The world is experiencing one of the deepest recessions in 60 years and no one knows how long it will take to recover. Singapore is an open economy and we too are coping with the impact of the economic slump. It was with this sentiment that the Minister for Finance delivered the 2009 Budget Speech on 22nd January 2009 with a resilient package worth S$20.5 billion to cushion the impact of the recession. The package aims to “keeping jobs and building for the future”. The package covers a wide spectrum of policy changes ranging from tax rebates, additional GST credits; and implementation of a temporary “Job Credit” scheme. We summarize below the changes in tax policy announced in the 2009 budget:
- Key Changes
1.1 Corporate Tax Rates
The corporate tax rate will be reduced to 17% effective from the YA 2010, a 1% drop from the current rate of 18%. There will be no change to the tax rates for personal tax and GST.
1.2 Personal Tax Rebates
There will be a one-off tax rebate of 20% for personal income tax for all resident taxpayers for YA 2009, capped at S$2,000. Property tax rebates of 40% will be granted to industrial and commercial properties; and owner-occupied residential properties. Statutory authorities such as JTC and HDB will also pass on the benefits to their tenants in the form of rental rebate of 15%. Private property owners are strongly urged to extend the benefits to their tenants.
1.3 Jobs Credit Scheme for Company
In order to protect jobs in Singapore, the Government introduced the “Jobs Credit” scheme for a period of one year. Under the scheme, cash rebates will be paid to employers for those employees under their CPF payrolls. A monthly rebate of 12% for the first S$2,500 for each eligible employee will be credited into the GIRO bank account of the employers. The payment will be made quarterly as follows:
Qualifying period |
CPF contribution deadline |
Jobs Credit payment date |
Oct 08 to Dec 08 |
14 Feb 09 for Jan 09 salary |
31 Mar 09 |
Jan 09 to Mar 09 |
14 Apr 09 for Apr 09 salary |
30 Jun 09 |
Apr 09 to Jun 09 |
14 Aug 09 for Jul 09 salary |
30 Sep 09 |
Jul 09 to Sep 09 |
14 Nov 09 for Oct 09 salary |
31 Dec 09 |
The above scheme aims to assist employers to defray part of the wage costs so as to protect jobs in Singapore. Details on how the scheme applies to permanent resident employees, the re-hired retirees and old aged workers are yet to be announced.
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- Tax Changes for Business
2.1 Corporate Tax Rates
In order to maintain our market competitiveness, the Government has shifted the reliance on direct tax as the main source of revenue to indirect tax with the introduction of the Goods and Services Tax (GST) in 1994. Consequential to the change of Government policy, the corporate tax rates have been adjusted progressively from the old rate of 33% in the 1990s to the current rate of 18%. The tax rate is now further reduced to 17% for the YA 2010. We append below the corporate income tax rates for the recent ten years of assessment:
Year of Assessment |
Year of Assessment |
2001 |
25.5 |
2002 |
24.5 |
2003 |
22 |
2004 |
22 |
2005 |
20 |
2006 |
20 |
2007 |
20 |
2008 |
18 |
2009 |
18 |
2010 |
17 |
2.2 Enhancement of Carry Back Relief for YA 2009 and 2010
The current tax law allows carry back of loss items to one immediate preceding YA and the amount is capped at S$100,000. The Government has proposed to change the law for YA 2009 and 2010. The new law will allow a carry back of loss items up to 3 immediate YA and the amount will be capped at S$200,000.
2.3 Capital Allowance for Renovation Expenses The Government announced last year that renovation expenses would be allowed to be written off over a period of 3 years for tax purposes and the amount would be capped at S$150,000 for any 3- year period. The policy will be enhanced to allow a one-year write off for the YA 2010 and 2011, subject to the same 3-year capping of S$150,000.
2.4 Tax-exemption for Companies Limited by Guarantee
The partial tax-exemption scheme for new start-up companies will be granted to all new start-up companies that are limited by guarantee effective from the YA 2010.
