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Welcome to our Singapore Budget 2013 summary.
The following is the summary of the tax changes were announced by Minister for Finance, Mr. Tharman Shanmugaratnam in his Budget Statement for the Financial Year 2013 which was delivered in Parliament on Monday, 25 February 2013.
Personal Income Tax Rebate
All resident individual taxpayers will be given a personal income tax rebate for the tax payable for Year of Assessment (YA) 2013. The amount of rebate granted depends on the age of the resident individual as at 31 Dec 2012, subject to a cap of $1,500:
a) 30% for resident individuals aged below 60; and
b) 50% for resident individuals aged 60 and above.
Simplifying the Taxation of Accommodation Benefits
With effect from YA 2015, the accommodation benefits enjoyed by employees (including company directors) will be taxed according to the market value, as follows:
a) Housing Accommodation: Annual value of the premises, less rent paid by the employee.
b) Hotel Accommodation: Actual costs incurred of the hotel stay.
c) Furniture & Fittings: Percentage of annual value of the housing accommodation.
IRAS will release further details of the changes by Oct 2013.
Phasing Out the Equity Remuneration Incentive Schemes (“ERIS”)
The ERIS (Start-ups) has expired on 15 Feb 2013 and will not be renewed. The ERIS (All Corporations) and ERIS (SMEs) will expire with effect from 1 Jan 2014.
For All Businesses
Wage Credit Scheme (WCS)
The Government will co-fund 40% of wage increases given to Singaporean employees earning a gross monthly wage of up to $4,000. Wage increases that are given in 2013 to 2015 will be eligible for WCS.
Eligible employers will receive the Wage Credits from IRAS automatically. The first payout will be in the second quarter of 2014 and the last payout will be in 2016.
How to qualify for co-funding in calendar year 2013
Employees must be
– Singapore Citizen;
– Earns a gross monthly wage less than $4,000;
– Was employed for at least three months in 2012;
– Is on employer’s payroll for at least 3 months in 2013 (i.e. employer must have paid employee CPF contributions for at least three months in 2013);
– Owners of companies or businesses are not considered as employees even if he has paid himself CPF contribution.
Employers need not submit any application to IRAS.
All employers will automatically be covered under WCS except government-related entities and entities not registered in Singapore.
IRAS will release further details by Jun 2013. For more information, please refer to Wage Credit Scheme
Corporate Income Tax (“CIT”) Rebate from YA 2013 to YA 2015
To help companies cope with rising business costs, the Minister for Finance has announced in Budget 2013 that, for the Years of Assessment (YA) 2013, 2014 and 2015, companies will receive a 30% Corporate Income Tax (CIT) Rebate that is subject to a cap of $30,000 per YA.
Companies need not apply for the CIT rebate as IRAS will compute the amount when assessing companies’ income tax returns, i.e. Form C/ Form C-S.
Productivity and Innovation Credit (“PIC”) Bonus from YA 2013 to YA 2015
To encourage businesses to undertake improvement in productivity and innovation, eligible businesses that spend a minimum of $5,000 in qualifying PIC investments in a YA will receive a dollar-for-dollar matching cash bonus.
The PIC Bonus is capped at $15,000 for the 3-year period (YA 2013 to YA 2015), and is given in addition to existing PIC benefits of:
a) 400% PIC tax deductions up to $400,000 in expenditure for each PIC qualifying activity; or
b) Cash payout at 60% on up to $100,000 of the qualifying expenditure.
Businesses eligible for the PIC Bonus are sole-proprietorships, partnerships and companies that have:
– incurred at least $5,000 in PIC-qualifying expenditure* during the basis period for the YA in which a PIC Bonus is claimed;
– active business operations in Singapore; and
– at least 3 local employees (Singapore citizens or Singapore permanent residents with CPF contributions) excluding sole-proprietors, partners under contract for service and shareholders who are directors of the company.
Businesses do not need to apply for the PIC Bonus separately. IRAS will compute the amount of PIC Bonus for each YA upon filing of the income tax return. IRAS will compute the amount of PIC Bonus upon approval of the PIC cash payout claim* submitted via the PIC Cash Payout Application Form (88KB). IRAS will generally approve the cash payout claim within 3 months from the date of receipt of the application, provided all requisite information is submitted at the time of application.
Liberalising the Scope of PIC Automation Equipment
With effect from YA 2013, companies will find it easier to qualify PIC benefits on automation equipment, through the following changes:
a) Liberalised conditions for approving equipment that is not on the prescribed list:
(ii) The equipment automates or mechanises, whether in whole or in part, the work processes, whether core or non-core of the business; and enhances the productivity of the business.
(iii) An equipment that is a basic tool will be allowed, so long as:
– It increases productivity compared to the existing equipment used in the business; or
– It has not been used in the business before.
b) The term “automation equipment” is changed to “IT and automation equipment” to reflect the fact that PIC already supports IT-related software besides automation equipment.
c) The prescribed equipment list will be updated regularly to take into account feedback from businesses
Enhancing the Productivity and Innovation Credit (PIC) Scheme to include Intellectual Property (“IP”) in-licensing
To help businesses that license IP rights instead of acquiring the IP for innovation or productivity improvements, the PIC scheme will be enhanced to allow IP in-licensing costs incurred from YA 2013 to YA 2015 to qualify for PIC benefits.
