Budget 2020 - Overview of Tax Changes

The following tax changes were announced by Deputy Prime Minister and Minister for Finance, Mr. Heng Swee Keat, in his Budget Statement for the Financial Year 2020 on Tuesday,18 Feb 2020.

For more information on the new Jobs Support Scheme and enhancement to the Wage Credit Scheme, please refer to the Stabilisation and Support Package (PDF, 306KB).

The full Budget Speech package is available at the Singapore Budget website. 


Individuals

 Tax Change  Summary FAQ / Related Information
Extend the withholding tax exemption for non-resident mediators
The withholding tax exemption will be extended until 31 March 2022.

Non-Resident Mediators                 

Extend the withholding tax exemption for non-resident arbitrators The withholding tax exemption will be extended until 31 March 2022.
Non-Resident Arbitrators              
Allow the concessionary withholding tax rate for non-resident public entertainers (“NRPEs”) to lapse

The concessionary withholding tax rate of 10% will be extended till 31 March 2022. It will then lapse after 31 March 2022.

Introduced in 2010, the concessionary tax rate for NRPEs was meant to kick-start Singapore’s push to being a vibrant global city. The local sports and entertainment scenes have flourished over the years and government schemes have been put in place to promote the sector.
Tax Obligations of Non-Resident Public Entertainers
 
Allow the Angel Investors Tax Deduction (“AITD”) scheme to lapse To maintain the resilience and progressivity of the tax system, the AITD scheme will lapse after 31 March 2020. With the lapsing of AITD, Singapore-based startups can access funding through other government schemes such as the Startup SG programme.


Angel investors, whose approved angel investor status commences on or before  31 March 2020, can continue to be granted the tax deduction under the AITD scheme in respect of qualifying investments made during the period of his approved angel investor status, subject to existing conditions of the AITD scheme.

Enterprise Singapore will provide further details of the transitional arrangement for approved angel investors by end-March 2020.
Angel Investors Tax Deduction Scheme (AITD)

All Businesses

Tax Change  Summary FAQ / Related Information 
 Jobs Support Scheme ("JSS")

All active employers, with the exception of Government organisations (local and foreign) and representative offices, are eligible for the JSS.   

Employers will receive an 8% cash grant on the gross monthly wages of each local employee (applicable to Singapore Citizens and Permanent Residents only)1 for the months of October 2019 to December 2019, subject to a monthly wage cap of $3,600 per employee.   

Employers do not need to apply for the JSS. The grant will be computed based on CPF contribution data.   

Employers can expect to receive the JSS payment from the Inland Revenue Authority of Singapore (IRAS) by 31 July 2020.

1Wages paid to business owners will not be eligible for the grant. 
  Jobs Support Scheme
Enhancement to Wage Credit Scheme ("WCS")

To continue encouraging enterprises to invest in raising productivity, upgrading and sharing of gains with their workers, the monthly wage ceiling will be raised from $4,000 to $5,000 for qualifying wage increases given in 2019 and 2020, so that more Singaporean employees will benefit.

Government co-funding levels will also be raised for 2019 and 2020 qualifying wage increases by five percentage points, to 20% and 15% respectively.  
Wage Credit Scheme
Corporate Income Tax ("CIT") Rebate  To help companies with cash flow, a CIT Rebate of 25% of tax payable, capped at $15,000, will be granted for Year of Assessment (“YA”) 2020.  Corporate Income Tax (CIT) Rebate for YAs 2013 to 2020 
Automatic extension of interest-free instalments of 2 months for payment of CIT on Estimated Chargeable Income (“ECI”) filed within 3 months from the companies’ financial year-end (“FYE”)

Companies paying their CIT by GIRO can automatically enjoy an additional 2 months of interest-free instalments, when they file their ECI within 3 months from their FYE.  

This automatic extension of instalment plan by 2 months will apply to:

  1. Companies that file their ECI from 19 February 2020 to 31 December 2020
  2. Companies that file their ECI before 19 February 2020, and have ongoing instalment payments to be made in March 2020.
  IRAS will provide the details of the change by 19 February 2020.  
Filing Estimated Chargeable Income (ECI) and Paying Estimated Taxes 
Increase the number of YAs for which the current year unabsorbed capital allowances (“CA”) and trade losses for a YA (collectively referred to as “qualifying deductions”) may be carried back

Under the enhanced carry-back relief scheme for YA2020, qualifying deductions for YA2020 may be carried back up to 3 immediate preceding YAs, capped at $100,000 of qualifying deductions and subject to conditions.  

