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THE 2008 BUDGET AND HOW IT WILL AFFECT YOU & YOUR COMPANY
The Finance Minister, Mr. Tharman Shanmugaratnam, announced the financial year 2008 Budget in Parliament on 15 February 2008. Highlights of the tax and other changes are summarised below:
1Corporate Tax Changes
1.1 Tax Deduction for Research & Development ("R&D") Expenditure (for all Companies)
Tax deduction for R&D expenditure is increased to 150% effective from the Year of Assessment ("YA") 2009 to 2013. Locally done R&D expenditure that are not related to the companies existing business can also qualify for the tax deduction.
1.2 R&D Tax Allowance for All Companies (main benefits for SMEs)
New R&D tax allowance is granted for YA 2009 to YA 2013, amounting to 50% of the first $300,000 of chargeable income for each YAs. It can be utilised against incremental expenditure on ongoing R&D within 3 YAs from the year the allowance is granted.
1.3 R&D Incentive for Start-Up Enterprise (RISE)
Start-ups Enterprise is allowed to convert up to $225,000 of its losses arising from tax deductions for R&D, to cash grants of up to $20,250.
1.4 Tax Incentive for Fixture & Fittings (main benefits for SMEs)
Expenditure incurred after 15 February 2008 on fixture, fittings and installations, except those relating to structure or expansion of building space, can be claimed up to a maximum of $150,000 every 3 years per business.
1.5 Foreign Tax Credit for Foreign-Sourced Income
Wef YA 2009, unilateral tax credit is claimable on foreign income taxes incurred on all types of foreign-sourced income earned in countries with which Singapore has yet to conclude the Avoidance of Double Taxation Agreement ("DTA").
1.6 Overseas Talent Recruitment Scheme
Double tax deduction for recruitment and relocation costs of hiring top global talent, is extended for another 5 years to 30 September 2013.
The Not-Ordinary-Resident (NOR) Scheme will be enhanced wef YA 2009. Now the Taxpayer's Singapore employment income threshold must be at least $160,000 to enjoy tax exemption on contribution to non-mandatory overseas pension scheme, which amount must not be claimed by his employer as a deduction.
1.7 Equity Remuneration Incentive Scheme (ERIS)
Companies now need only to issue stock options or share awards to at least 25% of their employees, instead of 50% currently required to qualify for ERIS. (formerly known as Entrepreneurial Employee Equity-based Remuneration Scheme)
Employees of qualifying ERIS (Start-up) companies is exempted from personal income tax on 75% of the gains derived from equity-based remuneration, up to $10 million of qualifying gains arising over 10 years.
To qualify for ERIS (Start-Ups), the company must be incorporated and conducting a trade in Singapore with a gross assets of market value of $100 million or less at time of granting equity-based remuneration. It must have at least 1 shareholder owning at least 10% shareholding. ERIS (Start-Ups) will be available for stock options or share awards granted between 16 February 2008 and 15 February 2013 in the first 3 years of incorporation of qualifying start-up.
1.8 Promoting Financial Sector Activities and Islamic Finance
5% concessionary tax rate is granted on income derived from performing specific Shariah compliant activities. The Approval period, is from 1 April 2008 to 31 March 2013 for a 5 years tax incentives.
Trading of Qualifying Debt Securities and Qualifying Project Debt Securities is now included as a qualifying activity under the FSI-Bond market enhanced-tier award.
A 5% concessionary tax rate is also granted to an insurer on income derived from offshore Islamic insurance (takaful) or reinsurance business.
1.9 Promoting Debt Market
Qualifying Debt Securities Scheme (QDS) is renewed for 5 years from 1 September 2009 to 31 December 2013. Qualifying income derived from QDS that are qualifying sukuks (Islamic bonds) or debt securities with tenure of more than 10 years is tax exempted.
Tax exemption on income derived by dealers from trading in Singapore government Securities is extended to 31 December 2013.
1.10 Promoting the Project Finance Industry
Existing tax incentives for infrastructure financing is extended to 31 December 2011.
