Budget 2021 - 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 2021 on Tuesday,16 Feb 2021.

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

Support for Workers and Businesses

Schemes Summary FAQ / Related information

Jobs Support Scheme

("JSS")

JSS will be extended for firms in Tier 1 and 2 sectors by up to six months, covering wages paid up to September 2021. Under the extended JSS, support levels will be tapered based on the projected recovery of the various sectors, as follows:
 

 a) Tier 1 sectors (e.g. Aviation, Aerospace, and Tourism) that are currently receiving 50% JSS support, will receive 30% JSS support for wages paid from April to June 2021 and 10% JSS support for wages paid from July to September 2021.

 b) Tier 2 sectors (e.g. Food Services, Retail, Marine & Offshore, and Arts and Entertainment) that are currently receiving 30% JSS support, will receive 10% JSS support for wages paid from April to June 2021.

 c) Tier 3A sectors currently receive 10% JSS support for wages paid from September 2020 to March 2021. JSS support will cease thereafter.

 d)  Employers which are not allowed to resume on-site operations currently receive Tier 1 JSS support for wages paid up to March 2021. For wages paid from April 2021 onwards, JSS support will revert to the firms’ base JSS tier.
Jobs Support Scheme

Wage Credit Scheme

("WCS")

The Scheme is extended by one year to 2021, with the  government co-funding ratio at 15% and the qualifying gross wage ceiling at $5,000.

Gross monthly wage increases (at least $50) previously given in 2019 and 2020 by the same employer will continue to be co-funded if they are sustained in 2020 and 2021.

Wage Credit Scheme

Jobs Growth Incentive

("JGI")

The JGI qualifying window will be extended by seven months.

With this extension, eligible companies that hire locals between March 2021 and end-September 2021 will receive wage support as follows:

  • For non-mature locals, up to 12 months based on 25% of the first $5,000 of gross monthly income, from the month of hire.  
  • For mature workers (aged 40 & above), persons with disabilities and ex-offenders, up to 18 months (12 months previously) based on 50% of the first $6,000 ($5,000 previously) of gross monthly income.  Eligible companies that had hired such locals between September 2020 and February 2021 will enjoy the enhanced support from March 2021.
Jobs Growth Incentive


Tax Changes

All Businesses

Tax Change Summary FAQ / Related information
Extend the Year of Assessment (“YA”) 2020 enhancements to the carry-back relief scheme
To continue providing support to businesses, the enhancements to the carry-back relief scheme for YA2020 will be extended to apply to qualifying deductions for YA2021, with the same parameters.
Loss Carry-Back Relief
Extend the option to accelerate the write-off of the cost of acquiring plant and machinery (“P&M”)
To continue providing support to businesses, the option to accelerate the write-off of the cost of acquiring P&M will be extended to capital expenditure incurred on the acquisition of P&M in the basis period for YA2022 (i.e. FY2021), with the same parameters.
Calculating Capital Allowances
Extend the option to accelerate the deduction of expenses incurred on renovation and refurbishment (“R&R”) To continue providing support to businesses, the option to claim R&R deduction in one YA (i.e. accelerated R&R deduction) will be extended to qualifying expenditure incurred on R&R in the basis period for YA2022 (i.e. FY2021), with the same parameters. Tax Treatment of Business Expenses
Enhance the Double Tax Deduction for Internationalisation (“DTDi”) scheme

To continue supporting internationalisation efforts of businesses amid changes in the business environment, the scope of the DTDi scheme will be enhanced to cover the following specified expenses incurred to participate in approved virtual trade fairs:

a) Package fees charged by event organisers for virtual exhibition hall and booth access, collateral creation, business meeting/match sessions,pitches/product launches/speaking slots, webinar/conference, and post event analytics;

b) Third-party costs for design and production of digital collaterals and promotion materials for virtual fairs; and

c) Logistics costs incurred to send materials/samples overseas to potential clients met at virtual trade fairs

The list of qualifying expenses for overseas investment study trips will also be expanded to include logistics costs to transport materials/samples used during the investment trips. 

In addition, the scope of qualifying activities which do not require prior approval from Enterprise Singapore or STB will be enhanced to cover the following additional activities, up to the current annual expense cap of $150,000:

a) Product/service certification (primarily to increase buyer’s acceptance in overseas markets) approved by Enterprise Singapore; 

b) Overseas advertising and promotional campaign;

c) Design of packaging for overseas markets; 

d) Advertising in approved local trade publication; and 

e) Participation in virtual trade fairs approved by Enterprise Singapore.

The above enhancements will take effect for qualifying expenses incurred on or after 17 February 2021.

Enterprise Singapore will provide further details of the changes by 28 February 2021.  

