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Singapore Budget 2015 Synopsis

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Introduction Future-proofingSingapore 3

Business tax Corporate income tax rate and rebate 7

TheInternationalGrowthScheme 9

Extending and enhancing the M&A scheme 10

ExtendingthetaxconcessionsforlistedREITs 13

Extending and enhancing the 250% tax deduction 15 for donations

ExtendingandenhancingtheMaritimeSectorIncentive 16

ExtendingandenhancingtheAngelInvestorsTax 19 Deduction scheme

Extending the Investment Allowance – 20 EnergyEfficiencyschemes

Extending the Development and Expansion Incentive 21 forInternationalLegalServicesscheme

Enhancing the Double Tax Deduction for 22 Internationalisation scheme

Withdrawing the concessionary tax rate on income 24 derived from offshore leasing of machinery and plant undersection43IoftheITA

Withdrawing the Approved Headquarters incentive 25 undersection43EoftheITA

Withdrawing the tax concession on royalties and 27 other payments from approved intellectual property or innovation

Allowing the PIC Bonus to lapse 28

IntroducingareviewdatefortheApprovedForeign 29 Loan incentive

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1Singapore Budget 2015 Synopsis

Financial services Extendingthetaxdeductionsforcollectiveimpairment 31

provisionsmadeundertheMASNotices

Extendingandrefiningthetaxincentiveschemefor 32 insurance businesses

Refiningthetaxincentivesforventurecapitalfunds 33 and venture capital fund management companies

ImprovingtheEnhanced-TierFundtaxincentivescheme 34

Personal income tax

Personalincometaxrateandrebate 37

CPFandSupplementaryRetirementSchemechanges 41

Simplifiedclaimforrentalexpenses 43

Goods and services tax

ExtendingandenhancingtheGSTremissionforlisted 45 REITs, and listed Registered Business Trusts carrying on qualifying businesses

Simplifyingpre-registrationGSTrulesfor 46 GST-registeredbusinesses

Miscellaneous

Enhancing support for innovation and internationalisation 50

Changes to vehicle taxes and petrol duties 52

Recalibratingforeignworkerlevies 53

ExtensionoftheWageCreditScheme 54

Extension and enhancement of the Temporary 55 Employment Credit

EnhancementoftheSpecialEmploymentCredit 55

Tax partners and directors 56

Tax services in Singapore 58

Glossary of terms 60

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Singapore Budget 2015 Synopsis2

IntroductionFuture-proofing Singapore

“The future depends on what you do today,” said Mahatma Gandhi.

In this year’s Budget announcement, the Government pressed on with a consistent purpose:theeconomictransformationthatSingaporehasembarkedonseveralyearsago must continue relentlessly so as to future-proof the country for a better tomorrow. To secure a distinctive place in the global economy means we must deepen our skills and capabilities, make innovation pervasive, and strengthen the economic and social infrastructure of the country.

Ithasnotbeen,andwillnotbe,easy.Singapore’squestforproductivitygrowth,underpinnedbymanybroad-basedmeasuresinrecentyears,hasnotyieldedsignificantproductivity growth overall. This signals that measures with good intent and purpose must be changed if they do not deliver the intended results. This Budget seeks to do just that – the schemes, both existing and new ones, are more targeted, and there is a conscious effort to make them accessible.

TheSMEsector,whichcontributesmorethan50%ofeconomicoutputand70%ofemployment,isthebackboneofSingapore’seconomy.Growingthenationwillnecessarilymeangivinghomegrownenterprisesalift.ItisnotsurprisingthatSMEs areoneofthemainbeneficiariesofthisBudget.

For one, the Capability Development Grant scheme will be extended, and more importantly,theschemewillbemademoreaccessiblewithasimplifiedapplicationprocess. Other funding schemes such as the venture debt risk-sharing programme, have been introduced to further reduce the funding gaps for innovative start-ups. With the strongfundingsupportnowavailabletoSMEs,itistimeforourlocalplayerstothinkandact bigger and bolder.

ThisalsomeansthatSMEsshouldhavethecourageandappetiteforscalingupandmovebeyondthecomfortofourshores.AdditionalsupportfromIESingaporethroughitsgrantschemes and Double Tax Deduction for Internationalisation scheme will help to this end.


The usual lament by homegrown enterprises is that our tax incentive programmes oftenleantowardsbenefitingtheMNCs.TheintroductionofanewInternationalGrowthSchemeisawelcomedmovetoaddressthisperceivedgap.Homegrownenterprises can now expand overseas and enjoy a 10% concessionary tax rate on their incremental income from qualifying activities, while retaining key business activities andheadquarterfunctionsinSingapore.

Our peopleStrengtheninghomegrownenterprisesmustgohand-in-glovewiththeupskillingofourpopulation.TheSkillsFutureinitiativesareinnovative.SkillsFutureempowerseverySingaporeantotakechargeofhiscareerandlifelonglearning.

It is hoped that trade organisations and industry bodies will make use of the SkillsFutureCredittooffertargetedtrainingtomeettheneedsofthebusinesssector.

“ To secure a distinctive place in the global economy means we must deepen our skills and capabilities, make innovation pervasive, and strengthen the economic and social infrastructure of the country.”


A fair and just societyThisyear,theSilverSupportScheme,whichcomplementstheexistingWorkfare,hasbeenintroducedtoprovideincomesupplementforthebottom20%to30%ofseniorSingaporeansduringtheirretirement.

HasSingaporeleanedtowardsbeingawelfarestate?Clearlyit’saboutstrikingafairbalance and in my mind, this social security support is crucial to ensuring social cohesiveness. Fortunately, the foundation for our social security network remains that of family and community support. Hopefully, with higher incomes coming from continuing education and training and greater retirement savings through our enhancedCPFscheme,everySingaporeancanbeself-reliantinthefuture.

Withincreasedsocialspending,theMinisterexpectsthatSingaporewillseeatighterbudget position in the coming years. For now, the Government is tapping on past budgetsurplusesandthe“redefined”netinvestmentincome,andraisingpetrolduties.

What has perhaps come as a surprise is the increase in the top marginal personal income tax rate from 20% to 22%, plus the tweaking of the tax rate structure that affectsthetop5%ofourincomeearners,tostrengthenSingapore’srevenueposition.While it cannot be said that this action is unexpected, this early announcement certainlydemonstratesourGovernment’sconfidencethatthismeasurewillnotsignificantlydentSingapore’scompetitiveness.

The Minister for Finance has indicated that the revenue measures that have been put in placewillbesufficientfortheincreasedplanningneedsuntiltheendofthedecade.PerhapswemightnotseeaGSTrateincreaseuntiltheendof2020?

ConclusionThis is one of the most holistic and comprehensive budgets seen. It has touched on every aspect of life that matters, from support for lifelong learning to sharper initiatives to help companies to continue to raise productivity, innovation and internationalise. It is laudable that there is a shift in policy-making towards a more pointed and targeted approach,andsimplifyingourtaxregimeandmakingschemesmoreSME-friendly.

ThisBudgetsteersSingaporeintherightdirection.IncelebratingSingapore’sJubileethisyear,let’scontinuetoact,believeinandplanforthe“SingaporeDream”.

Happy50thbirthday,Singapore!

Chung-Sim Siew Moon Partner and Head of Tax 23February2015


Business tax Singapore Budget 2015 Synopsis6

Business tax

CurrentThe corporate income tax rate is 17% with a partial tax exemption for normal chargeable income of up to S$300,000asfollows:

► 75%exemptionofuptothefirstS$10,000

► 50%exemptionofuptothenextS$290,000

Torelievebusinesscosts,a30%corporateincometaxrebatecappedatS$30,000perYAwasgrantedtocompaniesforthreeyearsfromYA2013toYA2015aspartoftheTransitionSupportPackageannouncedinBudget2013.

