News - Taxation
Singapore budget 2014 - Overview of Tax Changes (businesses and individuals)
For full details of the Budget Speech, please refer to Singapore Budget website.
| Businesses | |
| Tax Changes | Summary |
| Extension of Productivity and Innovation Credit (PIC) Scheme | The PIC scheme will be extended for three years till YA 2018. For enhanced tax deductions, the expenditure cap of $400,000 per qualifying activity per YA can be combined across YA 2016 to YA 2018 (i.e. $1.2 million per qualifying activity). For PIC cash payout, the expenditure cap of $100,000 per YA for all six qualifying activities cannot be combined across the three YAs, as is the case currently. |
| PIC+ Scheme | The PIC+ Scheme is introduced to provide support to Small and Medium Enterprises (“SMEs”) who are making more substantial investments to transform their businesses. Under the PIC+ scheme, the expenditure cap for qualifying SMEs will be increased from $400,000 to $600,000 per qualifying activity per YA. This means that these SMEs that invest beyond the current combined expenditure cap of $1.2 million for each qualifying activity can claim 400% enhanced tax deduction on an additional $200,000 of qualifying expenditure. PIC+ will take effect for expenditure incurred in YA 2015 to YA2018. The combined expenditure cap will be up to $1.4 million for YA 2015, and up to $1.8 million for YA 2016 to YA 2018. The expenditure cap for PIC cash payout will remain at $100,000 of qualifying expenditure per YA. IRAS will release further details by end Mar 2014. |
| Extending PIC benefits to training of individuals under centralised hiring arrangements | With effect from YA 2014, the PIC scheme will be enhanced to allow businesses to claim PIC benefits on training expenses incurred in respect of individuals hired under centralised hiring arrangements. |
| Refining the three-local-employees condition for PIC cash payout | With effect from YA 2016, businesses applying for PIC cash payout will have to meet the three-local-employees condition for a consecutive period of at least three months prior to claiming the cash payout. |
| Allowing Tax Deferral Option under the PIC Scheme to lapse | As the PIC cash payout serves a similar purpose to help businesses relieve cash-flow concerns, the tax deferral option will lapse with effect from YA 2015. |
| Extending the Research and Development (R&D) Tax Measures | To continue encouraging private R&D and to give certainty to businesses, the additional 50% tax deduction accorded under section 14DA(1) will be extended for ten years till YA 2025. To attract businesses to conduct large R&D projects in Singapore, the further tax deduction accorded under section 14E will be extended for five years till 31 Mar 2020. In line with the above extensions, businesses can continue to claim tax deductions/ allowances on R&D expenditure incurred for R&D in areas unrelated to their existing trade or business as long as the R&D is conducted in Singapore. Businesses can also continue to claim a further deduction of up to 300%, on qualifying R&D expenditure up to $400,000 under the PIC scheme, which has been extended till YA 2018. |
| Extending and Refining the Section 19B Writing Down Allowance (WDA) Scheme | To build Singapore as an IP hub, the Section 19B WDA will be extended for five years till YA 2020. The accelerated WDA for Media and Digital Entertainment (“MDE”) companies will be extended for three years till YA 2018. All other existing conditions of the Section 19B WDA remain unchanged. To provide clarity on the types of items that would not meet the description of “information that has commercial value”, a list will be legislated by end Dec 2014 to expressly exclude the following two categories of information: a) Customer-based intangibles, and b) Documentation of work processes. IRAS will publish the list by Jun instead of Apr 2014 as previously announced, as we are considering more feedback received. Businesses can also continue to claim a further 300% allowance on up to $400,000 of such qualifying costs under the PIC scheme, which has been extended till YA 2018. |
| Extending the Section 14A Tax Deduction Scheme for Registration Costs of Intellectual Property | The 100% tax deduction will be extended for five years till YA 2020. Businesses can also continue to claim a further 300% deduction on up to $400,000 of such qualifying costs under the PIC scheme, which has been extended till YA 2018. |
| Extending and Enhancing the Land Intensification Allowance (LIA) Scheme | The LIA scheme will be extended for five years till 30 Jun 2020. The LIA will be extended to: a) Logistics sector, in recognition of the close nexus between this sector and qualifying activities supported by LIA and b) Businesses carrying out qualifying activities on airport and port land. A new condition requiring existing buildings that have already met or exceeded the GPR benchmark to meet a minimum incremental GPR criterion of 10% will be introduced. This is to encourage businesses, especially those already in the top quartile of the relevant GPR benchmark, to continue intensifying their land use. All other existing conditions of the LIA scheme remain unchanged. The enhancements are effective for LIA approvals granted, and capital expenditure incurred on or after 22 Feb 2014. EDB will release the implementation details by end May 2014. |
| Waiving the Withholding Tax Requirement for Payments made to Branches in Singapore | To reduce compliance costs for businesses, payers will no longer need to withhold tax on sections 12(6) and 12(7) payments made to Permanent Establishments (“PEs”) that are Singapore branches of non-resident companies. These branches in Singapore will continue to be assessed for income tax on such payments that they receive and will be required to declare such payments in their annual tax returns. This change will take effect for all payment obligations that arise on or after 21 Feb 2014. |
| Individuals | ||||||||||
| Tax Changes | Summary | |||||||||
| Enhancing the Parent and Handicapped Parent Reliefs | To provide greater encouragement and recognition to individuals supporting their or their spouse’s parents, grandparents and great-grandparents (collectively referred to as “parents”), the quantum of parent / handicapped parent relief will be increased. Individuals who are staying with these dependants will enjoy a higher relief quantum, as follows:
If more than one claimant is making the claim and the claimants cannot agree on the apportionment ratio, the relief will be apportioned equally among all the claimants. The above changes will take effect from Year of Assessment (YA) 2015. |
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| Enhancing the Handicapped Spouse, Handicapped Sibling and Handicapped Child Reliefs | With effect from YA 2015, Handicapped Spouse Relief will be increased from $3,500 to $5,500. Handicapped Brother/Sister Relief will be increased from $3,500 to $5,500. Handicapped Child Relief will be increased from $5,500 to $7,500. | |||||||||
| Removal of Transfers of Qualifying Deductions and Deficits between Spouses | To simplify the individual income tax system, married couples can no longer transfer qualifying deductions and deficits to each other (including under the loss carry-back scheme) with effect from YA 2016. As a transitional measure, inter-spousal transfers of qualifying deductions and deficits incurred by a married couple in and before YA 2015 will still be allowed up till YA 2017, subject to existing rules. Any unabsorbed trade losses or capital allowances can still be carried forward to future years to be offset against the future income of the taxpayer until the amount is fully utilised, subject to existing rules. Any unutilised donations can also be carried forward to future years to be offset against the future income of the taxpayer, up to a maximum of five years. IRAS will provide more details by end May 2014. |
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| Removal of Section 40 Relief | To further simplify the individual income tax system, the Section 40 Relief will be removed from YA 2016. |