Double Tax Deduction For Internationalisation Scheme
Extend the Business and IPC Partnership Scheme (“BIPS”)

To continue supporting corporate volunteering, BIPS will be extended till 31 December 2023.

All other conditions of the scheme remain the same.

 BIPS

Extend the Not-for-Profit Organisation (“NPO”) tax incentive


To continue attracting NPOs to Singapore, the NPO tax incentive will be extended till 31 December 2027.  
Allow the Automation Support Package (“ASP”) to lapse, but retain the 100% Investment Allowance (“IA”) scheme to support automation

The ASP will lapse after 31 March 2021.  

Schemes including the Enterprise Development Grant, IA scheme, and the Enterprise Financing Scheme will continue to be available to support businesses in their automation, productivity, and scale-up efforts.

Specifically, the 100% IA scheme to support automation will be extended by two years, for automation projects approved by Enterprise Singapore from 1 April 2021 to 31 March 2023. All other conditions of the scheme remain the same.
 
Extend and enhance the Investment Allowance (Energy Efficiency) (“IA-EE”) scheme

The IA-EE scheme will be renamed the “Investment Allowance for Emissions Reduction” scheme, with the following revisions: 

a) Expansion in the scope of qualifying projects to include projects involving a reduction of greenhouse gas emissions; and 

b) Streamlined and updated eligibility conditions. These will apply to all projects (i.e. there will no longer be a distinction between data centres and non-data centres).  

The revised conditions will apply to projects approved by EDB from 1 April 2021 to 31 December 2026 (both dates inclusive).
 
Withdraw the Accelerated Depreciation Allowances for Highly Efficient Pollution Control Equipment (“ADA-PCE”) scheme

The ADA-PCE scheme will be withdrawn from 17 February 2021.

Since the introduction of this scheme in 1996, regulatory measures have been introduced including our air emission standards, which set emission concentration limits for a list of controlled pollutants. These measures are reviewed over time. 

The Ministry of Sustainability and the Environment (“MSE”) and the National Environment Agency (“NEA”) will continue to regularly review our measures to manage pollution and improve air quality in Singapore.

 


Finance Sector

Tax Change Summary FAQ / Related information

Extend and refine the double tax deduction (“DTD”) for qualifying upfront cost attributable to retail bonds issued under MAS’ Seasoning Framework and Exempt Bond Issuer Framework 

To promote rated retail bond issuances, the DTD scheme will be extended for qualifying upfront cost incurred on or after 19 May 2021 that is attributable to rated retail bonds (instead of all retail bonds) issued during the period from 19 May 2021 to 31 December 2026 (both dates inclusive) under the Seasoning Framework and Exempt Bond Issuer Framework. The refinement of the DTD scheme seeks to provide investors with access to rated retail bonds. Credit rating improves market transparency by providing timely and independent assessments of the creditworthiness of bond issuers. 

All other conditions of the DTD scheme remain the same.

MAS will provide further details of the changes by 31 May 2021. 


Extend and rationalise the withholding tax (“WHT”) exemptions for the financial sector


To support Singapore’s value proposition and competitiveness of our financial sector, the following changes will be made:


A) The existing WHT remission for interbank/ interbranch transactions will be legislated as a WHT exemption with effect from 1 April 2021, along with a review date of 31 December 2031.

Under this WHT exemption, all Section 12(6) payments made by banks in Singapore for the purpose of their trade or business, to their branches / head offices outside Singapore or other banks outside Singapore will be exempt from tax where such payments: 

a) are made during the period from 1 April 2021 to 31 December 2031 (both dates inclusive) under a contract that takes effect before 1 April 2021; or 

b) are made under a contract that takes effect during the period from 1 April 2021 to 31 December 2031 (both dates inclusive). In such cases, the WHT exemption will apply to the entire duration of the contract, including payments that are made beyond 31 December 2031 under that contract.

B) The WHT exemption will be extended till 31 December 2026. All other conditions of the WHT exemption remain the same. All Section 12(6) payments made to any non-resident person (excluding any PEs in Singapore) by the specified entities, for the purpose of the specified entities’ trade or business, are exempt from tax where such payments:

a) are made during the period from 1 April 2011 to 31 December 2026 (both dates inclusive) under a contract that took effect before 1 April 2011; or 

b) are made under a contract that takes effect during the period from 1 April 2011 to 31 December 2026 (both dates inclusive). In such cases, the WHT exemption applies to the entire duration of the contract, including payments that are made beyond 31 December 2026 under that contract.