ProposedThe Minister did not propose any change to the corporate income tax rate and the partial tax exemption threshold remains as before.

Giventhatbusinesseswillcontinuetofacecostpressuresinthisperiodofrestructuring,the30%corporateincometaxrebatewillbeprovidedforanothertwoYAs(YA2016andYA2017),withareducedcapofS$20,000percompanyperYA.

Points of view ► Thecorporateincometaxratehasremainedat17%sinceYA2010.At17%,Singapore’sheadline

corporate income tax rate continues to be one of the lowest in the world. This rate is only 0.5 percentage pointshigherthanthecurrentHongKongcorporateincometaxrateof16.5%.

► TheeffectivetaxrateofacompanyinSingaporewithS$500,000ofnormalchargeableincomewillbeonly11.8%.Itisfurtherreducedto8.27%ifwefactorinthecorporateincometaxrebateforYA2016andYA2017.Thisisnotablylowerthantheexistingtaxrateof16.5%inHongKong.Acompany’seffectivetaxrateinSingaporemaybereducedstillfurtherbysubstantivetaxincentivesincludingthePIC scheme.

► The top marginal personal income tax rate will be increased from the current 20% to 22% with effect fromYA2017.Basedonthecurrentcorporateincometaxrateof17%,thedifferencebetweenthecorporate income tax rate and the top marginal personal income tax rate will widen to 5%. Clearly, self-employed individuals, depending on their level of income, should give due consideration to corporatising their businesses in view of the lower corporate income tax rate and partial tax exemption. The additional costs of operating a company, e.g., audit and secretarial fees, will have to be taken into account before such a decision is made.

Corporate income tax rate and rebate


Business tax

► TheIRAShasclarifiedthat:

► The corporate income tax rebate will be given to all companies including registered business trusts, non-resident companies and companies that receive income taxed at a concessionary tax rate. The rebate, however, will not apply to the income derived by a non-resident company that is subject toafinalWHT.

► Companiesneednotfactorinthecorporateincometaxrebatewhenfilingtheirestimated chargeableincomeandFormC/C-SastheIRASwillcomputeandallowthecorporateincometaxrebate automatically.

► Forcompaniesthathavealreadyreceivedtheirnoticesofassessment(NOA)forYA2016wherethecorporateincometaxrebatewasnotgiven,IRASwillre-computetheassessmenttoallowthecorporateincometaxrebate.TherevisedNOAsincorporatingthecorporateincometaxrebate will be sent to affected companies by May 2015.

► Thecorporateincometaxrebatewillprovidesomereliefforcompanies,althoughitwillonlybenefitcompanies that are tax paying since it is computed on tax payable.

► Companies may consider deferring capital allowances claims or planning their group loss relief claims to optimise the amount of corporate income tax rebate.

8 Singapore Budget 2015 Synopsis

Business tax

ProposedToprovidegreaterandmoretargetedsupportforlargerSingaporecompaniesintheirinternationalisationefforts,anewInternationalGrowthScheme(IGS)willbeintroducedtosupporthighpotentialcompaniesintheirgrowthoverseas,whiletheycontinuetoanchortheirkeyfunctionsinSingapore.

UndertheIGS,qualifyingSingaporecompanieswillenjoyaconcessionarytaxrateof10%foraperiodnotexceedingfiveyearsontheirincrementalincomefromqualifyingactivities1.ThequalifyingSingaporecompanies will be expected to engage in internationalisation activities and provide opportunities for Singaporeanstogaingreaterinternationalexposure.

ThenewschemewillbeadministeredbyIESingapore.

Theapprovalwindowforthenewschemewillbefrom1April2015to31March2020.

FurtherdetailswillbereleasedbyIESingaporebyMay2015.

Points of view ► TheIGSwillbewelcomedbythelargerSingaporecompanieswhichareactivelyconsideringbusinessexpansionbeyondtheshoresofSingapore.Thetaxsavingsfromtheconcessionarytaxrateshouldbehelpful towards supporting these companies’ internationalisation efforts.

► Thefruitsfrominternationalisationeffortstypicallytaketimetomanifestgiventhesignificantsetupcostsanduncertaintiesinnewmarkets.Therefore,afive-yearincentiveperiodfortheIGSmaybetooshortforqualifyingSingaporecompaniestoeffectivelybenefitfromtheschemeastheymaygeneratelossesfromthe internationalisation efforts during the initial years.

► AstheintentoftheincentiveistosupportlargerSingaporecompaniesintheirinternationalisationefforts,itispossiblethattheconditionsfortheIGSwillincludeoverseasexpansionmilestonessuchasnumberofnewmarketspenetratedorpotentiallythenumberofSingaporeansbasedoverseas.ToensurethatthecompanywillalsobegrowingitsSingaporepresencetosupporttheinternationalexpansion,IESingaporemayalsoimposeSingapore-centricconditionssuchasnumberofheadquarteractivitiesperformedinSingapore,incrementalheadcountemploymentinSingaporeandlocalbusinessspending.

► While the incentive conditions are necessary to monitor the progress of the companies in achieving their goals and the effectiveness of the incentive scheme, it is important to ensure that the incentive conditions are not overly prescriptive and beyond the control of the company e.g., sales/revenue target conditions which can be cyclical in nature.

► Traditionally, most tax incentives do not incentivise income from transactions with domestic customers soastoprovidealevelplayingfieldforallcompaniesinSingapore.ItisunclearifthisprinciplewillbesimilarlyappliedundertheIGS.

► ItisalsonotcleariftheIGSwillbesufficientlyflexibletocovervariousdifferenttypesofincomesuchas sales, royalties, commissions etc. The ability to do so will ensure that it caters to the various different business models adopted by companies.

The International Growth Scheme

1 This refers to income in excess of the company’s average of the last three years’ income from the relevant qualifying activities suchasheadquarterfunctionsandspecificbusinesslines.


Business tax

CurrentThe M&A scheme was introduced in 2010 to encourage companies to consider M&A as a strategy for growth and internationalisation. It is available for qualifying M&A executed from 1 April 2010 to 31March2015.

a) Tax benefits under the M&A scheme

► AnM&Aallowancebasedon5%ofthevalueofthequalifyingacquisition,subjecttoacapofS$100monthevalueofqualifyingacquisitionsperYA.Theallowanceiswrittendownoverfiveyears.

► Stampdutyreliefonthetransferofunlistedshares,cappedatS$100mofqualifyingM&Adeals.ThisworksouttoacapofS$200,000ofstampdutyperFY.

b) Shareholding eligibility tiers under the M&A scheme

Currently, the acquiring company must acquire ordinary shares in a target company, whether directly or indirectly1, that results in the acquiring company holding:

► More than 50% ordinary shareholding in the target company (if the acquiring company’s original shareholding in the target company was 50% or less)

Or

► At least 75% ordinary shareholding (if the acquiring company’s original shareholding was more than 50% but less than 75%).

c) “12-month look-back period” for step acquisitions that straddle across FYs

An acquiring company can also elect for its ordinary share acquisitions in a target company made during a12-monthperiodtobeconsolidatedtoqualifyfortheM&Ataxbenefits.The12-monthperiodmustend on the share acquisition date on which the 50% or 75% shareholding threshold is met, or the date of a subsequent acquisition that is conducted within the same basis period. This is commonly known as the “12-month look-back period”.

