Budget 2018 - Overview of Tax Changes

Extend the 250% Tax Deduction for Qualifying Donations

To continue to encourage Singaporeans to give back to community, the 250% tax deduction for qualifying donations will be extended for donations made on or before 31 December 2021.

All other conditions of the scheme remain the same.

Tax Treatment of Business Expenses (A - H)

Donations and Tax Deductions

To ease business costs and support restructuring by companies, we will enhance and extend the CIT rebate as follows:

a) For YA2018, the CIT rebate will be enhanced to 40% of the tax payable, subject to a cap of $15,000. This is an increase from the previously announced rebate of 20% of tax payable, subject to a cap of $10,000; and

b) The CIT rebate will be extended for another year to YA2019, at a rate of 20% of the tax payable, capped at $10,000.

Overview of Corporate Income Tax

Corporate Tax Rates, Corporate Income Tax Rebates and Tax Exemption Schemes

Filing Estimated Chargeable Income (ECI) and Paying Estimated Taxes

Enhance the tax deduction for qualifying expenditure on qualifying research and development (“R&D”) projects performed in Singapore

To support businesses to build their own innovations, we will increase the tax deduction for staff costs and consumables incurred on qualifying R&D projects performed in Singapore from 150% to 250%.

All other conditions of the scheme remain unchanged.

This change will take effect from YA2019 to YA2025.

Enhance the tax deduction for costs on protecting intellectual property (“IP”)

To encourage businesses, in particular smaller ones, to register and protect their IPs, we will:

a) Extend the scheme till YA2025; and

b) Enhance the tax deduction from 100% to 200% for the first $100,000 of qualifying IP registration costs incurred for each YA.

This change will take effect from YA2019 to YA2025.

Enhance the tax deduction for costs on IP in-licensing

To support businesses to buy and use new solutions, we will enhance the tax deduction from 100% to 200% for the first $100,000 of qualifying IP in-licensing costs incurred for each YA.

Qualifying IP in-licensing costs include payments made by a qualifying person to publicly funded research performers or other businesses, but exclude related party licensing payments, or payments for IP where any allowance was previously made to that person.

This change will take effect from YA2019 to YA2025.

Enhance the Double Tax Deduction for Internationalisation (“DTDi”) scheme

To further encourage internationalisation, the $100,000 expenditure cap for claims without prior approval from IE Singapore or STB will be raised to $150,000 per YA. Businesses can continue to apply to IE Singapore or STB on qualifying expenses exceeding $150,000, or on expenses incurred on other qualifying activities.

All other conditions of the scheme remain the same.

This change will apply to qualifying expenses incurred on or after YA2019.

IE and STB will release further details of the change by April 2018.

Adjustment to the Start-Up Tax Exemption ("SUTE") scheme

As we strengthen support for firms to build capabilities, we will adjust the tax exemption under the SUTE scheme to: 

a) 75% exemption on the first $100,000 of normal chargeable income; and

b) 50% exemption on the next $100,000 of normal chargeable income.

All other conditions of the scheme remain unchanged.

This change will take effect on or after YA2020 for all qualifying companies under the scheme. For example, if a qualifying company’s first YA is 2019, the current SUTE parameters will apply in YA2019 while the new parameters will apply in YAs 2020 and 2021.

Overview of Corporate Income Tax

Common Tax Reliefs that Help Reduce the Tax Bills

Corporate Tax Rates, Corporate Income Tax Rebates and Tax Exemption Schemes

Adjustment to the Partial Tax Exemption (“PTE”) scheme

As we strengthen support for firms to build capabilities, we will adjust the tax exemption under the PTE scheme to:

a) 75% exemption on the first $10,000 of normal chargeable income; and

b) 50% exemption on the next $190,000 of normal chargeable income.

All other conditions of the scheme remain unchanged.

This change will take effect on or after YA2020 for all companies (excluding those that qualify for the SUTE scheme) and bodies of persons.

To continue supporting employee volunteerism through businesses, BIPS will be extended till 31 December 2021.

In addition, MOF and IRAS will review the administrative processes for BIPS based on feedback that has been received. Details of any change will be announced in the second half of 2018.

To make sure that our tax system remains fair and resilient in a digital economy, we will introduce GST on imported services on or after 1 January 2020.

