, if the IPR is not transacted at OMV:

  1. If the acquisition price of the IPR is higher than the OMV of the IPR, the Comptroller may substitute the acquisition price with the OMV of the IPR and restrict the writing-down allowance based on the OMV of the IPR; and 
  2. If the disposal price of the IPR is lower than the OMV of the IPR, the Comptroller may substitute the disposal price with the OMV of the IPR for the purpose of computing balancing charge.
    This change will apply to acquisitions, sales, transfers or assignments of IPRs that are made from 25 March 2016.

Writing-down Allowance for Intellectual Property Rights
Introducing the Business and IPC Partnership Scheme (“BIPS”)
To incentivise employee volunteerism through businesses, a pilot BIPS will be introduced from 1 July 2016 to 31 December 2018.
 

Under BIPS, businesses will enjoy an additional 150% tax deduction on wages and incidental expenses when they send their employees to volunteer and provide services to IPCs, including secondments.

This will be subject to the receiving IPCs’ agreement, with a yearly cap of $250,000 per business.

MOF and IRAS will release further details of the change by June 2016. 

Using PIC and Other Schemes

Business and IPC Partnership Scheme 


For Financial Sector

 Tax Changes Summary  FAQ / Related Information 
Extending and enhancing the Finance and Treasury Centre (“FTC”) scheme

To enhance activities in the areas of finance and treasury, the FTC scheme will be extended till 31 March 2021 with the following enhancements:

  1. The concessionary tax rate will be lowered to 8%. The substantive requirements to qualify for the scheme will be increased;
  2. To qualify for the concessionary tax rate, the FTCs will be allowed to obtain funds indirectly from approved offices and associated companies. Safeguards will be put in place to address the round-tripping risks; and
  3. The scope of tax exemption granted under Section 13(4) will be expanded to cover interest payments on deposits placed with the FTC by its non-resident approved offices and associated companies, provided the funds are used for the conduct of qualifying activities or services.

These changes will take effect from 25 March 2016.

EDB will release further details of the change by June 2016.

Excerpt from Budget 2016 Annex A-4 (PDF)
Extending and refining the Tax Incentive Scheme for Trustee Companies

The scheme will be subsumed under the Financial Sector Incentive (“FSI”) scheme from 1 April 2016.

The scope of qualifying activities will be expanded to align with trustee activities covered under the Financial Sector Incentive-Standard Tier (“FSI-ST”) scheme from 1 April 2016 for new and current incentive recipients. A concessionary tax rate of 12% will apply to new awards from 1 April 2016.

The current incentive recipients will continue to enjoy existing benefits till the expiry of their awards and may apply for renewal of their awards under the FSI scheme thereafter.

This change will take effect from 1 April 2016. MAS will release further details of the change by June 2016.

Excerpt from Budget 2016 Annex A-4 (PDF)


For Insurance Sector

Tax Changes  Summary 

FAQ / Related Information

Extending and refining the Tax Incentive Schemes for Insurance Companies

To streamline and simplify the tax incentives for the insurance sector, while ensuring the continued growth of high-value insurance activities in Singapore, the tax incentive schemes for Marine Hull and Liability Insurance, Specialised Insurance Business and Captive Insurance will be subsumed under the Insurance Business Development (“IBD”) umbrella scheme with the following changes:

  1. Marine Hull and Liability Insurance: The Marine Hull and Liability Insurance scheme will be subsumed under the IBD umbrella scheme from 1 April 2016. A concessionary tax rate of 10% will apply to new and renewal awards from 1 April 2016.
  2. Specialised Insurance Business: The Specialised Insurance Business scheme will be subsumed under the IBD umbrella scheme as an enhanced tier award from 1 September 2016, up till 31 Aug 2021.


    A concessionary tax rate of 8% will apply to new awards from 1 September 2019. As a transitional measure, a concessionary tax rate of 5% will apply to new awards from 1 September 2016 to 31 August 2019. A concessionary tax rate of 10% will apply to renewal awards from 1 September 2016.