Extending and enhancing the M&A scheme

1 An acquiring subsidiary must be set up for the purposes of holding shares and not carry on a trade or business.


Business tax

ProposedTofurthersupportcompanies,especiallySMEs,togrowviastrategicacquisitions,theschemewillbeextendedtill31March2020withthechangesbelow.

a) Revised tax benefits under the M&A scheme

► The M&A allowance rate will be increased to 25%.

► ThecaponthevalueofqualifyingacquisitionsfortheM&AallowanceperYAwillberevisedtoS$20m.

► StampdutyreliefonthetransferofunlistedshareswillcorrespondinglybecappedatS$20monthevalueofqualifyingM&Adeals,whichworksouttoacapofS$40,000ofstampdutyperFY.

b) Revised shareholding eligibility tiers

► The acquiring company must acquire ordinary shares in a target company, whether directly or indirectly, that results in the acquiring company holding:

► At least 20% ordinary shareholding in the target company (if the acquiring company’s original shareholding in the target company was less than 20%), subject to conditions

Or

► More than 50% ordinary shareholding in the target company (if the acquiring company’s original shareholding in the target company was 50% or less) (status quo).

► The existing 75% shareholding eligibility tier will be removed. Acquisitions of ordinary shares that result in the acquiring company owning at least 75% ordinary shareholding (if the acquiring company’s original shareholdingwasmorethan50%butlessthan75%atthebeginningofthebasisperiodforaYAorFY)will no longer qualify under the M&A scheme.

c) “12-month look-back period” for step acquisitions that straddle across FYs

► The 12-month look-back period will be removed to simplify the scheme.

The above changes will take effect for qualifying acquisitions made from 1 April 2015.

TheIRASwillreleasemoredetailsbyMay2015includingdetailsofrelevanttransitionalarrangementsarising from the above changes.


Business tax

Points of view ► TheextensionoftheM&AschemeforanotherfiveyearsisinlinewiththeGovernment’sinitiativestoencourageSMEstoexpandandconsiderstrategicacquisitions.

► TheM&Aallowancerateisincreasedsignificantlyfrom5%to25%,butcorrespondingly,thereisareductioninthecaponthedollarvalueofqualifyingacquisitionsfromS$100mtoS$20m.AlthoughthemaximumM&AallowanceremainsatS$5m(i.e.,5%XS$100munderthecurrentschemeand25%XS$20mundertheproposedchange),itisclearthatthisrefinementistargetedtoespeciallybenefitSMEswhich typically make smaller acquisitions.

Forexample,anSMEthatmakesanacquisitionofS$10mwillbeabletoclaimM&AallowanceofS$2.5mundertheproposedchangecomparedwithonlyS$0.5mundertheexistingscheme.

► UndertheproposedrevisedM&Ascheme,companieswillbeabletoclaimM&Abenefitsforacquisitionsresulting in at least 20% shareholding in the target company, down from the current threshold of 50% shareholding.Again,thisistargetedatbenefitingSMEs,whichmaynotbeabletoacquirelargestakes in their expansion strategies.

► TheIRAShasfurtherclarifiedthatcompaniesthatwishtoclaimM&Aallowancebasedonthe20%shareholding threshold will need to meet additional conditions as follows:

► The acquiring company must also have:

(i) At least 1 director represented on the Board of Directors of the target company

and

(ii) Acquired a shareholding of at least 20% in the target company and that the target company is consideredanassociateoftheacquiringcompanyunderSingaporeFRS28orSingaporeFRS forSmallCompanies.

► ►Theremovaloftheexisting75%shareholdingeligibletierundertheproposedrevisedM&Aschememeans that an acquiring company (with original shareholding of more than 50% but less than 75% in target company) which plans to increase its shareholding stake to 75% or more will no longer be able to benefitfromtheM&Aschemefrom1April2015onwards.Hence,suchanacquiringcompanyshouldtargettocompleteaplannedacquisitionby31March2015.

► Similarly,companiesplanningtoconsolidateanacquisitionunderthe12-monthlook-backperiodtoqualifyfortheM&Aschemeshoulddosoby31March2015.

► Going forward, where a company (with original shareholding of less than 20% in target company) plans to acquire a large stake of more than 50% (say 100%) in the target company over two or more separate transactions,carefulconsiderationisrequiredinordertofullybenefitfromtheM&Ascheme.

► Any unabsorbed M&A allowance is currently not available for transfer to other companies under the groupreliefsystem.ThislimitsthebenefitoftheM&Aallowanceiftheacquiringcompanydoesnothavesufficienttaxableincome.


Business tax

CurrentREITslistedontheSGXenjoythefollowingincometaxandstampdutyconcessions,whicharescheduled tolapseon31March2015:

► Concessionary income tax rate of 10% on distributions of taxable income to non-tax resident non-individual investors.

► Tax exemption on qualifying foreign-sourced income (i.e., foreign-sourced dividend income, interest income,trustdistributionsandbranchprofits)derivedinrespectofoverseasproperties,whichisalsoenjoyedbywholly-ownedSingaporetaxresidentsubsidiarycompaniesoflistedREITs.Thistaxexemption is subject to the satisfaction of certain conditions, including the conditions that the overseas propertyisacquiredbythetrusteeofthelistedREIToritswholly-ownedSingaporetaxresidentsubsidiarycompanyonorbefore31March2015andcontinuestobebeneficiallyownedbythetrusteeofthelistedREIToritswholly-ownedSingaporetaxresidentsubsidiarycompanyafter31March2015.

► StampdutyremissiononthetransferofaSingaporeimmovablepropertytoaREIT.

► Stampdutyremissiononthetransferof100%oftheissuedsharecapitalofaSingapore-incorporatedcompanythatholdsimmovablepropertiessituatedoutsideSingaporetotheREIT.

ProposedTocontinuetopromotethelistingofREITsinSingaporeandstrengthenSingapore’spositionasaREITs hub in Asia, the package of tax concessions for REITs has been reviewed to ensure that it remains competitive to support the growth of the industry.

TheincometaxconcessionforREITswillbeextendedforfiveyearsuntil31March2020.Withthisextension:

► The concessionary income tax rate of 10% on distributions of taxable income by listed REITs to non-tax resident non-individual investors will continue to apply to distributions made from 1 April 2015 to 31March2020(bothdatesinclusive).

► The tax exemption on qualifying foreign-sourced income will apply so long as the overseas property is acquiredbytheREIToritswholly-ownedSingaporetaxresidentsubsidiarycompanyonorbefore 31March2020.

The stamp duty remissions were intended to enable the industry to acquire a critical mass of local assets, as a base from which the REITs can expand abroad. As this has been achieved, the remissions will be allowedtolapseafter31March2015.

Allotherconditionsremainthesame.TheMASwillreleasefurtherdetailsbyMay2015.

Extending the tax concessions for listed REITs


Business tax

Points of view ► The extension of the income tax concessions, i.e., the 10% concessionary tax rate and the tax exemption onqualifyingforeign-sourcedincome(seealsothesectionon“ExtendingandenhancingtheGSTremission for listed REITs, and listed RBTs carrying on qualifying businesses”) was very much anticipated by the REITs industry and the market.

► The extension of the 10% concessionary tax rate for non-tax resident non-individual investors will help to preserve the attractiveness of REITs as a good investment asset class for this important group of investors.TheextensionwillenableacontinuedinflowofforeigncapitaltosupportthegrowthoftheSingaporeREITsindustry.

► It is also encouraging to see the tax exemption on qualifying foreign-sourced income being extended up to31March2020.Thiswillmakeiteasierforcross-borderREITsalreadylistedontheSGXtogrowtheirportfolioofoverseaspropertiesandencouragethelistingofmorecross-borderREITsontheSGX.

