Singapore’s 2018 budget highlights

The focus of finance minister Heng Swee Kiat’s 2018 budget last month was on helping Singaporean employers prepare for future opportunities and challenges brought about by new technologies and an aging population.

As a result, many of the budget’s schemes and proposals were directed towards greater levels of investment in developing the country’s knowledge resources and helping its domestic firms to grow, while also ensuring that the city state remains an attractive destination for foreign investment. Here is an outline of the key measures:

1. Measures to help employers overcome short-term pressures

• Wage Credit Scheme

Because rising wage costs remain a key concern for businesses in Singapore, the Wage Credit Scheme (WCS) will be extended for three more years to 2020 in order to help them cope with short-term cost pressures when hiring local talent.

The WCS, which subsidises wage increases for Singaporean employees up to a gross monthly wage of S$4,000 (US$3,031), will provide 20% of the total during 2018, 15% during 2019 and 10% during 2020. The gradual lowering of the WCS contribution is intended to help employers adapt to its eventual withdrawal. The overall aim of the scheme is to encourage them to share productivity gains with their staff.

• CIT rebate

To help taxpaying companies, and especially small ones, manage immediate cost challenges, the corporate income tax (CIT) rebate will be enhanced and extended.

The rebate will be increased to 40% percent of the amount of tax payable, capped at S$15,000 (US$11,368) for the year of assessment (YA) 2018. The current CIT rebate stands at 20% of tax payable, capped at S$10,000 (US$7,579) for YA 2018.

2. Changes to the Start-Up Tax Exemption scheme

At present, a new company can qualify for the following Start-Up Tax Exemptions (SUTE) in each of the first three YAs, subject to these conditions:

• A 100% exemption on the first S$100,000 (US$75,785) of normal chargeable income; and
• A 50% exemption on the next S$200,000 (US$151,570) of normal chargeable income.

As per the 2018 budget, the tax exemption under the SUTE scheme will be adjusted to become:

• A 75% exemption on the first S$100,000 (US$75,785) of normal chargeable income; and
• A 50% exemption on the next S$100,000 (US$75,785) of normal chargeable income.

All other scheme conditions remain unchanged. The amendment will take effect on or after YA 2020 for all companies that qualify.

3. Changes to the Partial Tax Exemption scheme

All organisations, except SUTE beneficiaries, currently qualify for the following Partial Tax Exemptions (PTE) in each YA:

• A 75% exemption on the first S$10,000 (US$7579) of normal chargeable income; and
• A 50% exemption on the next S$290,000 (US$219777) of normal chargeable income.

Tax exemptions under the PTE scheme will be adjusted to become:

• A 75% exemption on the first S$10,000 (US$7,579) of normal chargeable income; and
• A 50% exemption on the next S$190,000 (US$143,992) of normal chargeable income.

This change will take effect for all employers on or after YA 2020, with the exception of those qualifying for the SUTE scheme. All other scheme conditions remain unchanged.

4. Measures to foster productivity, technology, and innovation

• Enhanced tax deductions for qualifying R&D, IP and licensing costs

To encourage innovation, tax deductions have been raised for qualifying expenses incurred during research & development projects from 150% to 250% from YA 2019 to 2025. Similarly, tax deductions for intellectual property (IP) registration fees have increased from 100% to 200% for the first S$100,000 (US$75,785) of qualifying IP registration and IP in-licensing costs incurred for each YA. The change will take effect from YA 2019 and last until 2025.

• Tech Skills Accelerator to encourage digital skills

As digital technology continues to gain in importance, the 2018 budget has set aside an additional S$145 million (US$109 million) for the country’s TechSkills Accelerator (TeSA) programme. TeSA aims to equip the Singaporean workforce with digital skills in order to make them more employable in the information and communications technology sector.

• Productivity Solutions Grant

Existing grants that support the adoption of pre-scoped, off-the-shelf technology will be consolidated into a single Productivity Solutions Grant (PSG). As of 1 April 2018, the grant will provide funding for up to 70% of qualifying costs. Employers can apply for it through Singapore’s Business Grants Portal. 

