Differences Between the 2019 and 2020 Tax Seasons in Singapore
Both 2019 and 2020 tax seasons have been over in Singapore. Even if most of the things were similar, for example, the deadlines and the way of filing taxes, there were some slight changes and updates. We contrast between them, which will also give an idea of what to expect in the coming years.
It’s safe to say that there weren’t groundbreaking decisions in the 2020 tax season. However, there were some significant additions that are noticeable because of the COVID-19 pandemic. The government came up with ideas to decrease the burden of taxpayers. Furthermore, they stalled some tax increment plans for at least until the economy hasn’t recovered from the COVID-19.
The Corporate Tax Rate Changed
The general Singapore Corporate Tax remained at 17%. Still, the rates charged in the incentive for startups and businesses for their first income.
For Startups (the Startup Tax Exemption- SUTE)
Until the YA 2019, startups enjoyed a 100% tax exemption on the first S$100,000 of their normal chargeable income. They could enjoy a tax waiver of 50% for the next S$200,000 they made. This offer would last for three consecutive YAs.
For startups being registered after YA 2020, they will receive a 75% tax exemption on the first S$100,000 of their chargeable income. This extends to a further 50% tax exemption on the next S $100,000 of their chargeable income.
However, remember that the terms for receiving the SUTE are the same. The company still needs to be incorporated in Singapore and be a tax resident of the city-state. Furthermore, the firm can’t have more than 20 shareholders, and one shareholder must be own at least 10% of the shares.
Partial Tax Exemption for Businesses
Companies needed to pay 4.25% for the first $100,000 and 8.5% for the next $100,000 profit they made in 2019.
From the YA 2020, 75% of the income from the first $10,000 is exempt from taxes. Moreover, 50% of the next $190,000 income is tax-free for every company registered in Singapore.
Goods and Services Tax (GST) Didn’t Increase
Singapore has one of the lowest GSTs in the world with consumers needed to pay 7% on various items they buy. There were talks that the GST would hike to 9% between 2021 and 2025, but as of the 2020 budget speech, that won’t happen immediately. However, the GST will become 9% at least until 2025. Furthermore, Goods and Services Tax has been added to imported services. On the contrary, the payment of GST token no longer includes GST, which is good news for the people.
Remember, in recent times, claiming GST has become easier for companies after GST registration. The terms and procedures have become more straightforward and easier to understand.
When talking about GST and import, we also have to highlight the Overseas Vendor Regime. From now on, overseas digital services vendors like Netflix and Spotify have to register for GST in Singapore.
2020 Saw Temporary Tax Relief for Businesses
The main highlights of the comparison between the 2019 and 2020 tax seasons would be the temporary tax reliefs.
In 2019, we couldn’t even have dreamt of a virus that would force people to shut their doors and the global economy. However, the Singapore government introduced various incentives to help hundreds of thousands of businesses operating in the city-state.
Here are some temporary incentives that came in 2020:
Automatic Corporate Tax Rebate
In 2020, companies will get an automatic 25% corporate income tax rebate capped at S$15,000. This means you get the 25% income tax rebate up to S$15,000, and after that, you have to file your charges normally.
Enhanced Carry Back Relief Scheme
The carry bank relief scheme, which existed in the YA 2019, and some years before that, has been enhanced in YA 2020. Businesses can carry back unabsorbed capital allowances and trade losses up to three immediate preceding YAs. The cap is S$100,000. This will help companies that were in a position to pay taxes before the COVID-19 outbreak but have found themselves in a tax loss position for now.
Accelerated Relief for Plant & Machinery, Renovation & Refurbishment for YA 2021
Another highlight when we compare the 2019 and 2020 tax seasons in Singapore is the Accelerated Relief for Plant and Machinery, and Renovation and Refurbishment.
In the YA 2021, taxpayers incurring capital expenditure on plant and machinery can claim accelerated capital allowance over two years. They can claim the allowance of 75% of the costs in YA 2021, and 25% in YA 2022.
Businesses that have incurred qualifying expenses on renovation and refurbishment during YA can get a tax deduction for one YA. The cap, in this case, is S$3,00,000, for every period of three consecutive YAs.
Extension of the Mergers and Acquisitions Scheme
The Merger and Acquisition Scheme, which grants a company an allowance when acquiring ordinary shares of another company, will be available till 2025.
However, the scheme is only available on a limited basis, and the stamp duty relief will lapse for instruments executed after 1 April 2020. Furthermore, foreign Multinational Companies with Singapore subsidiaries will no longer be able to avail from the scheme like they could in the previous years.
The cap for the M&A allowance on the purchase consideration is S$10 million for each YA. There will be a double tax deduction (DTA) for the transaction costs of the qualifying share acquisition. The expenditure cap in this case is S$100,000.
Safe Harbour Tax Exemption Refined
The Safe Harbour tax exemption, which has been available since Budget 2012, will see its way through 2027. Under this scheme, the gains of a company from disposals of ordinary shares in another company in which they invest is free of income tax.
To be eligible, the investing company should have held at least 20% shares of the investee company, for at least 24 months continuously before the date of share disposal. As of 2022, the scheme will be available for investee companies developing the immovable property. It also applies to immovable properties outside Singapore.
Even if there are small differences between the 2019 and 2020 tax seasons in Singapore, there haven’t been significant changes. Well, there still aren’t many places for criticism because Singapore already has one of the best tax systems in the world, making it a haven for investors.
You can contact 3E Accounting if you are looking for the best taxation services in Singapore. We will make sure all your business taxes are done so you won’t have any legal problems, and at the same time, will ensure you make use of every available incentive.