► ThestampdutyremissiononthetransferofSingaporepropertieshasfacilitatedthelistingofSingapore-focusedREITsandhelpsuchREITstogrowtheirportfolioofSingaporeproperties.Thediscontinuanceofthisremissionmeansanadditionalcostofapproximately3%fortheacquisitionofSingaporeproperties;an additional cost that sponsors or sellers and the REITs would have to reckon with and manage. Sponsors,sellersandREITsmayneedtoconsiderotheracquisitionoptions.

► ThediscontinuanceofthestampdutyremissionfortransferofsharesinSingaporecompaniesthathold,directlyorindirectly,overseaspropertiesmeansthatSingapore-listedREITs(orREITsintendingtolistontheSGX)withanoverseasfocuswouldhavetopaymoreattentioninthemannerinwhichtheystructuretheir overseas acquisitions as otherwise, they may have to incur an additional stamp duty cost of 0.2%.

► Withthediscontinuanceofthestampdutyremissions,REITsshouldbeputonalevelplayingfieldwith other type of entities. It may be time to consider expanding the scope of the stamp duty relief for transfer of assets between associated permitted entities to include REITs.


Business tax

CurrentDonors are eligible for a 250% tax deduction for qualifying donations made to Institutions of a Public Character (IPCs) and other qualifying recipients (such as approved museums and prescribed educational institutions)from1January2009to31December2015.

ProposedTobuildastrongercultureofgivingandaspartoftheSG50jubileecelebration,thetaxdeductionratefor qualifying donations made to IPCs and other qualifying recipients in 2015 will be increased from the current250%to300%.

Thetaxdeductionwillrevertto250%forqualifyingdonationsmadefrom1January2016to31December2018 to IPCs and other qualifying recipients.

Points of view ► TheGovernmentisgenerousingivinga300%taxdeductionduringourjubileeyear.Theenhanced300%

tax deduction will result in an effective tax saving of 51% of the value of the qualifying donation made by acorporatedonorwhichistaxableattherateof17%.Thatis,foreveryS$100donatedbyacorporatedonor,thedonorwillenjoyareductionintaxofS$51,resultinginapost-taxcostofS$49tothedonor.

► Thetaxdeductionwillrevertto250%forqualifyingdonationsmadeafter31December2015.Hence,companieswithnon-Decemberfinancialyear-endswillneedtotracktheactualdatethequalifyingdonations were made.

► Unutiliseddonationscanonlybecarriedforwardforfiveyears.Assuch,corporatedonorswhicharenotgeneratingsufficienttaxableprofitsin2015orinthenearfuturemayormaynotbeabletoenjoytheenhanced tax deduction since carried forward capital allowances and tax losses must be set off against futureprofitsbeforecarriedforwarddonationscanbeutilised.

► Unutilised qualifying donations are also not allowed to be carried back under the loss carry-back relief scheme. They are however eligible for transfer to members of the same group under the group relief scheme if the conditions for group relief are met.

► The250%taxdeductionwassettoexpireby31December2015.Thethree-yearextensionisanaffirmationthattheenhanceddeductioniseffectiveinencouragingphilanthropyandfosteringthespiritof giving.

Extending and enhancing the 250% tax deduction for donations


Business tax

CurrentUndertheMaritimeSectorIncentive(MSI),shipoperators,maritimelessorsandprovidersofcertainshipping-relatedsupportservicescanenjoythetaxbenefitssummarisedinthetablebelow:

Name of shipping incentive Current treatment

For ship operators

MSI-ShippingEnterprise(SingaporeRegistryofShips)(MSI-SRS)

Tax exemption on qualifying income derived mainly from operating Singapore-flaggedships

MSI-ApprovedInternationalShippingEnterprise(MSI-AIS)award

Tax exemption on qualifying income derived from operating foreign-flaggedships

For maritime lessors

MSI-MaritimeLeasing(Ship) (MSI-ML(Ship))award

Tax exemption on qualifying income derived from leasing ships, and 10% concessionary tax rate on qualifying income derived from managing an approved shipping investment enterprise

MSI-ML(Container)award 10% or 5% concessionary tax rate on qualifying income derived from leasing of qualifying sea containers and intermodal equipment that are incidental to the leasing of qualifying sea containers, and 10% concessionary tax rate on qualifying income derived from managing an approved container investment enterprise

For providers of certain shipping-related support services

MSI-Shipping-relatedSupportServices (MSI-SSS)award

10% concessionary tax rate on incremental qualifying income derived from carrying out approved shipping-related supporting services

Inaddition,automaticWHTexemptionisgrantedonqualifyingpaymentsmadebyqualifyingMSIrecipientstonon-taxresidents(excludingaPEinSingapore)inrespectofqualifyingloansenteredintoonorbefore31May2016tofinancetheconstructionorpurchaseofqualifyingassets(e.g.,ships,containers),subjecttoconditions.

TheapprovalwindowtoawardMSI-AISforqualifyingentryplayers,MSI-ML(Ship),MSI-ML(Container)andMSI-SSSendson31May2016.

Extending and enhancing the Maritime Sector Incentive


Business tax

ProposedTofurtherdevelopSingaporeasaninternationalmaritimecentre,theMSIwillbeenhancedasfollows:

► TheautomaticWHTexemptionregimewillnowcoverfinanceleases,hire-purchasearrangements,andloansusedtofinanceequityinjectionintowholly-ownedSPVsorintercompanyloanstowholly-ownedSPVsfortheSPVs’purchase/constructionofships,containersandintermodalequipment.

► ThedefinitionofqualifyingshipmanagementactivitiesforthepurposeoftheMSI-SRS,MSI-AISawardandMSI-SSSawardwillbeupdatedtokeeppacewithindustrychanges.

► TheMSI-SRSandMSI-AISawardwillnowcovermobilisationfees,demobilisationfees,holdingfees,andincidental container rental income that are derived in the course of qualifying shipping operations.

► QualifyingprofitsremittedfromapprovedforeignbranchesbyMSI-AISentitieswillnowenjoyexemption.

► ExistingMSI-SSSawardrecipientscanrenewtheirawardtenureforanotherfiveyears,subjecttoqualifying conditions and higher economic commitments.

► TheMSI-MLawardwillnowcoverincomederivedfromfinanceleasestreatedassale.

TheenhancementstotheMSIwilltakeeffectforexistingandnewawardrecipientsfrom24February2015.

TheapprovalwindowtoawardMSI-AISforqualifyingentryplayers,MSI-ML(Ship),MSI-ML(Container)andMSI-SSSwillbeextendedtill31May2021.Inaddition,theautomaticWHTexemptionregimewillbeextendedtoqualifyingpaymentsmadeonqualifyingloanstakenonorbefore31May2021.

TheMaritimeandPortAuthorityofSingapore(MPA)willreleasefurtherdetailsbyMay2015.

Points of viewEnhancement of the automatic WHT exemption regime

► ►FinanceleasesandhirepurchasearrangementswerenotcoveredundertheautomaticWHTexemptionor the WHT exemption for charter fee payments prior to the budget announcement. The inclusion of these arrangements under the automatic WHT exemption regime is therefore a welcome move.

► Loansforthepurchaseof100%ofthesharesofanSPVthathas100%ownershipofashipregisteredasaSingaporeorforeignflaggedshipalreadyqualifyundertheautomaticWHTexemptionregime.Theproposalistoextendtheexemptionfurthertoincludeloanstofinanceequityinjectionintowholly-ownedSPVsorintercompanyloanstowholly-ownedSPVsfortheSPVs’purchaseorconstructionofships, containers and intermodal equipment.

