Singapore Budget 2016 Summary
Welcome to our Singapore Budget 2016 summary.
The following is the Budget 2016 Summary announced by Minister for Finance, Mr. Heng Swee Keat in his Budget Statement for the Financial Year 2016 which was delivered in Parliament on Thursday, 24 March 2016.
Enhancing the Corporate Income Tax Rebate for YA 2016 and YA 2017
To help companies, especially Small and Medium Enterprises (“SMEs”), the Corporate Income Tax rebate will be raised from 30% to 50% for YA 2016 and YA 2017, subject to a cap of $20,000 rebate per YA.
Allowing the Productivity and Innovation Credit (“PIC”) Scheme to lapse and lowering the cash payout rate
The cash payout rate will be lowered from 60% to 40% for qualifying expenditure incurred from 1 August 2016. All other conditions of the scheme remain unchanged. The PIC scheme, which has been extended for YA2016 to YA2018, will expire thereafter. It will not be available from YA2019.
Introducing mandatory electronic-filing (“e-Filing”) for CIT returns (including Estimated Chargeable Income, Form C and Form C-S)
In line with Government’s direction for more effective delivery of public services and to be aligned with the Smart Nation vision to harness technology to enhance productivity, mandatory e-Filing of CIT returns will be implemented in stages as follows:
YA 2018 – Companies with turnover of more than $10mil in YA 2017
YA 2019 – Companies with turnover of more than $1mil in YA 2018
YA 2020 – All companies
Introducing mandatory e-Filing for PIC cash payout application
To streamline and expedite processing of PIC cash payout applications, mandatory e-Filing of PIC cash payout applications will be introduced. This is also aligned with the Smart Nation vision to harness technology to enhance productivity. The mandatory e-Filing of PIC cash payout applications will be effective from 1 August 2016.
100% Investment Allowance (“IA”) under the Automation Support Package
To support firms to automate, drive productivity and scale up, qualifying projects may be eligible for an IA of 100% on the amount of approved capital expenditure, net of grants under the Automation Support Package. This IA is in addition to the existing capital allowance for plant and machinery. The approved capital expenditure is capped at $10 million per project.
The 100% IA is one of the four components in the Automation Support Package. MTI will announce more details of the Automation Support Package at the Committee of Supply.
Enhancing the Mergers & Acquisitions (M&A) scheme
To support more M&As, the existing cap for qualifying M&A deals will be doubled from $20m to $40m, such that:
a. Tax allowance of 25% will be granted for up to $40m of consideration paid for qualifying M&A deals per YA; and
b. Stamp duty relief will be granted for up to $40m of consideration paid for qualifying M&A deals per financial year.
These changes will apply to qualifying M&A deals made from 1 April 2016 to 31 March 2020. IRAS will release further details of the change by June 2016.
Extending the upfront certainty of non-taxation of companies’ gains on disposal of equity investments under Section 13Z of the Income Tax Act (“ITA”)
To provide upfront certainty to companies in their corporate restructuring, the scheme under Section 13Z will be extended till 31 May 2022 (to cover disposal of equity investments from 1 June 2017 to 31 May 2022). All conditions of the scheme remain the same.
Extending the Double Tax Deduction (“DTD”) for Internationalisation scheme
To support businesses in their internationalisation efforts, the DTD for Internationalisation scheme will be extended for another four years from 1 April 2016 to 31 March 2020. The existing automatic (no need for approval from IES or STB) DTD on expenses up to $100,000 will also be extended to qualifying expenditure incurred during this same period (1 April 2016 to 31 March 2020). All other conditions of the scheme remain the same.
IE Singapore will release further details of the change by June 2016.
Enhancing the Land Intensification Allowance (“LIA”) scheme
a) To encourage higher industrial land productivity, the LIA scheme will be extended to buildings used by a user or multiple users, who are related, for one or multiple qualifying trades or businesses, if certain conditions are met.
This change will take effect for LIA applications if:
i. The application for LIA is made from 25 March 2016; and
ii. The application for planning permission or conservation permission for the construction or renovation is made from 25 March 2016.
The qualifying capital expenditure for which an allowance may be made excludes any expenditure incurred before 25 March 2016.
b) A new criterion requiring LIA applicants to be related to the qualifying user or users of the building will also be introduced. This change will take effect for LIA applications if:
i. The application for LIA is made from 25 March 2016; and
ii. The application for planning permission or conservation permission for the construction or renovation is made from 25 March 2016.