2.5 Tax Framework for Facilitation Corporate Amalgamations
Under the current tax framework, companies undergoing amalgamation will be considered as disposing off their assets and liabilities and there are tax consequences to these changes. The Government will introduce a new tax framework for corporate amalgamations to minimize the tax consequences for corporate mergers and acquisitions. The IRAS will announce details of the new tax framework shortly.
2.6 Enhancement on Capital Allowance for YA 2010 and 2011
The current 3-year write off of plant and machinery will be fine-tuned for YA 2010 and 2011. The cost of asset can be claimed over a period of 2 years with 75% for the 1st year and the remaining 25% for the 2nd year.
2.7 Writing Down Allowance for Intellectual Property Rights
The current tax laws allow a 5-year write off for costs incurred in the acquisition of qualifying intellectual property rights (IPR). The laws will be modified to allow a 2-year write off period for cost incurred on IPR with Media and Digital Entertainment (MDE) content. The modified scheme will be available for IPR acquired during the period from 22 January 2009 to 31 October 2013.
2.8 Withholding Tax Exemption for Maritime Industry
Withholding tax exemption has been granted under the Block Transfer Scheme for interest paid by shipping enterprise to a lender outside Singapore for loans obtained to acquire Singapore-flagged ship. The scheme was granted from 1 November 2003 to 31 December 2008. It will be extended for another 5-year to 31 December 2013. In addition, withholding tax exemption will be extended to cover interest paid to foreign lenders for loans taken to acquire Special Purpose Company that owns Singapore registered ship. The scheme applies to ships registered between 1 January 2009 to 31 December 2013.
2.9 Tax Exemption for Foreign Sourced Income Received in Singapore
Foreign sourced incomes earned before 22 January 2009 and received in Singapore between 22 January 2009 to 21 January 2010 by resident non-individuals will be tax-exempt. The conditions for exemption of foreign sourced income will also be temporarily lifted.
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- Tax Incentives for Financial Sector
3.1 Enhancement of Fund Management Incentive
The current tax incentive for fund management will be enhanced to include a new Enhanced Tier for funds with a minimum fund size of S$50 million. The enhanced tier will be available to fund vehicles in the forms of companies, trusts and limited partnerships.
3.2 Financial Sector Incentive – Headquarter Services (FSI – HQ) Scheme
The above scheme will be enhanced for the period from 22 January 2009 to 31 December 2013 to include local network company and to grant withholding tax exemption to interest paid to foreigners on loans obtained for qualifying activities. MAS will release more information on the enhanced scheme later.
3.3 Commodity Derivatives Trading (CDT) Scheme
The above scheme will be enhanced from 27 February 2009 to include emission derivatives under the FSC-DM (CDT) award and to remove the restrictions on trading with counter-party.
3.4 Enhancement of Specified Income and Designated Investment Lists
The current lists of specified income and designated investments under the Financial Sector Incentives (FSI) will be extended from 22 January 2009 to include more specified income and designated investments.
3.5 Extension of Tax Deduction for Provisions made by Financial Institutions
The current tax deduction for collective impairment provisions that are allowed to financial institutions will be extended for a further period of 3 years, subject to conditions.
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- Changes to Personal Income Tax
4.1 Personal Tax Rebates
As mentioned above, a 20% tax rebate will be given to all resident taxpayers, subject to a cap at S$2,000 per taxpayer for the YA 2009.
4.2 Flexible GIRO Arrangement to Pay Tax (Extended Installment Plan)
Taxpayers who have lost their jobs in 2008 and 2009 can approach the IRAS to have their tax payment for the YA 2009 re-scheduled to the maximum of 24 months.
4.3 Removal of Income Tax on Net Annual Value of Properties
Currently, the net annual value of residential properties are subject to tax, with exemption for an amount of S$150,000 for the first property. The Government has announced to remove the tax on net annual value of properties from the YA 2010. With the change of law, residential property owners will no longer be taxed on any net annual value of the properties they own.