► Applicants are required to submit a self-declaration form to the MPA for each loan obtained to enjoy the WHT exemption. The exemption will be automatically granted based on representations made and the information provided in the form. The onus is on the applicant to ensure that all the conditions are met before claiming the WHT exemption.


Business tax

► The enhanced exemption is likely to apply to payments which are due and payable on or after 24 February 2015.

Update of definition of qualifying ship management activities

► Qualifyingshipmanagementactivitiesisdefinedinsection13A(16)oftheITAandbroadlycoversstrategic,commercialandtechnicalmanagement.Itwouldbeinterestingtoseeifthenewdefinition will now include corporate services such as training of crew, accounting and information technology services, etc.

Expansion of the qualifying income under the MSI-SRS, MSI-AIS, and MSI-ML awards

► ItisawelcomemovethattheMSI-SRSandMSI-AISawardswillnowcovermobilisationfees,demobilisation fees, holding fees, and incidental container rental income as the activities giving rise to such income are an integral part of a ship owner’s or operator’s activities and the fees involved canbesignificant.

► Currently,dividendincomereceivedbyaMSI-AISentityfroman“ApprovedNetworkCompany”iscoveredundertheMSI-AISaward.TheinclusionofbranchprofitsremittedfromapprovedforeignbranchesbyMSI-AISentitiesappearstobeinlinewiththecurrentexemptionfordividendincomereceivedfromApprovedNetworkCompanies.

► Itappearsthatonlyqualifyingprofitsremittedfromapprovedforeignbrancheswillqualifyforthetaxexemption. Hence, non-trade or passive income of the foreign branches would not be exempted from tax on remittance. We await more details on this in the announcement to be released by MPA in May 2015.

► MSI-MLawardisalsoenhancedtocoverincomederivedfromfinanceleasestreatedassale.TheMPA’sdefinitionoffinanceleaseisinlinewiththeregulationsmadeundersection10DoftheITA.

Extension of the MSI-SSS award tenure

► TheexistingMSI-SSSawardisonlyforaperiodoffiveyears.Theenhancementtoallowexisting MSI-SSSawardrecipientstorenewtheawardforanotherfiveyearsisawelcomemoveandwilldefinitelymake it even more attractive to ship owners or operators which are considering locating such services toSingapore.

► ConditionssuchasincrementalbusinessspendinginSingapore,headcount,andthesizeofthefleet arelikelytoberequiredbytheMPAinreviewingapplicationsforafive-yearextensionoftheMSI-SSSaward tenure.


Business tax

CurrentThe Angel Investors Tax Deduction (AITD) scheme was introduced to encourage eligible individuals who are able and willing to invest in start-up companies and help them grow. It applies to qualifying investments madeinqualifyingstart-upcompaniesfrom1March2010to31March2015.

Under the scheme:

► Anapprovedangelinvestorneedsto,amongstotherconditions,investaminimumofS$100,000intoastart-up company within a year, and hold the qualifying investment for a continuous period of two years, to enjoy a tax deduction of 50% of the cost of the qualifying investment.

► The amount of expenditure incurred on investments that qualify for the deduction is capped at S$500,000perYAi.e.,deductioncapofS$250,000.

► Thedeductionisgivenondueclaim,fortheYArelatingtothebasisperiodinwhichthelastdayofthetwo-year period falls. Deferral of the claim is not allowed.

► AnyunutiliseddeductioninanyYAwillbedisregardedandcannotbecarriedforwardforoffsetagainsthis future taxable income.

► Totheextenttheinvestmentamountsareco-fundedbytheGovernmentundertheSPRINGStart-upEnterpriseDevelopmentScheme(SEEDS)ortheBusinessAngelScheme(BAS),suchamountswillnotqualify for AITD.

ProposedTheschemewillbeextendedtill31March2020tocontinuetoencourageangelinvestorstoinvestin start-up companies and help them to grow.

In addition, to allow more investments to be eligible for the scheme, new qualifying investments made from24February2015to31March2020thatareco-fundedbytheGovernmentunderSEEDSor BASwillalsobeallowedtoqualifyfortheAITD.

All other conditions of the scheme remain the same.

Points of view ► TheGovernmentprovidesequity-basedco-financingtoqualifyingSingaporebasedstart-upsbymatching

the sum invested by qualifying investors on a dollar-for-dollar basis up to a certain amount under theSEEDSorBAS.TheliberalisationoftheAITDrulestoallowinvestmentamountsmadebyangelinvestorsinqualifyingstart-upcompaniesthatareco-fundedundertheSEEDSandBASwillhelpstart-upcompanies attract more angel investors.

► Start-upcompaniesandangelinvestorswillwelcometheextensionandliberalisationoftheschemeand look forward to further enhancements to encourage investments in start-up companies including:

► ►Theoptiontodeferthetaxdeductionclaim.

► ►ThecarryforwardofunutiliseddeductionsforuseinsubsequentYAs.

Extending and enhancing the Angel Investors Tax Deduction scheme


Business tax

CurrentTheInvestmentAllowance–EnergyEfficiency(IA-EE)schemeandIA-EEforGreenDataCentresschemeawardInvestmentAllowance(IA)toenergyefficientorgreendatacentreprojectswherethecapitalexpenditureincurredresultsinmoreefficientenergyutilisation.Undertheschemes,businessesmaybegrantedIAofbetween30%and50%oftheirqualifyingfixedcapitalexpenditureoninstallationofenergyefficientequipmentorintheretrofittingoftheirdatacentres.Bothschemesarescheduledtolapseafter31March2015.

ProposedAsenergyefficiencyremainsakeynationalpriority,thetwoschemeswillbecombinedintooneschemeknownasthe“InvestmentAllowance–EnergyEfficiencyscheme”from1March2015andtheschemewillbeextendedtill31March2021.

This scheme will be solely administered by the EDB.

The EDB will release more details by March 2015

Points of view ► AsSingaporestrengthensitspositionasaninfocommhubwithincreasingfocusonenergyandclimate

change challenges, the extension of both the IA-EE scheme and IA-EE for Green Data Centre scheme by another six years is timely.

► The extension of these schemes is a welcome move and will continue to encourage businesses to invest inenergy-efficientequipmentandimplementenergyefficientretrofitsintheirdatacentreswhichwouldhelp businesses reduce operating costs as well as pay less tax.

► Combining the two schemes into one and having the scheme solely administered by the EDB will make it simpler for businesses looking to apply for the IA incentive.

► It remains to be seen whether changes to the current conditions will be introduced by the EDB.

Extending the Investment Allowance – Energy Efficiency schemes


Business tax

CurrentTheDevelopmentandExpansionIncentiveforInternationalLegalServices(DEI-Legal)schemewasintroduced in Budget 2010 to encourage law practices to do more international legal services work from SingaporeandtoattractinternationallawpracticestosetupofficesinSingapore.Approvedlawpracticesenjoy a 10% concessionary tax rate on incremental income derived from the provision of qualifying internationallegalservicesforfiveyears.Theincentiveisavailabletolawpracticesthatareincorporated as companies.

Theincentiveisscheduledtolapseafter31March2015.

ProposedTocontinueencouraginglawpracticestodomoreinternationallegalservicesworkfromSingapore, theDEI-Legalschemewillbeextendedtill31March2020.Allotherconditionsoftheschemeremain the same.

Points of view ► It is noted that all other conditions of the scheme remain unchanged. The incentive continues to be

available only to companies. Partnerships are not eligible for the scheme.