C) The WHT exemption will be extended till 31 December 2026. All other conditions of the WHT exemption remain the same. Specified entities are not required to withhold tax on all Section 12(6) payments made to any PE in Singapore if the payments:

a) are made during the period from 17 February 2012 to 31 December 2026 (both dates inclusive) under a contract that took effect before 17 February 2012; or

b) are made under a contract that takes effect during the period from 17 February 2012 to 31 December 2026 (both dates inclusive). In such cases, the specified entities do not need to withhold tax on all Section 12(6) payments that are made for the entire duration of the contract, including payments that are made beyond 31 December 2026 under that contract.

As per the existing tax treatment, the PEs in Singapore are required to declare the Section 12(6) payments that they received in their annual income tax returns and are assessed to tax on such payments (unless the payments are specifically exempt from tax).  

MAS will release further details of all changes by 31 May 2021.

Payments That Are Not Subject to Withholding Tax
Extend the WHT exemption on payments made for structured products

To support Singapore’s value proposition and competitiveness of our financial sector, the WHT exemption will be extended for another five years and will cover payments made under a contract that takes effect during the period from 1 January 2007 to 31 December 2026 (both dates inclusive).

All other conditions of the WHT exemption remain the same.

MAS will release further details of the changes by 31 May 2021.

 

Extend the WHT exemption on payments for over-the-counter (“OTC”) financial derivatives


To support Singapore’s value proposition and competitiveness of our financial sector, the WHT exemption will be extended for another five years till 31 December 2026.
 

All other conditions of the WHT exemption remain the same.

All payments on OTC financial derivatives made by a financial institution in Singapore to any non-resident person (excluding any PE in Singapore) are exempt from WHT, where such payments:

a) are made during the period from 20 May 2007 to 31 December 2026 (both dates inclusive) under a contract that took effect before 15 February 2007; or

b) are made under a contract that takes effect during the period from 15 February 2007 to 31 December 2026 (both dates inclusive). In such cases, the WHT exemption applies to the entire duration of the OTC financial derivatives contract, including payments that are made beyond 31 December 2026 under that contract. 

MAS will release further details of the changes by 31 May 2021.

 

GST

Tax Change Summary FAQ / Related information

Extension of GST to

a) goods imported via air or post that are valued up to (and including) the current GST import relief threshold of S$400 (“low-value goods”), and 

b) business-to-consumer (“B2C”) imported non-digital services,

through the extension of the Overseas Vendor Registration and reverse charge regimes

GST will be extended to: 

a) Low-value goods which are imported via air or post. This will be effected via the Overseas Vendor Registration and reverse charge regimes. Jurisdictions that have extended their GST or Value Added Tax (“VAT”) regimes to cover imported low-value goods include Australia, New Zealand, Norway, Switzerland, and the United Kingdom. GST is already and will continue to be collected on goods imported via land or sea, regardless of value.

b) B2C imported non-digital services (such as live interaction with overseas providers of educational learning, fitness training, counselling and telemedicine). This will be effected via the Overseas Vendor Registration regime. Jurisdictions which already tax similar services include Australia and New Zealand.

This change, together with the change announced in Budget 2018 to extend GST to B2C imported digital services and business-to-business (“B2B”) imported services, will ensure a level playing field for our local businesses to compete effectively. Overseas suppliers of goods and services will be subject to the same GST treatment as local suppliers. This change will also ensure that our GST system remains resilient as the digital economy grows.

This change will take effect from 1 January 2023.

IRAS will consult the industry shortly, before we finalise the implementation details. 


For GST purposes, change the basis for determining whether zero-rating applies to a supply of media sales, from the place of circulation of the advertisement to the place where the customer and direct beneficiary of the service belong.

Online advertising has grown and is expected to account for an increasing share of advertising spending in future. 

Developments in digital technologies have also changed the way that media sales are supplied, making it more difficult for suppliers of digital media sales to determine the place of circulation of the advertisement.

Given this trend, the basis for determining whether zero-rating applies to a supply of media sales will be updated, to be based on the place where the customer (i.e. the contractual customer) and direct beneficiary of the service belong: 

a) If the customer of the service belongs outside Singapore and the direct beneficiary either belongs outside Singapore or is GST-registered in Singapore, the media sales will be zero-rated; and 

b) If the customer belongs in Singapore, the media sales will be standard-rated. 

This change will take effect for the supply of media sales on or after 1 January 2022. 


Providing International Services 

Advertising

e-Commerce



Other Tax Changes

Tax Change Summary FAQ / Related information

Extend the 250% Tax Deduction for Qualifying Donations 

To continue encouraging Singaporeans to give back to the community, we will extend the 250% tax deduction to qualifying donations made from 1 January 2022 to 31 December 2023.


All other conditions of the scheme remain the same.

Donations