4.4 Tax Exemption for Foreign Sourced Income Received in Singapore
Foreign sourced incomes earned before 22 January 2009 and received in Singapore between 22 January 2009 to 21 January 2010 by resident partners of partnerships in Singapore will be tax-exempt.
4.5 Enhancement of Tax Deduction on Donations
All donations made to Institutions of Public Character (IPC) or more commonly known as “Approved Charities” in 2009 will be given tax deduction of 250%, up from the current 200%.
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- Changes to Property Tax
5.1 Tax Rebates for Residential Properties
A tax rebate of 40% will be given to all residential property owners for the calendar year 2009.
5.2 Tax Rebates for Commercial and Industrial Properties
A tax rebate of 40% will be given to all commercial and industrial property owners for the calendar year 2009.
5.3 Property Tax Deferral for Land Approved for Business Development
Business property owners can apply to the IRAS for deferral of property tax on land approved for business development. The period of deferral will be granted from 22 January 2009 to 21 January 2011.
5.4 Deferral of Increase in Assessment Rate for Hotel Rooms
The rate for gross room receipts is supposed to increase from 20% to 25% from 1 January 2009. The Government has decided to postpone the increase for a year. The rate for gross room receipts will remain at 20% for 2009.
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- Changes to Goods and Services Tax (GST)
6.1 Zero-Rating for the Aerospace Industry
The current zero-rating provisions will be expanded to include private aircraft and importation of aircraft components or systems for qualifying aircraft without GST.
6.2 Suspension of GST for Goods removed for Auctions and Exhibitions
Currently, goods leaving Zero-GST or licensed warehouses will be subject to GST. With effective from 1 April 2009, GST will be suspended for goods temporarily removed from zero-GST or licensed warehouses for auctions and exhibitions, provided the goods are returned to the zero-GST or licensed warehouses subsequently.
6.3 Recovery of GST for Qualifying Funds
Currently, some of the locally managed funds are not able to claim for GST incurred if they do not qualify to register for GST. The law will be changed to allow qualifying funds that are managed by prescribed fund manager in Singapore to claim a substantial portion of the input GST incurred. The change will take effect from 22 January 2009 to 31 March 2014.
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- Financial Package
7.1 Stimulating Bank Lending and Trade Financing
Ever since the beginning of the worldwide credit crunch, the banks have become more cautious when granting credits. To tackle this, the Government has implemented since Nov 2008 the Local Enterprise Finance Scheme (LEFS) and the Micro Loan Programme (MLP) in which the Government assumes up to 80% share of the risk. The Government also assumes up to 50% of the risk for Bridging Loan Programme (BLP). The BLP is now enhanced to cater to loans up to S$5 million and the Government will assume risk of up to 80%. The new BLP will apply to all new loans from 1 February 2009. Besides, the Government will also take on a significant part of trade financing by enhancing the Loan Insurance Scheme (LIS) and the new Trade Credit Insurance Programme (TCIP). The Ministry of Trade and Industry will release more details of the changes.
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Other Changes
8.1 Port Dues Concession for Harbour Craft
The Maritime and Port Authority of Singapore (MPA) will implement a 20% port dues concession on harbour craft (excluding personal craft) for 1 year from 1 April 2009 to 31 March 2010.
8.2 Development of Business and Manpower Capability within the Maritime Sector
An additional S$45 million will be added to the Maritime Cluster Fund to provide funding for new industry-wide projects that build business and manpower capability within the cluster.
8.3 Aircraft landing Rebate
The current landing fee rebate will be increased from 15% to 25% to strengthen the market competitiveness of the Changi International Airport.
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Year of Assessment 2009 tax filing due dates
We wish to take this opportunity to remind our clients of the tax filing due dates for the Year of Assessment 2009:
Personal Tax,
Partnerships,
Clubs,
Associations and
Management Corporations |
Filing due on 15 April 2008 |
| Corporate Tax |
Filing due on 30 November 2008 |
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Mr Chng Chung Hing
Tax Director
Loke Lum Consultants Pte Ltd
Compiled on 23rd January 2009