New tax incentive of 10% concessionary tax rate for up to 10 years, on income derived by approved company from provision of management services to business trust or fund that owns offshore infrastructure assets and listed on the SGX, is introduced.
1.11 Promoting Asset Securitisation
Approved Special Purpose Vehicle scheme renewed for another 5 years ending 31 December 2013.
1.12 Promoting Insurance & re-Insurance Broking Activities
New tax incentive of 10% concessionary tax rate for up to 10 years, on fees and commissions derived by qualifying licensed direct and reinsurance broking and advisory services to non-Singapore based clients, is granted till 31 March 2013.
1.13 Promoting Wealth Management Activities
New tax incentive granting tax exemption, on locally sourced investment income and foreign-sourced income received by qualifying family owned investment holding companies, is granted till 31 March 2013.
1.14 Promoting Capital Markets
Listed REITs and registered business trusts in infrastructure business, ship leasing and aircraft leasing is allowed to claim input GST on business expenses incurred irrespective of whether they hold the underlying assets directly or indirectly through multi-tiered structures or SPVs.
1.15 Enhancements to the Maritime Finance Incentive Scheme
Wef 1 April 2008, the Maritime Finance incentive is enhanced, to include container leasing activity and allow partnerships to enjoy either the 5% or 10% concessionary tax rate on its onshore and offshore container leasing income, depending on its commitments. Container Investment manager will enjoy a 10% concessionary tax rate on its management fee income.
1.16 Tax Certainty on Treatment of Gains from Sale of Vessels
All gains from sale of vessels registered with Singapore Registry of Ships or Approved International Shipping enterprise will not be subject to income tax from YA 2010 to YA 2014. Concession expanded to include gains from sales of ships, which are subsequently leased back as well as gains from the sale of shares in a Special Purpose Company, which owns the ships.
1.17 Enhancement to Shipping Incentives
Treat foreign exchange gains and gains from risk management activities, that are in connection with and incidental to core shipping operations, as qualifying income under Section 13A, Approved International Shipping Enterprise and Maritime Finance Incentive schemes wef YA 2009.
1.18 Start-Up Tax Exemption Scheme
Start-up companies with corporate shareholders, having at least 1 individual holding a 10% shareholding, qualify for the existing Start-Up Tax Exemption Scheme. This scheme grants tax exemption for up to $100,000 on chargeable income for first 3 YAs.
1.19 Tax Deduction for Portable Medical Expenses
The tax deduction limit for medical expenses is now extended beyond 1% (but not more than 2%) of total wage bill for companies that provide their employees with either of the following:
• In-patient medical benefits through medical shield plans either by way of insurance or reimbursing the premiums into employees' Medisave Accounts; or
• Ad-hoc contribution to their employees' Medisave account but subject to a cap of $1,500 per employee per year
2Personal Tax Changes
• 20% Tax Rebate for the YA 2008 is granted, up to a maximum cap of $2,000.
• Individuals can claim tax relief up to $7,000 per year for top-ups that they or their employers make to their own Minimum Sum.
• Individuals can claim tax relief up to another $7,000 per year for top-ups that they make to the Minimum Sum of their spouse, siblings, parents or grandparents.
• Employers can claim the full tax deduction for the top-ups they make to their employees' Minimum Sum.
• Individuals will now be able to claim tax relief for voluntary contributions that they make specifically to their own Medisave Account up to a cap of ($26,393 less mandatory contributions) per YA.
• The age limit on contribution made to SRS is removed. Employers are allowed to contribute on behalf of their employees.
• Estate duty on deaths occurring on or after 15 February 2008 is removed.
The above summary was prepared for your quick reference and should you require more details on the above, please contact us.
15 February 2008
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News
Together with our former associate, Mazars, RMP has undertaken a joint project with Klein-Goddard Associés and Crédit Agricole Indosuez to publish a French book entitled: S'implanter à Singapour (Doing Business in Singapore).
