The Government Budget for fiscal year 2013 was announced by the DPM and Finance Minister in the Parliament on 25 February. The theme for the budget this year is "Quality Growth and An Inclusive Society". The two main thrusts of the budget this year are to continue improving productivity and build an inclusive society that benefits all Singaporeans.
A new Wage Credit Scheme (WCS) was introduced in the budget. Under this scheme, the Government will co-fund 40% of the wage increment for Singaporean workers with monthly salary of up to S$4,000 for 3 years. There will be a tax rebate for individuals for the YA 2013 and companies for the YA 2013 to 2015. The other changes announced include adjustment to CPF contribution rates for low wage workers, introduction of the productivity and innovation credit (PIC) bonus for 3 years, changes to property and vehicle taxes, and the usual adjustments made to financial sector tax incentives. We summarize below the changes in fiscal and tax policy as announced in the budget:
- Key Features
1.1 No change to Corporate Tax Rate and GST Rate, Changes to Individual Tax Rate
There will be no change to the tax rate for corporate tax and GST. The corporate tax rate remains at 17% with partial tax exemption for the first S$300,000 chargeable income. GST rate will remain at 7%.
For corporate tax, a partial tax exemption is applicable to the first S$300,000 chargeable income. After deducting the partial tax exemption, the effective tax rate for the first S$300,000 chargeable income is only 8.36% for the year of assessment 2013. Qualifying newly incorporated companies will enjoy an effective tax rate of only 5.67% for the first S$300,000 chargeable income for their first 3 years of assessment after incorporation.
The corporate tax rates for the current ten years are as follows:
Year of Assessment |
Corporate
Tax Rate (%)
|
2004 |
22 |
2005 |
20 |
2006 |
20 |
2007 |
20 |
2008 |
18 |
2009 |
18 |
2010 |
17 |
2011 |
17 |
2012 |
17 |
2013 |
17 |
For comparison, we append below corporate tax rates for selected jurisdictions:
Jurisdiction |
Corporate
Tax Rate (%) |
Hong Kong |
16.5 |
Taiwan |
17 |
Thailand |
23 |
South Korea |
24.2 |
Indonesia |
25 |
Malaysia |
25 |
Vietnam |
25 |
China |
25 |
The Philippines |
30 |
India |
32.45 |
Japan |
38.01 |
1.2 The Wage Credit Scheme (WCS)
Effective from 2013 and for a period of 3 years, the Government will co-fund 40% of the wage increment for Singaporean workers with monthly wages of below S$4,000. The qualifying conditions are:
1. Singapore citizen;
2. Gross monthly wage of up to S$4,000;
3. He / she was employed for at least 3 months in 2012; and
4. He / she is on employer’s payroll for at least 3 months in 2013.
1.3 Tax Rebate for Corporate Taxpayers for YA 2013 to YA 2015
Tax rebate will be given to corporate taxpayers for the YA 2013 to YA 2015. The tax rebate is 30% of the tax payable and capped at S$30,000 per tax year.
1.4 Introduction of Productivity and Innovation Credit (PIC) Bonus Scheme
The Government will pay a dollar-for-dollar PIC cash bonus from YA 2013 to YA 2015, up to a cap of S$15,000 of the qualifying expenditure. The minimum qualifying PIC expenditure is S$5,000. This is in addition to the existing PIC deduction and cash payout given for the YA 2013 to 2015. The six types of qualifying activities under the PIC scheme are:
(i) R&D expenditure.
(ii) Investment in design.
(iii) Acquisition of Intellectual Property (IP) rights.
(iv) Registration of IP rights.
(v) Investment in automation.
(vi) Training.
1.5 Increase in Foreign Workers Levies and Reduction to Dependency Ratio Ceilings (DRC)
Foreign workers levies will be increased for 2014 and 2015. Besides, DRC for all industries will be reduced from 1 July 2013. The minimum qualifying monthly salary for “S” pass will also be increased from S$2,000 to S$2,200.