► AlthoughtheDEIincentiveisgenerallyrenewableforupto20years,arenewalperiodofuptofiveyearsis not uncommon. This would allow the Government to timely review the effectiveness of the incentive anddetermineifitcontinuestoberelevanttotheindustryandbeneficialtotheeconomy.

► TheextensionoftheDEI-Legalschemeto31March2020allowsmorenewapplicantsandexistingqualifyingDEI-LegalcompaniestobenefitfromtheschemeandreflectstheGovernment’scommitmenttostrengthenSingapore’spositionasaleadinglegalserviceshubinAsia.

Extending the Development and Expansion Incentive for International Legal Services scheme


Business tax

CurrentBusinesses may claim a 200% tax deduction on qualifying expenditure incurred on qualifying market expansion and investment development activities, subject to conditions.

ProposedThe scope of qualifying expenditure supported under the Double Tax Deduction (DTD) for Internationalisation scheme will be enhanced to include qualifying manpower expenses incurred for Singaporeanspostedtonewoverseasentities.ThisprovidesgreatersupporttobusinessesexpandingoverseasaswellascreatesmoreskilledjobsandopportunitiesforSingaporeanstoworkoverseas.

TheamountofqualifyingmanpowerexpensestobeallowedDTDundertheschemewillbecappedatS$1mper approved entity per year, subject to conditions.

BusinesseswillhavetoapplytoIESingaporetoenjoytheDTDonqualifyingmanpowerexpenses.

Thischangewillapplytoqualifyingmanpowerexpensesincurredfrom1July2015to31March2020.

TheIESingaporewillreleasefurtherdetailsbyMay2015.

Points of view ► Sections14Band14KoftheITAcurrentlyallowDTDonqualifyingexpenditureformarketexpansion

and investment development activities. The list of qualifying expenditure outlined in the website of IESingaporeincludesairfare,hotelaccommodationandmeals,overseastransportationanddirectthird-party consultancy fees. Manpower expense in the form of basic salary is allowed only for the representativeofanOverseasTradeOfficewhoisaSingaporeanorSingaporePR.Thisproposedenhancement appears to widen the scope of qualifying expenditure to include other manpower related costs.

► ►Itisunclearwhatwillbeconsidered“qualifyingmanpowerexpensesincurredforSingaporeanspostedto new overseas entities”. Typically, such costs are borne by the overseas related entities and not bornebytheSingaporecompany.TheMoF,atitspost-Budgetbriefing,hasclarifiedthatthisproposedenhancement is not intended to grant a double-dip, i.e., resulting in tax deduction being claimed by both theSingaporecompanyandtheoverseasentity.

► It is possible that manpower expenses are not fully borne by the overseas related entities because of resistance from joint venture partners or other business/regulatory reasons. We will have to await further details in May 2015 to know whether such manpower expenses will be covered under this enhancement for DTD.

► At this stage, we also do not know what would qualify as “new overseas entities” – whether it includes onlyentitiesincorporated/registeredonorafter23February2015orwhetheritmustbewholly-ownedbytheSingaporecompany.

Enhancing the Double Tax Deduction for Internationalisation scheme


Business tax

► The existing DTD for Internationalisation scheme was enhanced in 2012 to allow companies to enjoy DTDonqualifyingexpenditureofuptoS$100,000perYAincurredoncertainqualifyingactivitieswithouttheneedforapprovalfromIESingaporeortheSingaporeTourismBoard.ThisautomaticDTDhowever does not extend to the proposed enhancement to cover manpower expenses. It is expected thatapprovalfromIESingaporeshouldbesoughtbeforepostingtheemployeesoverseas.

► TheexpenditurecapofS$1mperyearisgenerous,althoughSMEsmaynotnecessarilyincursuchlargeamounts of qualifying manpower expenses for posting employees overseas.

► It is also noted that the proposed enhancement will apply to qualifying manpower expenses incurred from1July2015to31March2020.TheexistingDTDforInternationalisationschemeundersections14Band14Kwillexpireon31March2016.Giventhelongerqualifyingperiodfortheproposedenhancement, it appears likely that the existing DTD for Internationalisation scheme will be extended beyond31March2016.

► TheproposedenhancementwillbewelcomedbybusinessesespeciallySMEswhichareincreasinglylookingtointernationalisationasagrowthstrategy.WhenfurtherdetailsfromIESingaporeare releasedbyMay2015,itwillbeclearerhowtheproposedenhancementwillbenefitbusinesses seeking to expand overseas.


Business tax

CurrentSection43Iprovidesfora10%concessionarytaxrateonincomederivedbyaleasingcompanyinrespectofoffshore leasing of machinery and plant.

ProposedWith the introduction of targeted tax incentives for leasing of aircraft, aircraft engines, ships and sea containers,therelevanceofsection43Ihasdiminished.

Tosimplifythecorporateincometaxregime,theschemewillbewithdrawnfrom1January2016.Anyincomederivedfrom1January2016byaleasingcompanyfromtheoffshoreleasingofanymachineryorplant will be subject to tax at the prevailing corporate tax rate.

Points of view ► With the proposed withdrawal, companies which have been enjoying the concessionary 10% tax rateundersection43Iwillhavetoevaluatetheadditionaltaximpact.Forexample,iftheyhaveanyunabsorbed losses or capital allowances and these are utilised against offshore leasing income derived onorafter1January2016,suchlossesorcapitalallowanceswouldbesubjecttoanadjustmentfactorof10/17,i.e.,effectivelyS$17oflossesorcapitalallowancesisrequiredtonullifythetaxeffectonS$10ofleasingincome.Dependingontheirsituation,companiesmaywanttoassessiftheyshouldmake an election for full taxation (i.e., for tax to be imposed at the prevailing corporate tax rate instead of10%)totakeeffectfromtheYA2016.

► Inaddition,itmaywarrantthesecompaniestoreviewtheirexistingtransactionflowsortoevaluatewhether other tax incentives may be applicable.

► Companies in the oil and gas industry sector may be the most affected by the proposed withdrawal, given that it is not uncommon for them to enter into offshore leasing contracts in respect of certain oil andgasequipmentlocatedoutsideSingapore.

Withdrawing the concessionary tax rate on income derived from offshore leasing of machinery and plant under section 43I of the ITA


Business tax

CurrentTheApprovedHeadquartersincentivewasintroducedtoencouragecompaniestouseSingaporeasabaseto conduct headquarters management activities.

The incentive confers tax exemption or a concessionary tax rate of 10% on income derived from:

► The provision of qualifying headquarters services to qualifying network companies

► Qualifyingtreasury,investmentorfinancialactivities.

ProposedAs part of the regular review of tax incentives with the objective of simplifying the corporate income tax regime, the Approved Headquarters incentive will be withdrawn from 1 October 2015.

CompaniesperformingqualifyingheadquartersactivitiesorservicesinSingaporetonetworkcompaniesmay qualify for the Development and Expansion Incentive (DEI), subject to meeting of conditions.

Points of view ► TheApprovedHeadquartersincentive,introducedin1986,wasthefirstofafewinitiativesrolledout

under the headquarters program which aims to nurture a headquarters ecosystem of companies across allindustriesinSingapore.

► Under this incentive, qualifying income derived by approved headquarters companies is generally taxed at the concessionary tax rate of 10%. Tax exemption may, however, be granted where the approved headquarters companies have global responsibility for the provision of any qualifying services. In addition, tax exemption may be granted on foreign dividends received from qualifying network companies.

► Following the proposed change, the tax incentive for all the initiatives under the headquarters program will be consolidated under the DEI, an incentive scheme governed by the Economic Expansion Incentives (Relief from Income Tax) Act.