The current PIC qualifying activity of “Acquisition of Intellectual Property” will also be renamed to “Acquisition and In-Licensing of Intellectual Property” to reflect the change.
IRAS will release further details by Apr 2013.
Rationalising the Start-up Tax Exemption (“SUTE”) Scheme
SUTE will no longer be available to the following types of companies incorporated from 26 Feb 2013:
a) A company whose principal activity is that of investment holding; and
b) A company whose principal activity is that of developing properties for sale, for investment, or for both investment and sale.
Investment holding companies derive only passive incomes such as dividend and interest income, while the real estate industry typically incorporates a new company for each new property development. The start-up tax exemption for encouraging entrepeneurship is not intended for such companies. These companies will be given partial tax exemption.
Property developers and investment holding companies will still be able to enjoy the partial tax exemption generally available to all companies.
All existing conditions of the SUTE scheme remain unchanged.
In summary, the investment holding company with the date of incorporation of 26 Feb 2013 and after has no longer can enjoy for pay zero tax on the first S$100,000 of chargeable income (profit) for the first three consecutive years.
Allowing the Deduction Scheme for Upfront Land Premium to Expire
As the deduction scheme has been assessed to be no longer relevant, it will be allowed to expire for leases granted on or after 28 Feb 2013.
Allowing the Further Tax Deduction Scheme for Expenses incurred in Relocation or Recruitment of Overseas Talent to Expire
As the objective of the scheme no longer merits a tax incentive, the scheme will be allowed to expire on 30 Sep 2013.
Extending and Refining the Qualifying Debt Securities (“QDS”) and Qualifying Debt Securities Plus (“QDS+”) Incentive Schemes
To further promote Singapore’s debt market, the QDS scheme will be extended for five years to 31 Dec 2018.
For debt securities issued during the period of 1 Jan 2014 to 31 Dec 2018, the requirement that the QDS be substantially arranged in Singapore will be rationalised to ease compliance for issuers.
The QDS+ scheme will also be extended for five years to 31 Dec 2018 and refined to allow debt securities with standard early termination clauses to qualify, subject to conditions.
The other existing conditions of the schemes remain unchanged.
MAS will release further details by end Jun 2013.
More Progressive Property Tax Structure for Residential Properties
IRAS will release further details of the changes by Jun 2013.
Removal of the Property Tax Refund Concession for Vacant Properties
With effect from 1 Jan 2014, the property tax refund concession for vacant properties (whether residential or not) will be removed. The tax treatment of all vacant properties will be streamlined as follows:
a) Vacant properties and properties undergoing repairs will be taxed at the prevailing property tax rates for non-owner-occupied properties;
b) However, residential properties undergoing repairs or building works for owner-occupation can be taxed at the owner-occupier property tax rates during the period of repairs or building works (for up to two years). This is provided that the property is owner-occupied for at least one year after the completion of the repairs or building works; and
c) Vacant land undergoing residential development for owner-occupation can be taxed at owner-occupier tax rates during the development period (for up to two years) if the property is owner-occupied for at least a year after the completion of the residential development. All other vacant land will continue to be taxed at 10% during the development period.
The property tax treatment for residential properties undergoing demolition and reconstruction remains unchanged.
IRAS will release further details of the changes by Jun 2013.
MOM related – Tightening Foreign Worker Policies
Increase in Foreign Worker Levies
Foreign Worker Levies for Work Permit and S Pass holders will be increased for all sectors in 2014 and 2015.
Reduction in Dependency Ratio Ceiling (DRC)
Increase in S Pass Qualifying Salary
The S Pass qualifying salary criteria will be increased from $2,000 to $2,200. Older and more experienced S Pass applicants will need to qualify at higher salaries, commensurate with their work experience.
Further details will be released by the Ministry of Manpower on 26 February 2013.
Direct Assistance for Cost of Living
One-Off GST Voucher (GSTV) Special Payment
To help households with their cost pressures, the Government will double the GSTV payments that lower- and middle-income households will receive in 2013.
More information on the GSTV and the 2013 GSTV Special Payment can be found on the GST Voucher website at GST Voucher Website .
The CPF contribution rates for employees earning above $50 to $1,500 will be increased from 1 January 2014.
Higher CPF Contribution Rates for Self-Employed Persons
Starting from 1 January 2014, self-employed persons earning an annual Net Trade Income (NTI) of above $6,000 to $12,000 will be required to contribute half (instead of the current one-third) of the full Medisave contribution rate relevant to their age group. For those who earn NTI of above $12,000 to $18,000, the contribution rate will increase with income, from half of the full rate (at NTI of $12,000) to the full contribution rate (at NTI of $18,000).
Further details on the changes to CPF contribution rates can be found on the Ministry of Manpower’s website at www.mom.gov.sg, and the Central Provident Fund Board’s website at www.cpf.gov.sg.
Motor Car related
Higher downpayment, shorter repayment time
TOUGH new curbs on car loans were announced yesterday which will require buyers to put down a downpayment of at least 40 percent for a new vehicle.
The maximum tenure for a car loan will also be limited to five years
Prior to yesterday, car buyers could take loans amounting to 100 percent of purchase prices – meaning zero downpayment – and stretch these loans as long as 10 years.
More expensive cars to attract higher tax
Vehicle taxes will be tiered so that the more expensive the make of the car, the higher the tax rate.
Read more about E-Newsletter March 2013