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- Tax Changes for Businesses
2.1 Enhancements of PIC Scheme
The existing qualifying criteria for automation equipment will be further relaxed to include basic tool if it improves the productivity of the business. The term "Automation Equipment" will be renamed to "IT and automation equipment". The category for "Acquisition of IP rights" will also be expanded to include in-licensing costs incurred for YA 2013 to 2015.
2.2 Rationalizing the Start-up Tax Exemption (SUTE) Scheme
The existing scheme will no longer be available to property developer and investment holding company from 26 Feb 2013.
2.3 Expiry of Deduction Scheme for Upfront Land Premium
The existing scheme will cease without renewal on and after 28 Feb 2013.
2.4 Expiry of Further Tax Deduction Scheme for Recruitment of Overseas Talents
The existing scheme will cease without renewal on and after 30 Sep 2013.
2.5 Extension of Qualifying Debt Securities (QDS) and QDS+ schemes
Both schemes will be extended for another 5 years to 31 Dec 2018.
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-
Tax Changes for Financial Sector
3.1 Extension of Financial Sector Incentive (FSI)
The existing scheme will be extended for another 5 years to 31 Dec 2018.
3.2 Tax Exemption on Income Derived by Primary Dealers from Trading in Singapore Government Securities
To continue encourage trading in Singapore Government securities, the tax exemption on income derived by primary dealers from such trading activities will be extended for 5 another years up to 31 Dec 2018.
3.3 Extension of Tax Incentive Scheme for Approved Special Purpose Vehicle (ASPV)
The existing scheme will be extended for another 5 years up to 31 Dec 2018.
3.4 Enhancement of Tax Exemption for Reinsurance Business
Tax exemption will be granted from 25 Feb 2013 for qualifying income derived from offshore catastrophe excess of loss (“CAT-XOL”) reinsurance layers. This is to encourage the underwriting of severe and volatile catastrophe risk insurance business.
3.5 Scheme for Offshore Insurance Broking Business
This tax incentive scheme will be extended for 5 years to 31 Mar 2018. A new 5% tax will be introduced on 1 Apr 2013 on fees and commissions derived from the provision of qualifying specialty insurance broking and advisory services.
3.6 Expiry of Offshore Insurance Scheme for Islamic Insurance and Reinsurance
The existing scheme will cease without renewal on and after 31 Mar 2013.
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- Tax Changes for Maritime Sector
4.1 Enhancement of Maritime Sector Incentive (MSI) and Approved International Shipping Enterprise (AIS) Award
To further promote the maritime industry, the maximum tenure for the above 2 schemes will be increased to 40 years, from the existing 30 years.
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- Changes to Individual Income Tax
5.1 Tax Rebate for the YA 2013
A one-off tax rebate will be granted to resident taxpayers as follows:
(1) 30% on tax payable for resident individuals aged below 60, capped at S$1,500; and
(2) 50% on tax payable for resident individuals aged 60 and above, also capped at S$1,500.
5.2 Changes to Taxation for Accommodation Benefits
The current taxable rule of using 10% of annual remuneration of taxpayer as the value of accommodation benefit will be changed from the YA 2015. The new rules from YA 2015 include:
(1) Housing accommodation – Annual value of property less rent paid by employee;
(2) Hotel accommodation – Actual costs incurred; and
(3) Furniture and fittings – Percentage of annual value of the housing accommodation.
5.3 Phasing out of Equity Remuneration Incentive Schemes (ERIS)
The above schemes expired on 15 Feb 2013 and expiring on 1 Jan 2014, and will not be renewed.
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- Changes to Property Tax
6.1 Progressive Property Tax Structure for Residential Properties
With effect from 1 Jan 2014, property tax for residential properties will be changed to multi-tiered structure, from the existing 2 tiers structure.