► WhiletheApprovedHeadquartersincentiveundersection43EoftheITAandtheheadquartersinitiatives under the DEI are both targeted at attracting the setting up of headquarters companies in SingaporeandadministeredbytheEDB,therearenotabledifferencesbetweenthetwopackagesofincentive, including the following:

► The DEI applies to income derived from the provision of services by the headquarters companies to bothrelatedandunrelatedparties.TheApprovedHeadquartersincentiveis,however,confinedtoonly provision of services to related companies.

Withdrawing the Approved Headquarters incentive under section 43E of the ITA


Business tax

► Unlike the Approved Headquarters incentive, there is no requirement to submit a list of qualifying networkcompaniestobespecificallyapprovedbytheEDBundertheDEI.

► The concessionary income tax rate offered under the DEI applies to only qualifying income above a baseincome(generallytheaverageofthreeyearsnetprofitbeforetax).Thereisnobaseincomeconcept under the Approved Headquarters incentive.

► ►ThereisnoexemptionundertheDEIforforeigndividendincome.

► Companies applying for the Approved Headquarters incentive are likely to be cost centres and hence remunerated on a cost-plus basis for the services that they provide. The imposition of a base income under the DEI should not have an adverse impact for those companies that are newly set up headquartersinSingapore.

► As the package of incentives currently offered under the DEI does not include tax exemption for foreign dividend income, headquarters companies which receive dividend income from their overseas network companies will have to assess if such foreign dividend income can qualify for tax exemption under section13(8)or13(12)oftheITAorotherwise,tomanageanyincrementalSingaporetaxliabilities. The Government can perhaps consider including foreign dividend income exemption as part of the package of tax incentives for the headquarters program offered under the DEI.

► AlthoughnotspecificallymentionedinBudget2015,webelievethatcompanieswhichhavebeenawardedtheApprovedHeadquartersincentiveshouldcontinuetoenjoythebenefitsunderthisincentiveuntil the end of the incentive period, i.e., even if this is beyond 1 October 2015.


Business tax

CurrentSection10(16)oftheITAprovidesataxconcessionto:

a) An individual who is the inventor, author, proprietor, designer or creator of an approved intellectual property or innovation.

Or

b)Anycompanyinwhichsuchanindividualbeneficiallyownsalltheissuedshares.

The income derived by such an individual or company from royalties or other payments received as consideration for the assignment of or the rights in the approved intellectual property or innovation shall be deemed to be:

a) The amount of royalties or other payments remaining after deductions and capital allowances (if any).

Or

b) An amount equal to 10% of the gross amount of royalties or other payments, whichever is less.

ProposedAsthetaxconcessionisassessedtobenolongerrelevant,thesection10(16)concessionwillbewithdrawnfromYA2017.

Points of view ► Thesection10(16)concessionunderwentenhancementin2000and2006aspartoftheGovernment’s

initiative to encourage innovation, creativity and enterprise. The withdrawal of this concession in Budget 2015 may be indicative of its diminished relevance in the light of the more recent tax measures such as theR&DregimeandPICschemewhichaccordtaxbenefitstoinnovation.

► Thewithdrawalofthesection10(16)concessionmayhaveanimpactonthewithholdingtaxliabilityofnon-resident individuals or non-resident companies which are in receipt of royalties or other payments from an approved intellectual property or innovation. Without the concession, non-resident recipients of theincomemaybesubjecttoSingaporewithholdingtaxonthefullgrossroyaltyincome.

► AsthewithdrawaloftheconcessioniseffectivefromYA2017,itislikelythatsuchroyaltypaymentswhicharedueandpayabletothenon-residentrecipientsonorafter1January2016willbeaffected.

► Section10(14)hassimilarprovisionsthatapplytoauthors,composersorchoreographerswhoderiveroyalty income from the copyright in any literary, dramatic, musical or artistic work. While Budget 2015 seesthewithdrawalofthesection10(16)concession,thesection10(14)concessionisnotwithdrawn.ThisreflectstheGovernment’scontinuedsupportforthedevelopmentoftheartsinSingapore.

Withdrawing the tax concession on royalties and other payments from approved intellectual property or innovation


Business tax

CurrentThePICBonuswasintroducedinBudget2013.Itsoughttohelpbusinessesdefrayrisingoperatingcostsand encourage businesses to undertake improvements in productivity and innovation.

BusinessesthatspendaminimumofS$5,000inqualifyingPICinvestmentsinaYAmayreceiveadollar-for-dollarmatchingcashbonusofuptoS$15,000intotaloverYA2013toYA2015.

ThePICBonusisprovidedontopoftheexisting400%taxdeductions/allowancesandthe60%cashpayoutavailable under the PIC scheme.

ProposedThe PIC Bonus was intended as a transitional measure and has been successful in spreading the culture ofproductivityamongstSMEs.Asthereisnowagoodtake-upofthePICscheme,thePICBonuswillbeallowedtolapseafterYA2015.

Points of view ► The PIC Bonus was introduced to encourage small businesses to take advantage of the PIC scheme and

undertake productivity investments.

► SincetheintroductionofthePICschemeinYA2011,therehasbeenastrongincreaseinthetake-uprates.BasedonapressreleasebytheMoFissuedon12February2015,54,000or46%ofactivecompanieshavefiledclaimsunderthePICschemeinYA2014,upfrom36,000or33%inYA2011.Given that usage of the PIC scheme is showing good progress, the phasing out of the PIC Bonus is not anticipatedtohaveanysignificantimpactonbusinesses.

Allowing the PIC Bonus to lapse


Business tax

CurrentThe Approved Foreign Loan (AFL) incentive was introduced to encourage companies to invest in productive equipmentforthepurposeofcarryingonsubstantiveactivitiesinSingapore.Underthescheme,taxexemption or a concessionary tax rate may be granted on interest payments made to a non-tax resident for loans to a company to purchase productive equipment.

ToqualifyasanAFL,theloanmustbeatleastS$200,000.TheMinisterforTradeandIndustryhasthe discretion to approve an application for a foreign loan of less than the minimum loan quantum of S$200,000tobeanAFL.

ProposedAreviewdateof31December2023willbelegislatedforthisschemetoensurethattherelevanceofthescheme is periodically reviewed. In addition, the minimum loan quantum under the AFL incentive will be increasedtoS$20mfrom24February2015.

The Minister for Trade and Industry may approve an AFL application on a foreign loan lower than the legislatedminimumloanquantumofS$20m.

Points of view ► TheproposedsignificantincreaseintheloanquantumtoS$20msuggestamoretargetedfocusto

incentivise investments in high-value productive equipment. This is also in line with the Government’s focus on productivity and innovation.

► In practice, the AFL incentive is typically awarded to companies with principal incentives e.g., Pioneer incentive or Development and Expansion Incentive (DEI) awarded by the EDB with the AFL incentive period tied to the principal incentive period. Given that such companies will typically have substantial capital expenditure commitments imposed under the principal incentives, the proposed increase in the loanquantumthresholdtoS$20m,thoughsignificant,maynotundulyimpacttheirabilitytoqualifyforthe AFL incentive.

► However, for companies that intend to invest progressively on productive equipment but may not obtain loansofatleastS$20mfromoneforeignlendere.g.,theremaybemultiplelenderseachwithloanquantumoflessthanS$20m,theymaynolongerbenefitfromtheAFLincentivewiththeproposedchange,unlessspecificallyapprovedbytheMinisterforTradeandIndustry.

