Singapore Government Announces 2% Cut In Corporate Tax

by Mary Swire, Tax-News.com, Hong Kong

02 March 2004

Delivering the Singaporean government’s 2004 Budget last week, Deputy Prime Minister and Minister for Finance Lee Hsien Loong announced a number of tax cuts that he claimed will support creativity and enterprise, and attract talent and investments to Singapore as part of a “best for business” package of measures.

As a result, the Government is to lower the corporate tax rate to 20% from Year of Assessment (YA) 2005. Whilst the lowering of personal income taxes remains on hold, Lee revealed that the government remains committed to reducing the top personal tax rate to 20% as soon as budgetary conditions permit.

To boost private wealth management activities, all foreign-sourced income remitted by resident individuals will be exempt from tax. Singapore-sourced investment income derived by individuals from financial instruments will also be exempt from tax from YA 2005.

To encourage entrepreneurship, the first $100,000 of normal chargeable income for new companies will be exempt from tax in each of their first three years of assessment between YA 2005 and YA 2009. The current Technopreneur Investment Incentive will be expanded in scope and renamed the Enterprise Investment Incentive (EII). Investors in start-ups awarded the EII will enjoy tax deductions for any losses they incur in these start-ups. To help SMEs make greater use of intellectual property, the withholding tax on royalty payments will be reduced from 15% to 10%.

The Minister for Finance also announced other tax changes that would benefit individuals. These include the lowering of the Additional Registration Fee (ARF) for new cars from 130% to 110% of Open Market Value (OMV) and the streamlining of the estate duty process.

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