A National Robotics Programme (NRP) was also announced to encourage the wider use of robotics in sectors such as construction. A new National Wide E-Invoicing Framework is intended to improve productivity and enhance cash flow, while an Open Innovation crowd-sourcing Platform should help employers find suitable partners to help them jointly create solutions.

•  Double Tax Deduction for Internationalisation scheme

The Double Tax Deduction for Internationalisation (DTDi)  scheme provides organisations with incentives to expand internationally. Employers are currently entitled to a tax deduction of 200% on qualifying market expansion and investment development expenses, subject to approval. The threshold for qualifying for DTDi without approval will be raised from S$100,000 (US$75,786) to S$150,000 (US$113,678) per YA. 

• Enterprise Singapore

The Enterprise Singapore grant, which is a composite of two existing grants – SPRING Singapore’s Capability Development Grant and IE Singapore’s Global Company Partnership Grant – is intended to provide companies with integrated support to help them compete at both the domestic and international level.

• Enterprise Development Grant

The Enterprise Development Grant is designed to fund employers in building up their capabilities and covers up to 70% of qualifying costs from YA 2018 to 2019.

• PACT scheme

An integration of various partnership support measures, the PACT scheme will enable companies to receive up to 70% of qualifying costs if they collaborate with other organisations in areas such as upgrading their capabilities, developing their business and expanding internationally. 

First published on ASEAN Briefing. 

Vasundhara Rastogi, editor of Dezan Shira & Associates.

Since its establishment in 1992, Dezan Shira & Associates has been guiding foreign clients through Asia’s complex regulatory environment and assisting them with all aspects of legal, accounting, tax, internal control, HR, payroll and audit matters. As a full-service consultancy with operational offices across China, Hong Kong, India and ASEAN, we are your reliable partner for business expansion in this region and beyond. For inquiries, please email us at info@dezshira.com. Further information about our firm can be found at: www.dezshira.com.

The focus of finance minister Heng Swee Kiat’s 2018 budget last month was on helping Singaporean employers prepare for future opportunities and challenges brought about by new technologies and an aging population.

As a result, many of the budget’s schemes and proposals were directed towards greater levels of investment in developing the country’s knowledge resources and helping its domestic firms to grow, while also ensuring that the city state remains an attractive destination for foreign investment. Here is an outline of the key measures:

1. Measures to help employers overcome short-term pressures

• Wage Credit Scheme

Because rising wage costs remain a key concern for businesses in Singapore, the Wage Credit Scheme (WCS) will be extended for three more years to 2020 in order to help them cope with short-term cost pressures when hiring local talent.

The WCS, which subsidises wage increases for Singaporean employees up to a gross monthly wage of S$4,000 (US$3,031), will provide 20% of the total during 2018, 15% during 2019 and 10% during 2020. The gradual lowering of the WCS contribution is intended to help employers adapt to its eventual withdrawal. The overall aim of the scheme is to encourage them to share productivity gains with their staff.

• CIT rebate

To help taxpaying companies, and especially small ones, manage immediate cost challenges, the corporate income tax (CIT) rebate will be enhanced and extended.

The rebate will be increased to 40% percent of the amount of tax payable, capped at S$15,000 (US$11,368) for the year of assessment (YA) 2018. The current CIT rebate stands at 20% of tax payable, capped at S$10,000 (US$7,579) for YA 2018.

2. Changes to the Start-Up Tax Exemption scheme

At present, a new company can qualify for the following Start-Up Tax Exemptions (SUTE) in each of the first three YAs, subject to these conditions:

• A 100% exemption on the first S$100,000 (US$75,785) of normal chargeable income; and
• A 50% exemption on the next S$200,000 (US$151,570) of normal chargeable income.

As per the 2018 budget, the tax exemption under the SUTE scheme will be adjusted to become:

• A 75% exemption on the first S$100,000 (US$75,785) of normal chargeable income; and
• A 50% exemption on the next S$100,000 (US$75,785) of normal chargeable income.

