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No changes to the corporate tax rate which remains at 17% (reduced in 2009). Personal tax rates/bands remain unchanged with top marginal rate of 20% for chargeable income above $320,000. See Appendix A for the Personal Tax Rates YA 2010/2011.
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All imported goods are subject to GST, at the point of entry into Singapore , unless relief is granted under the GST (Import Relief) Order or under GST suspension schemes such as the Major Exporter Scheme. Wef 1.10.2010 approved GST- registered businesses can defer the payment of the import GST until the submission of the GST returns for the prescribed accounting period. Customs or excise duties remain payable at the point of importation.
Qualifying conditions for an approved IGDS (Import GST Deferment Scheme) business include : (a) file GST returns on a monthly basis; (b) must be GST-registered for at least 3 years; (c) must be solvent; (d) goods are imported for own business; (e) have an inter-bank GIRO account with IRAS; (f) good internal controls and proper accounting records; (g) good compliance record with Singapore Customs; (h) complete a GST self-review; and (i) such other conditions as the Comptroller may impose (including a letter of guarantee).
As an example, if you import goods on 10 June and GST on the imported goods is S$20,000; (a) a IGDS business will file GST returns on 30 June claiming the input tax of S$20,000 and setting off the S$20,000 due from the Comptroller against the import GST not paid; (b) a non IGDS business will first pay the S$20,000 on 10 June and claim a input tax refund of S$20,000 at the next submission of the GST returns.
A IGDS status is valid for 3 years and may be renewed for a further 3 years. Once IGDS status is granted, any other prior approved GST status relating to imports (such as MES) will be terminated. The IGDS may be revoked at any time if any of the conditions attached are breached. You can use your IGDS status to (a) import your own goods for your business; and (b) import goods of an overseas principal as a section 33(2) or section 33(A) agent.
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A New Mergers & Acquisition tax allowance for qualifying M & A deals executed from 1 April 2010 to 31 March 2015 (both dates inclusive). The tax allowance will be written down equally over 5 years – the quantum is computed at 5% of “the value of the acquisition”. The allowance is subject to an annual cap of S$5 million of total allowances granted for all “qualifying deals” executed for each Year of Assessment.
Stamp duty will be remitted on the transfer of unlisted shares for all “qualifying M & A deals”, the stamp duty remission is capped at S$200,000 a year (the transfer of listed shares does not attract stamp duty as it does not require a share transfer document). IRAS will release details by June 2010. IRAS will refund stamp duty paid on qualifying M & A deals, executed on or after 1 April 2010 but before IRAS finalise the rules.
Important clarifications are needed before taxpayers act on this incentive. Clients can access our detailed analysis at Appendix B.
Tax framework for corporate amalgamations : S.34C of the ITA was enacted to give effect to the 2009 budget proposals on a new tax framework aimed at minimizing the tax consequences of SVAs. A very brief summary of the tax proposals :
(a) Unlike the sale of assets or shares to an acquiring company, a SVA will not result in possible taxable gains on the disposal of assets and shares from the amalgamating companies to the amalgamated company. There will be no taxable gains in a SVA as on the date of the amalgamation, the amalgamated company would be treated as “stepping into the shoes” of the amalgamating companies and carrying on or continuing their businesses without any actual or legal interruption.
(b) Unabsorbed tax losses in the amalgamating companies cannot be transferred across or between separate and different legal entities, under the ITA and are strictly disregarded. Under the new tax framework, the utilization of the unabsorbed tax losses of the amalgamating companies in a SVA will be allowed to the amalgamated company subject to conditions.
(c) Tax incentives granted to an amalgamating company, strictly speaking, cannot be transferred to another legal entity. However the amalgamating company can, prior to the SVA, make an application to the regulatory agency for the incentive to be transferred to the amalgamated company.
(d) The amalgamated company will have to assume the rights and obligations, and meet all liabilities under the ITA, of all of the amalgamating companies which have ceased to exist under the SVA, for all the years of assessments as if the amalgamated company is the amalgamating company.
(f) The new tax framework also clarified and set out rules on other tax issues such as compliance with FRS 39 and FRS 103, reclassifications of assets; transfer of retained earnings from overseas accounts, specific tax deductions, interest restrictions, election under s.24 for the transfer of qualifying assets at tax written values, group loss reliefs, carry back of unused capital allowances and tax losses, pioneer and other tax reliefs,, research and development allowances, foreign exchange gains and losses, stamp duty reliefs on asset transfers, incurring GST on asset transfers, etc.
The new s.34C tax framework will apply to qualifying SVAs taking place on or after 22.1.2009. The amalgamated company has to elect within 90 days from the date of the amalgamation, to apply s.34C. Election is in writing and is irrevocable.
Clients can access our detailed analysis at Appendix C.
Temporary tax concessions applicable to YA 2011 enacted in the 2009 budget : (a) business can claim accelerated capital allowances on plant and machinery within 2 years (instead of the current 3 years), with 75% of the capital allowances claimable in the 1 st year. (b) businesses that incur qualifying renovation expenses can deduct these expenses in 1 year instead of the current 3 years. Tax deductible amount is still capped at S$150,000 for every 3 years.
