Singapore Budget 2018 – Overview of Tax Changes for Businesses and Individuals

1. The CIT rebate will be extended for another year to YA 2019, at a rate of 20% of tax payable, capped at $10,000; and
2. For YA 2018, the CIT rebate will be enhanced to 40% of tax payable, with enhanced cap at $15,000.

No prior approval is needed from IE Singapore or STB for tax deduction on the first $100,000 of qualifying expenses incurred on the following activities for each YA:

1. Overseas business development trips/missions;
2. Overseas investment study trips/missions;
3. Participation in overseas trade fairs; and
4. Participation in approved local trade fairs.

Businesses can continue to apply to IE Singapore or STB on qualifying expenses exceeding $150,000, or on expenses incurred on other qualifying activities.

All other conditions of the scheme remain the same.

IE and STB will release further details of the change by April 2018.

1. 100% exemption on the first $100,000 of normal chargeable income*; and
2. 50% exemption on the next $200,000 of normal chargeable income.

* Normal chargeable income refers to chargeable income that is taxed at the prevailing corporate income tax rate.

1. 75% exemption on the first $100,000 of normal chargeable income; and
2. 50% exemption on the next $100,000 of normal chargeable income.

All other conditions of the scheme remain unchanged.

This change will take effect on or after YA 2020 for all qualifying companies under the scheme.

For example, if a qualifying company’s first YA is 2019, the current SUTE parameters will apply in YA 2019 while the new parameters will apply in YAs 2020 and 2021.

1. 75% exemption on the first $10,000 of normal chargeable income; and
2. 50% exemption on the next $290,000 of normal chargeable income.

1. 75% exemption on the first $10,000 of normal chargeable income; and
2. 50% exemption on the next $190,000 of normal chargeable income.

All other conditions of the scheme remain unchanged.

This change will take effect on or after YA 2020 for all companies (excluding those that qualify for the SUTE scheme) and bodies of persons.

Currently, GST is not applicable on imported services provided by an overseas supplier which does not have an establishment in Singapore.

B2B imported services will be taxed via a reverse charge mechanism. Only businesses that:

• make exempt supplies, or
• do not make any taxable supplies need to apply reverse charge

The majority of businesses make taxable supplies and thus would not be affected by this reverse charge mechanism. The reverse charge mechanism requires the local business customer to account for GST to IRAS on the services it imports. The local business customer can in turn claim the GST accounted for as its input tax, subject to the GST input tax recovery rules.

The taxation of B2C imported services will take effect through an Overseas Vendor Registration (OVR) mode. This requires overseas suppliers and electronic marketplace operators which make significant supplies of digital services to local consumers to register with IRAS for GST. IRAS will release further details by end February 2018.

The FSI scheme is scheduled to lapse after December 31, 2018.

The trading in loans and their related collaterals, excluding immovable property, is a qualifying activity that is accorded a concessionary tax rate of 13.5%.

The scope of trading in loans and their related collaterals is expanded to include collaterals that are prescribed infrastructure assets or projects. The change will apply to income derived on or after January 1, 2019, in respect of new and renewal awards approved on or after June 1, 2017.

All other conditions of the scheme remain the same.

MAS will release further details of the change by May, 2018.

There is a range of WHT exemptions for the financial sector which applies to different financial institutions for payments made under different types of financial transactions.

A) To ensure that the relevance of the tax concessions is periodically reviewed, a review date of December 31, 2022, will be introduced for the WHT exemptions for the following payments:

1. Payments made under cross-currency swap transactions made by Singapore swap counterparties to issuers of Singapore dollar debt securities;
2. Payments made under interest rate or currency swap transactions by financial institutions;
3. Payments made under interest rate or currency swap transactions by MAS; and
4. Specified payments made under securities lending or repurchase agreements by specified institutions; and

B) The following WHT exemptions will be legislated, along with a review date of December 31, 2022:

1. Interest on margin deposits paid by members of approved exchanges for transactions in futures; and
2. Interest on margin deposits paid by members of approved exchanges for spot foreign exchange transactions (other than those involving Singapore dollar).

Fund managers approved under the Financial Sector Incentive – Fund Management (FSI-FM) scheme can qualify for 10% concessionary tax rate on the income derived from managing an incentivised fund.

MAS is studying the regulatory framework for S-VACCs to further develop and strengthen Singapore’s position as a hub for both fund management and fund domiciliation.

Notably, a S-VACC is a new structure designed for collective investment schemes, and will accommodate a variety of traditional and alternative asset classes and investment strategies.

1. An S-VACC will be treated as a company and a single entity for tax purposes;
2. Tax exemption under Sections 13R and 13X of the ITA will be extended to S-VACCs;
3. 10% concessionary tax rate under the FSI-FM scheme will be extended to approved fund managers managing an incentivised S-VACC; and
4. The existing GST remission for funds will be extended to incentivised S-VACCs.

