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PwC Singapore Suggests Budget 2015 Measures

by Mary Swire,, Hong Kong

02 December 2014

PwC Singapore has released its annual tax policy recommendations, which have been compiled in response to an ongoing Ministry of Finance pre-Budget consultation on tax and spending measures.

PwC Singapore's Budget 2015 Wishlist includes various recommendations that aim to provide additional support for small and medium-sized enterprises (SMEs) through the city-state's tax code.

For example, it suggests changes to the partial tax exemption that "was introduced to reduce the effective tax rates of small and medium-sized enterprises (SMEs), but also benefits all corporate taxpayers, which may not need assistance."

Instead of the partial tax exemption, PwC suggests that an exemption on the first SGD300,000 (USD230,000) of an SME's chargeable income would maximize the tax benefit for such businesses. It said eligibility limitations, such as a turnover threshold and number of employees, could be imposed to target the tax break only at SMEs.

It recommends promoting bank lending to SMEs by allowing banks a double deduction for losses on loans to SMEs, while the Ministry could consider reintroducing an incentive for employee share option schemes and could restrict it to employees of start-up companies or SMEs.

PwC said that, as "international tax rules are being rewritten as part of the Organisation for Economic Cooperation and Development's base erosion and profit shifting project, measures that have served Singapore well will need to be re-examined in the light of today's environment." While "Singapore tweaks its tax policies to enhance international competitiveness, … we will have to ensure that our rules are consistent with the changing global norms," PwC Singapore said.

In that respect, the firm included a recommendation that the Ministry should streamline Singapore's corporate tax incentives. In particular, a single tax incentive rate should be established, and "core requirements could be legislated for specified concessionary tax rates."

The firm's Wishlist includes an enhancement to Singapore's mergers and acquisitions (M&A) rules. It has proposed "allowing a waiver of the condition that the ultimate holding company must either be incorporated in Singapore or a company that qualifies for the international headquarters incentive. This would encourage acquiring groups that have trading operations in Singapore to conduct their M&A from Singapore."

TAGS: environment | Finance | tax | business | holding company | tax incentives | mergers and acquisitions (M&A) | corporation tax | Singapore | ministry of finance | small and medium-sized enterprises (SME) | transfer pricing | tax breaks

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