EDB will release further details of the changes by July 2016.
Providing an election for the writing-down period for intellectual property rights (“IPRs”) under Section 19B of the ITA
To recognise the varying useful lives of IPRs, while maintaining a simple and certain tax regime, companies or partnerships may elect for their Section 19B WDA to be claimed over a writing-down period of 5, 10, or 15 years.
The election must be made at the point of submitting the tax return of the YA relating to the basis period in which the qualifying cost is first incurred. The election, once made, is irrevocable.
This change will apply to qualifying IPR acquisitions made within the basis periods for YA 2017 to YA 2020.
IRAS will release further details of the change by 30 April 2016.
Introducing an anti-avoidance mechanism for IPR transfers under Section 19B of the ITA
To ensure that Section 19B writing down allowances are granted based on transacted values that are reflective of the open market value (“OMV”) of an IPR, an anti-avoidance mechanism for IPR transfers will be included under Section 19B to empower the Comptroller to make the following adjustments to the transacted price of the IPR, if the IPR is not transacted at OMV:
a. If the acquisition price of the IPR is higher than the OMV of the IPR, the Comptroller may substitute the acquisition price with the OMV of the IPR and restrict the writing-down allowance based on the OMV of the IPR; and
b. If the disposal price of the IPR is lower than the OMV of the IPR, the Comptroller may substitute the disposal price with the OMV of the IPR for the purpose of computing balancing charge.
This change will apply to acquisitions, sales, transfers or assignments of IPRs that are made from 25 March 2016.
Introducing the Business and IPC Partnership Scheme (“BIPS”)
To incentivise employee volunteerism through businesses, a pilot BIPS will be introduced from 1 July 2016 to 31 December 2018.
Under BIPS, businesses will enjoy an additional 150% tax deduction on wages and incidental expenses when they send their employees to volunteer and provide services to IPCs, including secondments.
This will be subject to the receiving IPCs’ agreement, with a yearly cap of $250,000 per business.
MOF and IRAS will release further details of the change by June 2016.
Other tax incentives includes
- Extending and enhancing the Finance and Treasury Centre (“FTC”) scheme
- Extending and refining the Tax Incentive Scheme for Trustee Companies
- Extending and refining the Tax Incentive Schemes for Insurance Companies
- Enhancing the Maritime Sector Incentive (MSI)
- Enhancing the Global Trader Programme (Structured Commodity Finance) (“GTP(SCF)”) scheme
- Providing for allocation of expenses under Section 14U of the ITA and pre-commencement expenses under Part V of the ITA
- Withdrawing the Approved Investment Company scheme under Section 10A of the ITA
- Extending the Not-for-Profit Organisation (“NPO”) tax incentive under Section 13U of the ITA
- Withdrawing the tax exemption on income derived by non-residents trading in Singapore in specified commodities via consignment arrangements
Introducing a cap of $80,000 on personal income tax reliefs
To enhance the progressivity of our Personal Income Tax regime, the total amount of personal income tax reliefs that an individual can claim will be capped at $80,000 per Year of Assessment (YA). This change will take effect from YA 2018.
Removing the tax concession on home leave passages for expatriate employees
The tax concession of taxing only 20% of the value of home leave passages for expatriate employees will be removed with effect from YA 2018.
MOM – RELATED
Foreign Worker Levy Freezes For The Marine and Process Sectors
In view of challenging business conditions in these sectors, foreign worker levy increases will be deferred for one year for Work Permit holders in the Marine and Process sectors. Manufacturing Work Permit levies will remain unchanged for another year, as announced at Budget 2015.
Planned levy increases for Services and Construction Work Permit holders, as well as S Pass holders in all sectors, will proceed, in view that the foreign workforce has continued to grow in these areas over the past year.
Business Grants Portal
To improve access to the range of incentive schemes administered by various government agencies, a Business Grants Portal will be launched for grant application. The portal will start with grants from IE Singapore, SPRING, STB and Design Singapore and progressively expand to include grants from other government agencies.
National Trade Platform
To support businesses, particularly in the logistics and trade finance sectors, a National Trade Platform will be developed as the next-generation platform. This platform will serve as a one-stop trade information management system to allow electronic data sharing amongst businesses and government agencies and aims to become an open innovation platform to allow service providers to formulate value-added services and apps in areas such as operations, visibility and trade finance. This platform will eventually replace the current TradeNet and TradeXchange systems.
