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Singapore Confirms Future GST Hike In Budget

by Mary Swire,, Hong Kong

20 February 2018

Singapore will hike its seven percent goods and services tax rate to nine percent some time between 2021 and 2025, Singapore's Finance Minister, Heng Swee Keat, announced in the territory's new Budget.

"The exact timing will depend on the state of the economy, how much our expenditures grow, and how buoyant our existing taxes are. But I expect that we will need to do so earlier rather than later," the minister said.

In addition, from January 1, 2018, Singapore will levy GST on overseas supplies of consultancy and marketing services and electronic services, such as the provision of apps and music downloads, to Singaporean consumers.

The corporate income tax rebate will be increased to 40 percent of tax payable in the 2018 year of assessment (YA), capped at SGD15,000 (USD11,443), before falling to 20 percent in the 2019 YA, capped at SGD10,000 (USD7,628).

The Budget also proposes to raise the tax deduction on licensing payments for the commercial use of intellectual property, from 100 percent to 200 percent, capped at SGD100,000 of licensing payments per year.

In addition, the tax deduction for IP registration fees will be raised from 100 percent to 200 percent, capped at SGD100,000, and the deduction for qualifying expenses incurred on R&D executed in Singapore will also be raised from 150 percent to 250 percent.

The threshold for expenses qualifying for the Double Tax Deduction for Internationalisation (DTDi) will increase from SGD100,000 to SGD150,000, effective from the 2019 YA.

Some tax breaks are to be altered from 2020 YA. For instance, the exemptions under the Start-Up Tax Exemption Scheme and the Partial Tax Exemption Scheme will be restricted to SGD200,000 of chargeable income. The schemes will exempt 75 percent – instead of 100 percent currently – of their first SGD100,000 of chargeable income from corporate tax. This means that for a taxable income of SGD100,000, the effective corporate tax rate is 4.3 percent for start-ups and 8.1 percent for older firms, as compared to the headline rate of 17 percent.

The carbon tax announced earlier in the year will be implemented from 2019 on all facilities producing 25,000 tonnes or more of greenhouse gas emissions annually, at a rate of SGD5 (USD3.81) per tonne of emissions between 2019-2023, increasing to a rate of SGD10-15 per tonne by 2030. A first payment will be taken in 2020.

No additional carbon tax will be levied on petrol, diesel, and compressed natural gas, which are already covered by excise duties. The Government expects to collect revenues of almost SGD1bn from the new carbon tax in the first five years.

The top marginal Buyer's Stamp Duty (BSD) rate for residential properties will increase from three percent to four percent, applying to the portion of a property's value above SGD1m, effective from February 20, 2018. The rates for non-residential properties remain the same at between one percent to three percent.

Finally, the 250 percent deduction for charitable donations will be extended for a further three years, to December 31, 2021. The Business and IPC Partnership scheme (introduced in 2016 to encourage corporate giving by offering a 250 percent tax deduction on the associated costs of staff volunteering and providing charitable services) will also be extended for three years.

TAGS: Finance | VAT rates | tax | business | marine | intellectual property | entrepreneurs | goods and services tax (GST) | Singapore | fees | excise duty | licensing | carbon tax | stamp duty | tax breaks | tax reform | services | Work | Tax

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