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Singapore Adds To Tax Incentives In Budget

by Mary Swire,, Hong Kong

29 March 2016

Singapore's 2016 Budget, released on March 24, includes measures to support businesses to expand and enhances finance sector, treasury management, and international trade tax incentives.

Among the proposals, the Budget would extend the double tax deduction (DTD) for Internationalization Scheme by four years from April 1, 2016, to March 31, 2020. This covers qualifying expenses incurred for activities such as participation in overseas business development and investment study trips.

To support more mergers and acquisitions (M&As), the Budget proposes to grant the M&A allowance on up to SGD40m of the value of a deal, instead of the current cap of SGD20m. This change would take effect for qualifying M&A deals made from April 1, 2016, to March 31, 2020. The Budget also proposes to extend, until May 31, 2022, the non-taxation of companies' gains on the disposal of their equity investments, based on existing scheme parameters, to provide upfront certainty for corporate restructuring.

Next, the Minister has proposed to extend the Finance and Treasury Centre (FTC) scheme until March 31, 2021. The following enhancements are proposed to take effect from March 25, 2016:

  • The concessionary tax rate would be lowered to eight percent. The substantive requirements to qualify for the scheme would be increased;
  • To qualify for the concessionary tax rate, FTCs would be allowed to obtain funds indirectly from approved offices and associated companies. Safeguards would be put in place to address round-tripping risks; and
  • The scope of tax exemption granted under Section 13(4) would be expanded to cover interest payments on deposits placed with the FTC by its non-resident approved offices and associated companies, provided the funds are used for the conduct of qualifying activities or services.

In a bid to help companies, especially small- and medium-sized enterprises (SMEs), the Budget proposes to raise the existing corporate income tax rebate, from 30 percent of tax payable to 50 percent of tax payable, with a capped rebate of SGD20,000 each year for the 2016 and 2017 assessment years. The Budget also expands the SME Mezzanine Growth Fund from the current SGD100m to a total fund size of up to SGD150m, to provide more capital to support Singapore's SMEs to scale-up and engage in cross-border business

In addition, the Productivity and Innovation Credit (PIC) Scheme will be revised. The Budget proposes to lower the cash payout rate under PIC from the current 60 percent to 40 percent for expenditures incurred on or after August 1, 2016. The 400 percent tax deduction under the scheme is to remain unchanged. The PIC scheme, which has been extended for YA 2016 to YA 2018, will expire after YA 2018.

In the area of personal income tax, the Budget proposes a cap on the total amount of personal income tax relief an individual can claim, at SGD80,000 per assessment year.

In addition, the Budget proposes a pilot Business and IPC Partnership Scheme from July 1, 2016, till the end of 2018. Under the scheme, businesses whose employees volunteer and provide services to Institutions of a Public Character (IPCs), including through secondments, will receive a 250 percent tax deduction on the associated cost incurred, subject to receiving an IPC's agreement. This deduction will be subject to a yearly cap of SGD250,000 per business and SGD50,000 per IPC.

TAGS: individuals | Finance | Institutions | tax | investment | business | tax incentives | interest | law | employees | equity investment | budget | corporation tax | Singapore | ministry of finance | agreements | treasury management | small and medium-sized enterprises (SME) | legislation | tax rates | tax reform | legislation amendments | trade | individual income tax | services

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