Extending Special Employment Credit (SEC) For 3 Years To Support Companies
In view of present economic uncertainties, employers will continue to enjoy the SEC for 3 more years (till 2019) for workers aged 55 and above earning up to $4,000 a month. This will cover about 340,000 workers, or 3 in 4 older Singaporean workers.
Employers will continue to enjoy up to 8% wage offset for Singaporean workers aged 65 and above, up to 5% for workers aged 60 to 64, and up to 3% of those aged 55 to 59.
New SME Working Capital Loan scheme to support viable SMEs
SMEs with cash flow concerns or which wish to continue growing their business can now enjoy support under the new SME Working Capital Loan scheme, for loans of up to $300,000 per SME. Under this three year scheme, the Government will co-share 50% of the default risk of such loans with participating financial institutions, to encourage lending to our SMEs.
Support For Businesses With The Automation Support Package
With the new Automation Support Package, companies can look forward to receiving support to scale up their automation projects and drive productivity.
The Package will comprise four components:
1) A grant of up to $1 million, at up to 50% of project cost, to support the roll-out or scaling up of automation projects.
2) A new 100% Investment Allowance for automation equipment for qualifying projects.
3) Improve SME’s access to loans for qualifying projects with increase in government’s risk-sharing from 50% to 70% with participating financial institutions.
4) Collaboration between IE Singapore and SPRING to help businesses access overseas market when they scale up and internationalise.
Expansion of SME Mezzanine Growth Fund To Support Scale-Ups
Companies can look forward to financing and tax incentives to support their growth and scale-up.
First, to provide more support for our SMEs to scale up and internationalise, the SME Mezzanine Growth Fund will be expanded to a total fund size of up to $150 million. It will be done by matching up to $25 million of new private sector investment on a 1:1 basis.
Second, to support more mergers and acquisitions (M&As), M&A allowance will be granted on up to $40 million of the value of the deal, instead of up to $20 million currently. With the enhanced 25% rate announced in Budget 2015, companies can now enjoy up to $10 million of M&A tax allowance per Year of Assessment.
Third, there will be a 5-year extension (until 31 May 2022) of the non-taxation of companies’ gains on disposal of their equity investments, based on existing scheme parameters. This will provide upfront certainty to companies for their corporate restructuring.
To strengthen support for start-ups in new and existing industries, a new entity called “SG-Innovate” will be set up.
SG-Innovate will match budding entrepreneurs with mentors, introduce them to venture capital firms, help them to access talent in research institutes, and open up new markets. It will build on what has been done by Infocomm Investments Private Limited (IIPL), and work with @SPRING Singapore and EDB to expand the accelerator programmes to new and emerging sectors such as Smart Energy, Digital Manufacturing, Fintech, Digital Health, and Internet-of-Things.
CARE FOR THE YOUNG
New Child Development Account (CDA) First Step Grant for Families with Children
There will be a new Child Development Account (CDA) First Step grant for all Singaporean children babies born from 24 March 2016. Parents will automatically receive $3,000 in their child’s CDA, which they can use for their children’s healthcare and childcare needs. They will also continue to receive dollar-for-dollar matching from the Government, up to the co-savings cap.
In addition, the Medisave withdrawal limit for pre-delivery medical expenses will be doubled from $450 to $900, with immediate effect.
KidSTART Pilot Initiative for Families with Children
A new pilot initiative, KidSTART, draws together government and community resources to 1) better support parents who may need more support to give their children a good start in life, 2) help these children receive appropriate learning, development and health support, and 3) study approaches that work best in Singapore context.
Outdoor Adventure Education Masterplan for Youth and Students
More youths will have the chance to go on an expedition with Outward Bound Singapore at the existing Pulau Ubin site or the new Coney Island campus expected to be ready around 2020. This is part of the Government’s effort to expand outdoor adventure education for all students, through a new National Outdoor Adventure Education Masterplan. This initiative seeks to help youths build confidence and to develop camaraderie with students across different schools.
Fresh Start Housing Scheme for Families with Children and Living in Rental Housing
Families with young children will soon be eligible for a grant of up to $35,000 to own a 2-room flat, with a shorter lease which will be more affordable for them. Families will need to demonstrate effort, for example by staying employed and making sure their children attend school.
CARE FOR LOW-WAGE WORKERS AND PEOPLE WITH DISABILITIES
Enhancements to Workfare for Low Wage Workers and Persons with Disabilities
From Jan 2017, workers earning an average wage of up to $2,000 per month (up from the current $1,900 ceiling) will be eligible for Workfare Income Supplement (WIS).