Taxpayers may elect to carry back to the relevant preceding YAs an estimated amount of qualifying deductions available for YA2020, before the actual filing of their income tax returns for YA2020.   

IRAS will provide the details of the change by end-February 2020. 

Loss Carry-Back Relief
Provide an option to accelerate the write-off of the cost of acquiring plant and machinery (“P&M”) 

A taxpayer who incurs capital expenditure on the acquisition of P&M in the basis period for YA2021 (i.e. financial year (“FY”) 2020) will have an option to accelerate the write-off of the cost of acquiring such P&M over 2 years. If exercised, this option is irrevocable.

The rates of accelerated CA allowed are as follows:

a) 75% of the cost incurred to be written off in the first year (i.e. YA2021); and,
b) 25% of the cost incurred to be written off in the second year (i.e. YA2022).

The above option will be in addition to the options currently available under Sections 19 and 19A of the ITA.

No deferment of CA claims is allowed under the above option. If a taxpayer opts for the accelerated write-off option, it needs to claim the capital expenditure incurred for acquiring P&M based on the rates of 75% (in YA2021) and 25% (in YA2022).

Write-off over Two Years
Provide an option to accelerate the deduction of expenses incurred on renovation and refurbishment (“R&R”)
 
A taxpayer which incurs qualifying expenditure on R&R during the basis period for YA2021 (i.e. FY2020) for the purposes of its trade, profession or business will have an option to claim R&R deduction in 1 YA (i.e. accelerated R&R deduction). The cap of $300,000 for every relevant period of 3 consecutive YAs will still apply. If exercised, this option is irrevocable.
 

This option will be in addition to the existing option currently available under Section 14Q of the ITA. 

Renovation or Refurbishment Works Expenditure
Extend and enhance the Double Tax Deduction for Internationalisation (“DTDi”) scheme

To continue encouraging internationalisation, the DTDi scheme will be extended till 31 December 2025. In addition, the scope of the DTDi scheme will be enhanced to cover the following:  

  • Third-party consultancy costs relating to new overseas business development to identify suitable talent and build up business network; and
  • New categories of expenses incurred for overseas business missions (i.e. fees incurred on speaking spots to pitch products/services at overseas business and trade conferences, transporting materials/samples used during the business missions, and third-party consultancy costs to arrange business networking events to promote products/services).

The expanded scope will take effect for expenses incurred on or after 1 April 2020.
 
Enterprise Singapore will provide further details of the changes by end-March 2020.

Double Tax Deduction for Internationalisation Scheme 
 Extend the Mergers & Acquisitions (“M&A”) scheme

To continue encouraging companies to consider M&A as a strategy for growth and internationalisation, the M&A scheme will be extended to cover qualifying acquisitions made on or before 31 December 2025.

The scheme will remain unchanged for acquisitions made on or after 1 April 2020, except for the following:

  1. Stamp duty relief will lapse for instruments executed on or after 1 April 2020; and
  2. No waiver will be granted for the condition that the acquiring company must be held by an ultimate holding company that is incorporated in and is a tax resident of Singapore. This will apply for acquisitions made on or after 1 April 2020.
Mergers and Acquisitions Allowance 
Extend and refine the upfront certainty of non-taxation of companies’ gains on disposal of ordinary shares  To provide upfront certainty to companies in their corporate restructuring, the scheme under Section 13Z will be extended to cover disposals of ordinary shares by companies from 1 June 2022 to 31 December 2027.
 
In addition, to ensure consistency in the tax treatment for property-related businesses, the scheme will not apply to disposals of unlisted shares in an investee company that is in the business of trading, holding or developing immovable properties in Singapore or abroad.
 
The tax treatment of such share disposals will be based on the facts and circumstances of the case. The change will apply to shares disposed on or after 1 June 2022.

All other conditions and exclusions of the scheme remain the same. IRAS will provide further details of the changes by end 2020.
 