    The scope of qualifying activities will be expanded to cover business of underwriting both onshore and offshore specialised risks from 1 September 2016 for new and current approved insurers

  3. Captive Insurance: The Captive Insurance scheme will be subsumed under the IBD umbrella scheme from 1 April 2018. A concessionary tax rate of 10% will apply to new and renewal awards from 1 April 2018.

The current approved insurers will continue to enjoy benefits under their existing insurance awards till the expiry of their awards, and may apply for renewal under the IBD scheme thereafter.

MAS will release further details of the change by June 2016.

Excerpt from Budget 2016 Annex A-4 (PDF)


For Maritime Sector

 Tax Change Summary  FAQ / Related Information 
Enhancing the Maritime Sector Incentive (MSI)

To further develop Singapore as an International Maritime Centre, the MSI will be enhanced as follows:

  1. The MSI-SRS and MSI-AIS award will cover income derived from operation of ships used for exploration or exploitation of offshore energy or offshore minerals, or ancillary activity relating to exploration or exploitation of offshore energy or offshore minerals.
  2. The MSI-ML(Ship) award will cover income derived from leasing of ships used for exploration or exploitation of offshore energy or offshore minerals, or ancillary activity relating to exploration or exploitation of offshore energy or offshore minerals.
  3.  The restriction on the qualifying counterparty’s requirement under MSI-ML(Ship) award will be removed. Therefore, tax exemption will be granted on income derived from leasing of ships used for qualifying activities to any counterparties for use outside the port limits of Singapore.

The above changes will take effect from 25 March 2016. MPA will release further details of the change in (a) and (b) by June 2016.

Shipping Companies


Other Tax Changes for Businesses

Tax Changes  Summary  FAQ / Related Information 
Enhancing the Global Trader Programme (Structured Commodity Finance) (“GTP(SCF)”) scheme 

To strengthen Singapore’s trade finance capabilities and encourage more SCF activities to be done in Singapore, the GTP(SCF) scheme will be enhanced to include the following qualifying activities:

  1. Consolidation, management and distribution of funds for designated investments;
  2. Mergers & Acquisitions advisory services; and
  3. Streaming Financing.

This change will take effect from 25 March 2016.

IE Singapore will release further details of the change by June 2016.

Excerpt from Budget 2016 Annex A-4 (PDF) 
Providing for allocation of expenses under Section 14U of the ITA and pre-commencement expenses under Part V of the ITA

To ensure fair allocation of Section 14U and pre-commencement expenses to pre-incentive and incentive income derived by businesses enjoying tax incentives, and provide certainty on the allocation method to be used:

  1. Section 14U and pre-commencement expenses that are directly incurred to derive the pre-incentive income or incentive income will be specifically identified and set off against the relevant income; and
  2. For all remaining Section 14U and pre-commencement expenses, they will be allocated between the pre-incentive and incentive income based on income proportion (e.g. using turnover, gross profit

This change will take effect for Section 14U and pre-commencement expenses that are incurred from 25 March 2016.

IRAS will release further details of the change by June 2016.

Excerpt from Budget 2016 Annex A-4 (PDF) 
Withdrawing the Approved Investment Company scheme under Section 10A of the ITA

As the scheme is assessed to be no longer relevant, the Approved Investment Company scheme will be withdrawn from YA 2018.


    Excerpt from Budget 2016 Annex A-4 (PDF)
    Extending the Not-for-Profit Organisation (“NPO”) tax incentive under Section 13U of the ITA
    To continue promoting Singapore as a hub for NPOs, the NPO tax incentive will be extended till 31 March 2022.  
    Excerpt from Budget 2016 Annex A-4 (PDF)
    Withdrawing the tax exemption on income derived by non-residents trading in Singapore in specified commodities via consignment arrangementsAs the scheme is assessed to be no longer relevant, the tax exemption for non-residents trading in Singapore in specified commodities via consignment arrangements will be withdrawn from YA 2018. Excerpt from Budget 2016 Annex A-4 (PDF)