B2B imported services will be taxed via a reverse charge mechanism. Only businesses that: (i) make exempt supplies, or (ii) do not make any taxable supplies need to apply reverse charge. The majority of businesses make taxable supplies and thus would not be affected by this reverse charge mechanism. The reverse charge mechanism requires the local business customer to account for GST to IRAS on the services it imports. The local business customer can in turn claim the GST accounted for as its input tax, subject to the GST input tax recovery rules.

The taxation of B2C imported services will take effect through an Overseas Vendor Registration (OVR) mode. This requires overseas suppliers and electronic marketplace operators which make significant supplies of digital services to local consumers to register with IRAS for GST.

IRAS will release further details by end-February 2018.

Raise Buyer’s Stamp Duty on the Value of Residential Property in Excess of $1 Million

The Buyer’s Stamp Duty rates for non-residential properties remain unchanged.

Stamp Duty Basics for Property

Buyer's Stamp Duty (BSD)

Stamp Duty Basics for Property-Holding Entities

Buying or Acquiring Property-Holding Entities

Selling or Disposing Property-Holding Entities

The stamp duty remission will be allowed to lapse after 31 December 2018.

All other conditions of the scheme remain the same. 

MAS will release further details of the extension by May 2018.

Introduce a tax framework for Singapore Variable Capital Companies (“S-VACCs”)

A tax framework for S-VACC will be introduced to complement the S-VACC regulatory framework:

a) An S-VACC will be treated as a company and a single entity for tax purposes; 

b) Tax exemption under Sections 13R and 13X of the ITA will be extended to S-VACCs; 

c) 10% concessionary tax rate under the FSI-FM scheme will be extended to approved fund managers managing an incentivised S-VACC; and

d) The existing GST remission for funds will be extended to incentivised S-VACCs.

The conditions under the existing schemes in (b), (c) and (d) remain unchanged.

The changes will take effect on or after the effective date of the S-VACC regulatory framework.  

Enhance the Enhanced-Tier Fund Scheme under Section 13X of the ITA

To cater for more diverse fund structures, tax exemption under the Enhanced-Tier Fund Scheme will be extended to all fund vehicles constituted in all forms. Besides companies, trusts and limited partnerships, all fund vehicles will be able to qualify for the Enhanced-Tier Fund Scheme if they meet all qualifying conditions.

All other conditions of the scheme remain the same.

The change will take effect for new awards approved on or after 20 February 2018.  

Extend the tax transparency treatment for Singapore-listed Real Estate Investment Trusts (“S-REITs”) to Singapore-listed Real Estate Investment Trusts Exchange-Traded Funds (“REITs ETFs”)

To have parity in tax treatments between investing in individual S-REIT and via REITs ETF with investments in S-REITs, the following tax treatment will be accorded to REITs ETFs: 

a) Tax transparency treatment on the distributions received by REITs ETFs from S-REITs which are made out of the latter’s specified income; 

b) Tax exemption on such REITs ETFs distributions received by individuals, excluding individuals who derive any distribution: 

   i. through a partnership in Singapore; or 

   ii. from the carrying on of a trade, business or profession; and 

c) 10% concessionary tax rate on such REITs ETFs distributions received by qualifying non-resident non-individuals.

Subject to conditions, the tax concessions for REITs ETFs will take effect on or after 1 July 2018, with a review date of 31 March 2020, which is the same as that for other tax concessions for S-REITs.

IRAS will release further details on the application for the tax transparency treatment by April 2018.  

Extend and enhance the Financial Sector Incentive (“FSI”) scheme

To further strengthen Singapore’s position as a leading financial centre, the FSI scheme will be extended till 31 December 2023.

The scope of trading in loans and their related collaterals is expanded to include collaterals that are prescribed infrastructure assets or projects. The change will apply to income derived on or after 1 January 2019 in respect of new and renewal awards approved on or after 1 June 2017.

All other conditions of the scheme remain the same.

Extend the tax deduction for banks (including merchant banks) and qualifying finance companies for impairment and loss allowances made in respect of non-credit-impaired financial instruments

To promote the overall robustness and stability of the Singapore financial system, the tax deduction under Section 14I of the ITA will be extended till YA2024 (for banks and qualifying finance companies with December FYE) or YA2025 (for banks and qualifying finance companies with non-December FYE).