Non-taxation of Companies' Gains on Disposal of Equity Investments under Section 13Z 
Extend the Land Intensification Allowance (“LIA”) scheme  The objective of the LIA scheme remains relevant given the scarcity of land in Singapore. The LIA scheme will be extended till 31 December 2025. This refers to the last date a building or structure may be approved for LIA.    Land Intensification Allowance (LIA) 
Extend the writing-down allowance (“WDA”) scheme for the acquisition of an indefeasible right to use an international submarine cable system (referred to as “Indefeasible Right of Use” or “IRU”) under Section 19D of the ITA  The WDA scheme under Section 19D will be extended until 31 December 2025, i.e. WDA will be allowed on qualifying capital expenditure incurred on or before 31 December 2025 for the acquisition of an IRU.   -
Allow the further tax deduction scheme for research and development (“R&D”) expenditure under Section 14E of the ITA (“Section 14E incentive”) to lapse  The Section 14E incentive will lapse after 31 March 2020.
 
Over the years, the Government has enhanced the broad-based tax deductions for R&D conducted in Singapore. These broad-based tax deductions are available for all businesses without a need for approval.
 
With the previous enhancement in Budget 2018, businesses conducting qualifying R&D projects in Singapore can enjoy up to 250% tax deduction on qualifying expenses from YA2019 to YA2025.

Existing Section 14E incentive recipients can continue to enjoy the further tax deduction under Section 14E incentive until their awards expire.
-
Streamline the number of years of working life of P&M for CA claims under Section 19 and the Sixth Schedule of the ITA 

To simplify CA claims under Section 19 of the ITA, the prescribed working life of P&M in the Sixth Schedule will be streamlined. Businesses claiming annual allowance under Section 19 of the ITA may make an irrevocable election to write down their P&M as follows:

  1. If the current prescribed working life of the P&M in the Sixth Schedule is 12 years or less, businesses may choose to claim annual allowance over 6 or 12 years; or
  2. If the current prescribed working life of the P&M in the Sixth Schedule is 16 years, businesses may choose to claim annual allowance over 6, 12 or 16 years.
The above will apply for P&M acquired in or after FY2022, and in cases where P&M were purchased prior to FY2022 and no claim for CA (both initial and annual allowances) has been made (i.e. the claim for CA in respect of the entire cost of the P&M has been deferred).
 
Streamline the number of years of working life in Sixth Schedule
 Refine the tax treatment of expenditures funded by capital grants There should be no double incentivisation of recipients through grants and tax deductions or allowances. For capital grants approved on or after 1 January 2021, recipients will not be allowed to claim tax deductions or allowances on that part of the expenditures that are funded by such grants from the Government or statutory boards.

Tax Treatment of Grants/ Payouts Commonly Received by Companies

Tax treatment of expenditures funded by capital grants

Other Tax Changes for Businesses

Tax Change  Summary FAQ / Related Information 
 Extend and enhance the Maritime Sector Incentive (“MSI”)

To continue developing Singapore as an international maritime centre, the MSI scheme will be extended until 31 December 2026. Similarly, the withholding tax (“WHT”) exemption will be extended for qualifying payments made on qualifying financing arrangements entered into on or before 31 December 2026.

In addition, the following changes will be made to the MSI scheme: 

a)  Expand the scope of in-house ship management income exemption under the MSI-AIS Award to include such income derived by MSI-AIS Sister Company and MSI-AIS Local Subsidiary;

b) Allow income derived from operating a ship that is provisionally registered with the SRS to qualify for tax exemption under the MSI-SRS scheme, regardless of whether a permanent certificate is subsequently obtained. Where a permanent certificate is not obtained, the tax exemption is only allowed up to 1 year from the date of issue of the provisional certificate; and

c)  Allow the stamp duty remission to lapse for instruments executed on or after 1 June 2021.
 

The enhancements in (a) and (b) will apply to existing and new award recipients for qualifying income derived on or after 19 February 2020.

MPA will provide further details of the changes by May 2020.

 
Extend and refine the Global Trader Programme ("GTP")

To further strengthen Singapore’s position as a global trading hub and to encourage more structured commodity financing (“SCF”) activities to be done in Singapore, the GTP will be extended until 31 December 2026.