All other scheme conditions remain unchanged. The amendment will take effect on or after YA 2020 for all companies that qualify.

3. Changes to the Partial Tax Exemption scheme

All organisations, except SUTE beneficiaries, currently qualify for the following Partial Tax Exemptions (PTE) in each YA:

• A 75% exemption on the first S$10,000 (US$7579) of normal chargeable income; and
• A 50% exemption on the next S$290,000 (US$219777) of normal chargeable income.

Tax exemptions under the PTE scheme will be adjusted to become:

• A 75% exemption on the first S$10,000 (US$7,579) of normal chargeable income; and
• A 50% exemption on the next S$190,000 (US$143,992) of normal chargeable income.

This change will take effect for all employers on or after YA 2020, with the exception of those qualifying for the SUTE scheme. All other scheme conditions remain unchanged.

4. Measures to foster productivity, technology, and innovation

• Enhanced tax deductions for qualifying R&D, IP and licensing costs

To encourage innovation, tax deductions have been raised for qualifying expenses incurred during research & development projects from 150% to 250% from YA 2019 to 2025. Similarly, tax deductions for intellectual property (IP) registration fees have increased from 100% to 200% for the first S$100,000 (US$75,785) of qualifying IP registration and IP in-licensing costs incurred for each YA. The change will take effect from YA 2019 and last until 2025.

• Tech Skills Accelerator to encourage digital skills

As digital technology continues to gain in importance, the 2018 budget has set aside an additional S$145 million (US$109 million) for the country’s TechSkills Accelerator (TeSA) programme. TeSA aims to equip the Singaporean workforce with digital skills in order to make them more employable in the information and communications technology sector.

• Productivity Solutions Grant

Existing grants that support the adoption of pre-scoped, off-the-shelf technology will be consolidated into a single Productivity Solutions Grant (PSG). As of 1 April 2018, the grant will provide funding for up to 70% of qualifying costs. Employers can apply for it through Singapore’s Business Grants Portal. 

A National Robotics Programme (NRP) was also announced to encourage the wider use of robotics in sectors such as construction. A new National Wide E-Invoicing Framework is intended to improve productivity and enhance cash flow, while an Open Innovation crowd-sourcing Platform should help employers find suitable partners to help them jointly create solutions.

•  Double Tax Deduction for Internationalisation scheme

The Double Tax Deduction for Internationalisation (DTDi)  scheme provides organisations with incentives to expand internationally. Employers are currently entitled to a tax deduction of 200% on qualifying market expansion and investment development expenses, subject to approval. The threshold for qualifying for DTDi without approval will be raised from S$100,000 (US$75,786) to S$150,000 (US$113,678) per YA. 

• Enterprise Singapore

The Enterprise Singapore grant, which is a composite of two existing grants – SPRING Singapore’s Capability Development Grant and IE Singapore’s Global Company Partnership Grant – is intended to provide companies with integrated support to help them compete at both the domestic and international level.

• Enterprise Development Grant

The Enterprise Development Grant is designed to fund employers in building up their capabilities and covers up to 70% of qualifying costs from YA 2018 to 2019.

• PACT scheme

An integration of various partnership support measures, the PACT scheme will enable companies to receive up to 70% of qualifying costs if they collaborate with other organisations in areas such as upgrading their capabilities, developing their business and expanding internationally. 

First published on ASEAN Briefing. 

Vasundhara Rastogi, editor of Dezan Shira & Associates.

Since its establishment in 1992, Dezan Shira & Associates has been guiding foreign clients through Asia’s complex regulatory environment and assisting them with all aspects of legal, accounting, tax, internal control, HR, payroll and audit matters. As a full-service consultancy with operational offices across China, Hong Kong, India and ASEAN, we are your reliable partner for business expansion in this region and beyond. For inquiries, please email us at info@dezshira.com. Further information about our firm can be found at: www.dezshira.com.