All other conditions of the scheme remain the same.  

Rationalise the Withholding Tax (“WHT”) exemptions for the financial sector

As part of the Government’s process to continually review tax concessions to ensure relevance and usefulness, the following changes are made: 

a) To ensure that the relevance of the tax concessions is periodically reviewed, a review date of 31 December 2022 will be introduced for the WHT exemptions for the following payments: 

   i. Payments made under cross currency swap transactions made by Singapore swap counterparties to issuers of Singapore dollar debt securities;

   ii. Payments made under interest rate or currency swap transactions by financial institutions;

   iii. Payments made under interest rate or currency swap transactions by MAS; and 

   iv. Specified payments made under securities lending or repurchase agreements by specified institutions; and 

b) The following WHT exemptions will be legislated, along with a review date of 31 December 2022: 

   i. Interest on margin deposits paid by members of approved exchanges for transactions in futures; and 

   ii. Interest on margin deposits paid by members of approved exchanges for spot foreign exchange transactions (other than those involving Singapore dollar).  

   The change in (b) will take effect for payments under agreements entered into on or after 20 February 2018. 

c) The WHT exemptions for the following payments will be withdrawn:

   i. Interest from approved Asian Dollar Bonds; and

   ii. Payments made under over-the-counter financial derivative transactions by companies with FSI-Derivatives Market awards that were approved on or before 19 May 2007. 

   The change in (c) will take effect for payments under agreements entered into on or after 1 January 2019;

Unless the WHT exemptions under (a) and (b) are extended, the WHT exemptions will cease to apply to payments that are liable to be made under agreements entered into on or after 1 January 2023. WHT exemptions will continue to apply to payments that are liable to be made on or after 1 January 2023, under agreements entered into on or before 31 December 2022.

All other conditions of the schemes remain the same.

Extend the Qualifying Debt Securities (“QDS”) incentive scheme and allow the Qualifying Debt Securities Plus (“QDS+”) incentive scheme to lapse

To continue supporting the development of Singapore’s debt market, the QDS scheme will be extended till 31 December 2023.

As part of the Government regular review of tax incentives, the QDS+ scheme will be allowed to lapse after 31 December 2018.

Debt securities with tenure beyond 10 years, and Islamic debt securities that are issued: 

a) After 31 December 2018 can enjoy tax concessions under the QDS scheme if the conditions of the QDS scheme are satisfied; 

b) On or before 31 December 2018 can continue to enjoy the tax concessions under the QDS+ scheme if the conditions of the QDS+ scheme are satisfied. 

To strengthen our primary dealer network and encourage trading in SGS, the tax exemption on income derived by primary dealers from trading in SGS will be extended till 31 December 2023.  

To further strengthen Singapore’s position as a leading insurance and reinsurance centre, the IBD-IBB scheme will be extended till 31 December 2023.

All conditions of the IBD-IBB scheme remain the same.

To streamline and simplify the insurance tax incentives, the IBD-SIBB scheme will be allowed to lapse after 31 March 2018. With the lapsing of IBD-SIBB scheme, specialty insurance broking and advisory services will be incentivised under the IBD-IBB scheme, at a concessionary tax rate of 10%. 

Extend the Investment Allowance (“IA”) scheme to include qualifying investment in submarine cable systems landing in Singapore

To strengthen Singapore’s position as a leading digital connectivity hub, we will extend IA in respect of productive equipment to capital expenditure incurred on newly-constructed strategic submarine cable systems landing in Singapore, subject to qualifying conditions.

All other conditions of the IA scheme apply, except for the following which will be permitted:

a) The submarine cable systems can be used outside Singapore; and

b) The submarine cable systems, on which IA has been granted, can be leased out under the indefeasible rights of use arrangements.

This change will take effect for capital expenditure incurred between 20 February 2018 and 31 December 2023, inclusive of both dates.

Introduce a review date for the Withholding Tax ("WHT") exemption on container lease payments made to non-resident lessors.

A review date of 31 December 2022 will be introduced to ensure that the relevance of the scheme is periodically reviewed.

This means that unless the scheme is extended, such payments accruing to a non-resident lessor under any lease or agreement entered into on or after 1 January 2023 in respect of the use of a qualifying container for the carriage of goods by sea will be subject to WHT.

Extension of the Wage Credit Scheme (WCS)