The following changes will be made to the GTP:

a) The qualifying activities of GTP(SCF) will be subsumed under GTP with effect from 19 February 2020;

b) The GTP(SCF) will lapse after 31 March 2021; and

c) The concessionary tax rate of 5% on income from qualifying transactions in LNG will lapse after 31 March 2021. With the lapsing of this concession, LNG will be treated no differently from other GTP-qualifying commodities under the GTP.

For (b), existing recipients of GTP(SCF) awards can continue to enjoy the tax concession under the GTP(SCF) till the expiry of their awards, if the conditions for approval of their awards continue to be met.

For (c), existing recipients of GTP awards can continue to enjoy the concessionary tax rate of 5% on income from qualifying transactions in LNG until the expiry of their awards, if the conditions for approval of their awards continue to be met.

Enterprise Singapore will provide further details of the changes by May 2020.

 

Property Tax

Tax Change  Summary FAQ / Related Information 
Property Tax (“PT”) Rebate 

Qualifying commercial properties will be granted a rebate for PT payable for the period 1 January 2020 to 31 December 2020, as part of the Stabilisation and Support Package

The PT Rebate is 30% of the PT payable for:

  • A hotel room or function room of a hotel licensed under the Hotels Act;

  • Serviced apartment or serviced apartment function room; and

  • Meetings, Incentives, Conventions and Exhibitions (MICE) space components of prescribed MICE venues, namely Suntec Singapore Convention & Exhibition Centre, Singapore EXPO, and Changi Exhibition Centre. 

The PT Rebate is 15% of the PT payable for other qualifying commercial properties. Some examples include:

  • Premises of an international airport i.e. Singapore Changi Airport;

  • Premises of a prescribed international cruise or regional ferry terminal, namely Singapore Cruise Centre, Marina Bay Cruise Centre and Tanah Merah Ferry Terminal;

  • Shops (e.g. retail and F&B), including those within hotels, serviced apartments, and the prescribed MICE venues; and

  • Premises of tourist attraction

The PT rebate is 10% of PT payable for:

  • Marina Bay Sands; and
  • Resorts World Sentosa

 The above 30% and 15% property tax rebates do not apply to them.


 No rebate shall be given to any premises or any part of any premises used for the following:

(a) Any residential, industrial or agricultural purpose;

(b) As an office, a business or science park, a petrol station or a warehouse;

(c) As a facility that is for exclusive use of occupiers of particular premises, whether with or without their guests, such as in-house gym, function and meeting space, club lounge, staff canteen and carpark located within the premises mentioned in (a) and (b);

(d) Tenements such as space for base station, vending machine, signage, advertisement, ATM, AXS machines located within the premises mentioned in (a) and (b); or

(e) Accommodation for staff.

IRAS will inform owners of qualifying properties on their property tax rebates by 30 April 2020. Owners are not required to submit any claims for the rebate. Owners of qualifying properties can expect to receive their refunds by 31 May 2020.

For information on whether your property qualifies for the rebate and the administrative details, please refer to the e-Tax Guide which has been updated on 10 Mar 2020.

e-Tax Guide

Stamp Duty

Tax Change  Summary FAQ / Related Information 
Lapse the stamp duty relief on instruments for the acquisition of shares under an M&A scheme

To continue encouraging companies to consider M&A as a strategy for growth and internationalisation, the M&A scheme will be extended to cover qualifying acquisitions made on or before 31 December 2025.

The scheme will remain unchanged for acquisitions made on or after 1 April 2020, except for the following: 

a) Stamp duty relief will lapse for instruments executed on or after 1 April 2020; and 

b) No waiver will be granted for the condition that the acquiring company must be held by an ultimate holding company that is incorporated in and is a tax resident of Singapore. This will apply for acquisitions made on or after 1 April 2020.


Acquisition of Shares of Companies

Lapse the stamp duty remission relating to MSI-Maritime Leasing (Ship) (“MSI-ML(Ship)”) Award and MSI-ML (Container) Award


To continue developing Singapore as an international maritime centre, the MSI scheme will be extended till 31 December 2026. Similarly, the withholding tax (“WHT”) exemption will be extended for qualifying payments made on qualifying financing arrangements entered into on or before 31 December 2026.