Eligible workers will receive higher payouts, which will vary depending on their age and income. WIS will be paid for every month worked, and monthly rather than quarterly to help with more immediate cashflow needs.
About 460,000 Singaporeans are expected to benefit from WIS. This is more than the bottom 20% of workers, with some support also provided to those in the 30th income percentile.
The Workfare Training Support scheme for low wage workers above 35 years old will also be expanded to include persons with disabilities who earn low wages and are under 35 years old, to better support them in their learning.
SUPPORT FOR PEOPLE THROUGH CHANGE
“Adapt and Grow” initiative
Workers who may face greater difficulty in finding jobs will be eligible for wage support schemes under a new “Adapt and Grow” initiative, to encourage firms to hire them.
Retrenched professionals will benefit from increased coverage of professional conversion programmes to cover more sectors, including Design and Information and Communications Technology (or ICT).
Building on our SkillsFuture efforts and in our transformation into a Smart Nation, a new TechSkills Accelerator will be set up to pioneer a new way of enabling our people to acquire expertise and skills.
The Government recognises that the demand for ICT professionals is growing and that the current shortage of our own experts is driving up pay. To keep up with the fast growing sector, the TechSkills Accelerator will:
– Identify specific skills in demand and working with specialised training providers to meet these complex demands
– Develop industry-recognised skills standards and certification
– Work with anchor employers to better match job placements
Infocomm Development Authority of Singapore – IDA – IDA will be partnering major IT employers and associations – SiTF Academy, Singapore Computer Society (SCS) and the IT Management Association (ITMA).
CARE FOR SENIORS
Implementation of Silver Support Scheme for Seniors
The Silver Support Scheme aims to support the bottom 20% of Singaporeans aged 65 and above, with a smaller degree of support extended to cover up to 30% of seniors. Eligibility will be assessed according to three criteria – lifetime wages, housing type and the level of household support. Eligible Singaporeans will receive between $300 and $750 every quarter, depending on their flat type.
Eligible seniors will be notified by the CPF Board before the first payout in July this year, and it will be a double payout for two quarters. The next two payouts, each for the coming quarter, will be made in end-September and end-December. In subsequent years, payouts will be made in March, June, September and December. More than 140,000 seniors will benefit from Silver Support, which will cost close to $320m in the first year and likely increase over time as our population ages.
Pilot Community Networks for Seniors
Seniors will be encouraged to stay active, healthy and meaningfully engaged in the community through new pilot Community Networks for Seniors, comprising local stakeholders, such as VWOs, community volunteers, schools and businesses.
These networks also aim to 1) help seniors discover health conditions earlier and manage them well, 2) connect them to relevant support, and 3) provide more targeted and coordinated health and social support to vulnerable seniors who may be living alone with limited family support.
SUPPORT FOR HOUSEHOLDS
2016 One-off GST Voucher-Cash Special Payment for Singaporean Households
To support households amid current economic conditions, 1.4 million Singaporeans will receive a one-off GST Voucher – Cash Special Payment of up to $200 in 2016, depending on the annual value of their home, in addition to existing GSTV – Cash payouts.
Service & Conservancy Charges Rebate for Singaporean Households
More help on the way for households. 840,000 HDB households will receive a total of 1 to 3 months of Service & Conservancy Charges (S&CC) rebates this year, based on their flat type
BUILDING A CARING SOCIETY
Supporting Community Chest Giving to Build a Caring Society
The Government will match dollar-for-dollar on any additional donation through SHARE, over and above FY15 level for 3 years, starting from Apr 2016. Part of the matching funds will be made available for companies to support their corporate social responsibility efforts.
Jurong Innovation District
A new Jurong Innovation District will be built in Jurong West by 2022, bringing together researchers, students, innovators and businesses to develop new products and services.
Changi Airport Terminal 5
Investing in infrastructure for the future such as Changi Airport Terminal 5 helps to better connect us to the world, and to test innovative solutions. This year, a further $1 billion top-up will be made to the Changi Airport Development Fund to support this effort.
Enhancement to Revitalisation of Shops Scheme To Help Our Heartland Shops Be More Vibrant
Heartland shops give our neighbourhoods a sense of community. The Government will set aside about $15 million annually to enhance the Revitalisation of Shops package to support promotional activities and upgrading projects in HDB town centres and neighbourhood centres. This will help them bemore vibrant. SPRING will also work with the Federation of Merchants’ Associations and local merchant associations to strengthen their capabilities to support heartland businesses.