A new broad-based Productivity and Innovation Credit effective from YA 2011 to 2015 is introduced to provide significant tax deductions in six activities :
(a) R & D done in Singapore [two existing R & D incentives will be phased out, R & D tax allowance (RDA) and R & D initiative for start-up enterprises (RISE)];
(b) investments in design done in Singapore [more details will be released by DesignSingapore Council in May 2010];
(c) acquisition of IP rights [the taxpayer must own the legal and economic rights of the IP];
(d) registration of IP rights;
(e) investment in automation [qualifying investments will be based on the “Income Tax Automation Equipment Rules 2004” which will be expanded to include a wider range of equipment and software for automating processes]; and
(f) training [external training and WDA-certified in-house training].
The tax allowance, for the six activities, is computed at 250% for the first S$300,000 qualifying expenditure and 100% (R & D 150%) tax deduction for balance over S$300,000, for each year of assessment. Businesses (must have at least 3 local employees) can convert up to S$300,000 of the tax allowance, for each YA, into a cash benefit at the rate of 7%, or S$21,000 non-taxable cash grant. IRAS will release details of the Productivity and Innovation Credit in June 2010.
Currently ship brokers and Forward Freight Agreement (“FFA”) traders are taxed at the prevailing corporate tax rate (17%). A new incentive will offer a concessionary tax rate of 10%, subject to conditions, for qualifying companies solely carrying out ship-broking and/or FFA trading activities in Singapore . The incentive is awarded for 5 years. Taxpayers can apply to MPA for this incentive, from 1 April 2010 to 31 March 2015. MPA will release details by end March 2010.
Currently ship management fees derived from rendering ship management services to related Special Purpose Vehicles (SPVs) are taxed at the prevailing corporate tax rate (17%). Wef 22.2.2010 ship management fees from ship management services to related qualifying SPVs will be tax exempt under s.13A of the ITA and under the Approved International Shipping Enterprise (“AIS”) scheme, subject to conditions. MPA will release details by end March 2010.
The Maritime Finance Incentive (“MFII”) will be extended from 28.2.2011 to 31.3.2016. An approved MFI enjoys either tax exemption or a concessionary tax rate (10% or 5%) on qualifying income. The MFI is now awarded for not more than 5 years. Taxpayers can apply for the MFI from 1.3.2011 to 31.3.2016.
An approved angel investor can now enjoy tax deduction for his investment in “qualifying investments in qualifying start-ups”. This is a significant concession since tax deduction is currently not allowed for the cost of investments as it is a capital expenditure. An eligible angel investor who invests a minimum of S$100,000 in a start-up in a given year can claim 50% tax deduction on his investment at the end of a two-year holding period. The tax deduction is capped at S$500,000 of qualifying investments for each YA. The incentive is valid 1 March 2010 to 31 March 2015 (both dates inclusive). SPRING Singapore will give details by June 2010.
Currently Industrial building allowances (IBA) is granted to a person who has incurred capital expenditure to construct or purchase an industrial building for use in the qualifying trades specified under s.18(1) of the ITA. IBA will be phased out wef 22.2.2010. Qualifying capital expenditures incurred on or before 22.2.2010 will continue to qualify for IBA subject to existing IBA rules, until the qualifying expenditure is fully written down, or the industrial building is disposed of, demolished or otherwise cease altogether to be used. Although IBA will not be granted after 22.2.2010, transitional provisions apply to contractual commitments made on or before 22.2.2010.
A new Land Intensification Allowance (LIA) incentive effective 1 July 2010 will replace the IBA. Businesses qualifying for the LIA will be granted initial allowance of 25% and annual allowance of 5% on qualifying capital expenditures (over 15 years). The user of the building should be in nine industry sectors – pharmaceuticals, petrochemicals, petroleum, specialities, other chemicals, semiconductor-wafer fabrication, aerospace, marine and offshore engineering and solar cell manufacturing. The LIA will be available for 5 years and will be administered by the EDB. EDB and JTC will release details by June 2010.
Wef 1.1.2011 GST rules on the time of supply will be simplified at the earlier of (a) when a tax invoice is issued; and (b) when payment is received. However the date when goods are delivered, made available, or services performed will still be retained as a reference point in some circumstances, such as GST registration and deregistration. IRAS will release details by May 2010.
Approved law practices will enjoy a 10% concessionary tax on incremental income from qualifying international legal services for 5 years, under the Development and Expansion incentive (DEI). The incentive is valid 1 April 2010 to 31 March 2015 (both dates inclusive).
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Wef 1.1.2011 the Financial Sector Incentive (FSI) will be enhanced; the list of qualifying activities will be updated and the Qualifying Base will be removed. The Monetary Authority of Singapore (MAS) will release details by April 2010.
MAS has issued a revised circular on the tax exemption scheme for qualifying Family-owned Investment Holding Companies (“FIHC”). A FIHC grants tax exemption to all foreign-sourced income, specified Singapore-sourced investment income derived from financial instruments, and income from a locally-administered trust; these tax exemptions are currently available to individuals. Conditions apply.
Established 1984 