Property tax rates table for Owner-occupied residential properties:
|
Annual Value
|
Tax Rates from 1 Jan 2014
|
Tax Rates from 1 Jan 2015
|
| First $8,000 |
0% |
0% |
| Next $47,000 |
4% |
4% |
| Next $5,000 |
5% |
6% |
| Next $10,000 |
6% |
6% |
| Next $15,000 |
7% |
8% |
| Next $15,000 |
9% |
10% |
| Next $15,000 |
11% |
12% |
| Next $15,000 |
13% |
14% |
| AV in excess of $130,000 |
15% |
16% |
Property tax rates table for Non owner-occupied residential properties:
|
Annual Value
|
Tax Rates from 1 Jan 2014
|
Tax Rates from 1 Jan 2015
|
| First $30,000 |
10% |
10% |
| Next $15,000 |
11% |
12% |
| Next $15,000 |
13% |
14% |
| Next $15,000 |
15% |
16% |
| Next $15,000 |
17% |
18% |
| AV in excess of $90,000 |
19% |
20% |
6.2 Removal of Property Tax Refund Concession for Vacant Properties
The existing concession treatment of tax refund for vacant properties will be removed from 1 Jan 2014. Residential properties undergoing renovation will be taxed at owner-occupier property tax rate.
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- Changes to Vehicle Tax and Certificate of Entitlement (COE)
7.1 Modification to Additional Registration Fee (ARF) for Vehicles
From 26 Feb 2013, the ARF will be changed from the existing 100% to tiered structure as follows:
First S$20,000 |
100% |
Next S$30,000 |
140% |
In excess of S$50,000 |
180% |
7.2 Extension of COE for Commercial Vehicles
The owners of commercial vehicles will be allowed to renew the vehicle COE for a further 5 years, after a 5 years extension at the end of the initial 10 years of COE. In total, a commercial vehicle can be used on road for 20 years.
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- Other Changes
8.1 GST Voucher Special Payment
The GST voucher scheme will be renewed for qualifying Singaporeans in 2013. There are 3 components to the GST voucher, these are:
- Cash payout. An annum amount of S$250 or S$100 will be paid to qualifying Singaporeans. Details are as follows:
GST Voucher – Cash
Assessable Income for YA 2012
|
Annual Value of Home as at 31 Dec 2012 |
Up to $13,000
|
$13,000 < AV < $20,000
|
< $24,000 |
$250 |
$100 |
- CPF Medisave Special Payment. A medisave top up of between S$150 and S$450 will be paid into the CPF medisave account of older Singaporeans. Details are as follows:
GST Voucher – Medisave
|
Annual Value of Home as at 31 Dec 2012 |
Up to $13,000
(All HDB Flats)
|
$13,000 < AV < $20,000
|
65 - 74 |
$250 |
$150 |
75 - 84 |
$350 |
$250 |
> 85 |
$450 |
$350 |
- U-Save Payment. An utilities rebates will be given to HDB households as follows:
GST Voucher – U-Save Special Payment
|
July 2013 |
Jan 2014 |
Total |
HDB 1- and 2-Room |
$130 |
$130 |
$260 |
HDB 3-Room |
$120 |
$120 |
$240 |
HDB 4-Room |
$110 |
$110 |
$220 |
HDB 5-Room |
$100 |
$100 |
$200 |
HDB Executive |
$90 |
$90 |
$180 |
8.2 Discontinuation of Certain Tax Incentives
Tax incentive schemes for Family-owned Investment Holding Company, Overseas Enterprise Incentive (OEI) and Approved Cyber Traders (ACT) Scheme expiring on 31 Mar 2013 and 25 Feb 2013, respectively and will not be renewed.
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- Year of Assessment 2013 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 2013:
Personal Tax,
Partnerships,
Clubs,
Associations and
Management Corporations |
Filing due on 15 April 2013 |
| Corporate Tax |
Filing due on 30 November 2013 |
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