The conditions under the existing schemes in (2), (3) and (4) remain unchanged.

The changes will take effect on or after the effective date of the S-VACC regulatory framework.

MAS will release further details of the tax framework for S-VACCs by October, 2018.

All other conditions of the scheme remain the same. The change will take effect for new awards approved on or after February 20, 2018.

MAS will release further details of the change by May 2018.

1. Tax transparency treatment on the distributions received by REITs ETFs from S-REITs which are made out of the latter’s specified income;
2. Tax exemption on such REITs ETFs distributions received by individuals, excluding individuals who derive any distribution:
3. through a partnership in Singapore; or
4. from the carrying on of a trade, business or profession; and
5. 10% concessionary tax rate on such REITs ETFs distributions received by qualifying non-resident non-individuals.

Subject to conditions, the tax concessions for REITs ETFs will take effect on or after July 1, 2018, with a review date of March 31, 2020, which is the same as that for other tax concessions for S-REITs.

Application for the tax transparency treatment can be submitted to IRAS on or after April 1, 2018.

MAS and IRAS will release further details of the change by March, 2018.

MAS will release further details of the change by May, 2018.

1.  Tax exemption on income derived by an ASPV from approved asset securitisation transactions;
2. GST recovery on its qualifying business expenses at a fixed rate of 76%;
3. WHT exemption on payments to qualifying non-residents on over-the-counter financial derivatives in connection with an asset securitisation transaction; and
4. Remission of stamp duties on the instrument relating to transfer of assets to the ASPV for approved asset securitisation transactions.

The scheme is scheduled to lapse after December 31, 2018.

All other conditions of the scheme remain the same.

MAS will release further details of the extension by May, 2018.

1. 10% concessionary tax rate for qualifying companies and bodies of persons in Singapore; and
2. Tax exemption for qualifying non-residents and qualifying individuals.

To qualify as QDS, debt securities must be substantially arranged by financial institutions in Singapore.

The QDS+ scheme grants tax exemption for all investors on qualifying income derived from QDS that are:

1. Debt securities (excluding Singapore Government Securities) with an original maturity of at least 10 years; and
2. Islamic debt securities or sukuk.

The QDS and QDS+ schemes are scheduled to lapse after December 31, 2018.

Debt securities with tenure beyond 10 years, and Islamic debt securities that are issued:

1. After December 31, 2018, can enjoy tax concessions under the QDS scheme if the conditions of the QDS scheme are satisfied;
2. On or before December 31, 2018, can continue to enjoy the tax concessions under the QDS+ scheme if the conditions of the QDS+ scheme are satisfied.

MAS will release further details of the change by May, 2018.

1. The submarine cable systems can be used outside Singapore; and
2. The submarine cable systems, on which IA has been granted, can be leased out under the indefeasible rights of use arrangements.

This change will take effect for capital expenditure incurred between February 20, 2018, and December 31, 2023, inclusive of both dates.

1. The provision of services by his qualifying employee to an IPC during that period; or
2. The secondment of his qualifying employee to an IPC during that period.

In addition, MOF and IRAS will review the administrative processes for BIPS based on feedback that has been received. Details of any change will be announced in the second half of 2018.

1. 150% tax deduction for staff costs and consumables incurred, and
2. 100% tax deduction for other qualifying expenditure

All other conditions of the scheme remain unchanged. This change will take effect from YA 2019 to YA 2025.

B) Enhance the tax deduction to 200% for the first $100,000 of qualifying IP registration costs incurred for each YA.

This change will take effect from YA 2019 to YA 2025.

This change will take effect from YA 2019 to YA 2025.

Qualifying IP in-licensing costs include payments made by a qualifying person to publicly funded research performers or other businesses, but exclude related party licensing payments, or payments for IP where any allowance was previously made to that person

1. The provision of services by his qualifying employee to an IPC during that period; or
2. The secondment of his qualifying employee to an IPC during that period.

In addition, MOF and IRAS will review the administrative processes for BIPS based on feedback that has been received. Details of any change will be announced in the second half of 2018.

• *first $180,000 – 1%
• *next $180,000 – 2%
• *amount exceeding $360,000 – 3%

• *no changes for the first $180,000 and the next $180,000
• *next $640,000 – 3% (revised)
• *amount exceeding $1 million – 4% (new)

The revised rates will apply to all residential properties acquired on or after February 20, 2018.

The  BSD rates for non-residential properties remain unchanged at 1% to 3%.

1. Cigarettes and other manufactured tobacco: From $388/kgm or 38.8 cents/stick of cigarette to $427/kgm or 42.7 cents/stick of cigarette.
2. Beedies, Ang Hoon and smokeless tobacco: From $299/kgm to $329/kgm.
3. Unmanufactured and cut tobacco and other tobacco refuse: From $352/kgm to $388/kgm.

These tax changes will take effect from February 19, 2018.