In addition, the following changes will be made to the MSI scheme:

a) Expand the scope of in-house ship management income exemption under the MSI-AIS Award to include such income derived by MSI-AIS Sister Company and MSI-AIS Local Subsidiary; 

b) Allow income derived from operating a ship that is provisionally registered with the SRS to qualify for tax exemption under the MSI-SRS scheme, regardless of whether a permanent certificate is subsequently obtained. Where a permanent certificate is not obtained, the tax exemption is only allowed up to 1 year from the date of issue of the provisional certificate; and

c) Allow the stamp duty remission to lapse for instruments executed on or after 1 June 2021. 

The enhancements in (a) and (b) will apply to existing and new award recipients for qualifying income derived on or after 19 February 2020.
 

MPA will provide further details of the changes by May 2020.


 

Financial Sector

Tax Change  Summary FAQ / Related Information 
Extend tax incentive schemes for insurance businesses

To support Singapore’s value proposition as an Asian insurance and reinsurance centre, the IBD and IBD-CI schemes will be extended until 31 December 2025. The concessionary tax rate remains at 10%.

To streamline and simplify the IBD umbrella scheme, the IBD-MHL scheme will lapse after 31 March 2020. With the lapsing of the IBD-MHL scheme, insurers engaged in the MHL insurance and reinsurance business will be incentivised under the IBD scheme.

To align the tenure of all awards under the IBD umbrella scheme, all new and renewal IBD scheme awards approved on or after 1 April 2020 will be granted for a period of 5 years.

MAS will provide further details of the changes by May 2020.

-
Enhance the WHT exemption for interest on margin deposits

To further develop Singapore’s derivative market, we will enhance the scope of the WHT exemption for interest on margin deposits to cover the following entities and products:

Covered entities:

a) Members of approved exchanges

b) Members of approved clearing houses;

c) Approved exchanges; and

d) Approved clearing houses.

Covered products

a) Spot foreign exchange (other than those involving Singapore dollar);

b) Financial futures;

c) Gold futures; and

 d) All other derivative contracts traded or cleared on approved exchanges and approved clearing houses.

Note: the enhancements are indicated in bold font.

The enhancements will apply for agreements entered into on or after 19 February 2020. The extension of the WHT exemption will be reviewed together with the other WHT exemptions for the financial sector, before 31 December 2022.

MAS will provide further details of the changes by May 2020.


-
Extend and enhance the Finance and Treasury Centre (“FTC”) scheme To continue encouraging finance and treasury activities in Singapore, the FTC schedule will be extended till 31 December 2026, with the following enhancements from 19 February 2020:


a) The list of qualifying sources of funds will be expanded to include funds raised via convertible debt issued on or after 19 February 2020; and   

b) The list of qualifying FTC activities will be expanded to include transacting or investing into private equity or venture capital funds that are not structured as companies. Income derived on or after 19 February 2020 by approved FTCs from this activity will qualify for the concessionary tax rate.

 
Extend and refine the tax incentives for venture capital funds and venture capital fund management companies To continue encouraging venture capital funding for Singapore-based companies, the Section 13H scheme and Fund Management Incentive will be extended until 31 December 2025.
 

In addition, the key refinements to the incentives are as follows:

Section 13H scheme:

a) The list of investments and income incentivised under the Section 13H scheme will be expanded to include relevant items of the Specified Income – Designated Investments list applicable for fund incentives1;

(1Under Sections 13CA, 13R and 13X of the ITA)

b) Apart from companies incorporated in Singapore and partnerships, the Section 13H incentive may be granted to venture capital funds which are constituted as foreign-incorporated companies or Singapore Variable Capital Companies;

c) The statutory sub-limit imposing a maximum tenure of 10 years for the first tranche of the tax exemption will be removed, while the 15-year cap on the overall tenure of the tax exemption status remains. This means that the tax exemption may be awarded for the fund life of the venture capital fund, up to a total tenure of 15 years; 

d) Approved venture capital funds will be allowed, by way of remission, to claim GST incurred on their expenses at a fixed recovery rate to be determined for the industry; and

Fund Management Incentive:

e) Statutory limitations on the total incentive tenure allowed for each venture capital fund management company will be removed. Instead, each Fund Management Incentive award for the fund manager will be set at a maximum tenure of 5 years, and can be renewed subject to conditions.

The above changes will take effect from 1 April 2020.

Enterprise Singapore will provide further details of the changes by May 2020.