► Currently, the AFL incentive covers the purchase of productive equipment for the purpose of carrying onsubstantiveactivitiesinSingapore.Productiveequipmentreferstomachineryorplantwhichwillnormally qualify for capital allowances, and does not extend to investments in intellectual property (IP). Given that IP acquisition can be a substantial investment, the expansion of the scope of the AFL incentive to include investments in IP will be much welcomed and in line with the Government’s focus on building a knowledge-based economy.

Introducing a review date for the Approved Foreign Loan incentive


Financial services

Financial services30 Singapore Budget 2015 Synopsis

Financial services

CurrentBanksmayclaimataxdeductionforcollectiveimpairmentprovisionsmadeunderMASNotice612,subjecttocapsasstipulatedundersection14IoftheITA.Similarly,financecompaniesandmerchantbanksmayclaimataxdeductionforcollectiveimpairmentprovisionsmadeunderMASNotice811andMASNotice1005 respectively.

ThesetaxconcessionsarescheduledtolapseafterYA2016orYA2017,dependingonthefinancial yearendofthebankorfinancecompany.

ProposedInrecognitionthatbanksandfinancecompaniesneedtomaintainadequatelevelsofimpairmentprovisionsundertherelevantMASNoticesastheytransitiontothenewaccountingstandardonimpairmentinSingapore(whichiseffectiveforthefinancialyearbeginningonorafter1January2018),thetaxconcessionswillbeextendeduntilYA2019orYA2020,dependingonthefinancialyearendofthebank orfinancecompany.

All conditions of the scheme remain the same.

Points of view ► Thisisthethirdtimethatthesetaxconcessions(firstintroducedin2005)havebeenextended.Theextensionofthetaxconcessionswillallowbanks,merchantbanksandfinancecompanies(whichdonothavearobustlossestimationprocessorsufficientqualityhistoricalloanlossdatatoprovideforcollectiveimpairmentunderFRS39)tocontinuetoclaimataxdeductionforthecollectiveimpairmentprovisionsrequiredundertheMASNotices,subjecttothestipulatedcapsundersection14I.

► ►Theexpiryofthetaxconcessionscoincidewiththe1January2018effectivedatetoadoptthenewFRS109onfinancialinstrumentswhichwillreplaceFRS39inSingapore.AllbanksandfinancecompaniesareexpectedtocomplywiththerequirementsofFRS109effectiveforthefinancialyearbeginningonorafter1January2018.

► ►ThereisasignificantchangeinthebasisofcomputingimpairmentundertheproposedFRS109 ascomparedtotheexistingFRS39.WeunderstandthattheMASisindiscussionswiththe industrytoevaluatetheimpactofadoptingthenewFRS109onthecomputationofcollectiveimpairment provisions.

Extending the tax deductions for collective impairment provisions made under the MAS Notices


Financial services

CurrentApproved general, life and composite insurers and reinsurers may enjoy a concessionary tax rate of 10% on qualifyingincomederivedfromqualifyinginsuranceandreinsurancebusinessconductedfromSingaporefor a 10-year award tenure.

Theschemeisscheduledtolapseafter31March2015.

ProposedTostrengthenSingapore’svaluepropositionasanAsianinsuranceandreinsurancecentre,theschemewillbeextendedtill31March2020asthe“InsuranceBusinessDevelopment”(IBD)incentive.Theconcessionary tax rate remains at 10%.

In addition, a renewal framework will be introduced with effect from 1 April 2015 to encourage existing recipientsoftheincentivetocontinueexpandingtheiroperationsinSingapore.

TheMASwillreleasefurtherdetailsbyMay2015.

Points of view ► The extension of the current tax incentive scheme not only provides added stimulus to attract new entrantsintotheSingapore’svibrantinsurancesector,italsoprovidesexistingincentivisedinsurersandreinsurers a framework for renewal of their tax incentives.

► The current tax incentive is often referred to as the Offshore Insurance Business (OIB) tax incentive and broadly provides for a concessionary tax rate of 10% on income derived from accepting insurance and reinsurance covering offshore risks. Further, the current tax incentive requires a segregation of investmentincomerelatingtotheOIBwhichisderivedfromoutsideSingaporeandthosederived fromSingapore.Theformermayalsobeentitledtothe10%concessionarytaxratewhilethelatter does not. In view of the rebranding of the OIB tax incentive to IBD, we hope the scope of qualifying income under the extended incentive can be aligned with the accounting of income by types of funds and risks to incentivise the insurance players on a business focused approach and to reduce their administrative burden.

► The existing OIB tax incentive is awarded based on a 10-year award tenure. We hope the same tenure periodwillbeaccordedtoeligibleapplicantsfortheIBDasashortertenuremaysignificantlyreducetheattractiveness of the tax incentive for insurance businesses looking to make long term commitment to theirpresenceinSingapore.

► Weexpectthespecificationofheadcountrequirements,amongstpossiblyothers,intheproposedrenewalframework.Existingincentivisedinsurancebusinessesoftenfinditdifficulttocommittoaggressive incremental headcount plans. In line with the Government’s push for productivity and innovation,wehopetherenewalframeworkprovidesmoreflexibilitytotakeintoaccountotherfactors,includingadditionalvalue-addedactivitiestobecarriedoninSingaporeandthetypesofprofessionalstobe employed.

Extending and refining the tax incentive scheme for insurance businesses


Financial services

CurrentCurrently,approvedventurecapitalfundsmaybegrantedtaxexemptionundersection13HoftheITAonthe following income:

a) Gains arising from the divestment of approved portfolio holdings

b) Dividend income from approved foreign portfolio companies

c) Interest income arising from approved foreign convertible loan stock

Fundmanagementcompaniesmanagingsection13HfundsmayalsobegrantedtaxexemptionunderthePioneerServiceincentiveonthefollowingincome:

a) Management fees derived from an approved venture capital fund

b) Performance bonus received from the said approved venture capital fund

ProposedIn recognition of the importance of venture capital activity in supporting entrepreneurship, a 5% concessionary tax rate will be accorded to approved venture capital fund management companies managingsection13Hfundsontheirspecifiedincome.Theapprovalwindowwillbefrom1April2015to31March2020.

Withtheintroductionofthisnewincentive,thePioneerServiceincentiveforventurecapitalfundmanagement companies will be withdrawn from 1 April 2015 given that venture capital is no longer a pioneeringactivityinSingapore.Pioneercertificatesalreadyissuedwillnotbeaffectedbythischange.

Areviewdateof31March2020willbelegislatedforsection13Htoensurethattherelevanceofthescheme is periodically reviewed.

Points of view ► While the Government recognises that venture capital fund management is no longer a pioneering activityinSingapore,itispreparedtogranta5%concessionarytaxrateonqualifyingincomefromventure capital fund management activities. This is a fairly attractive tax rate compared to the prevailing Singaporecorporatetaxrateof17%,anditisanindicationofSingapore’scontinuedeffortstopromoteventure capital activities and entrepreneurship. In particular, it is a recognition that venture capital can playanimportantroleinnurturingupcomingandinnovativeindustriesinSingapore.

► Theproposedreviewdateof31March2020isconsistentwiththeGovernment’spolicytointroducesunset clause for tax incentives. It allows the Government to review the effectiveness of the tax incentive and evaluate its relevance over time.

► Aligned with the move towards transparency on tax matters, it will be helpful if the minimum criteria of the tax incentive schemes for the venture capital funds and venture capital fund management companies are made publicly available.

► It will be important for the tenure of the tax incentive granted to the approved venture capital fund management company to match the life of the approved venture capital fund.

Refining the tax incentives for venture capital funds and venture capital fund management companies


Financial services

CurrentTheEnhanced-TierFundtaxincentivescheme(Scheme)grantstaxexemptiontoapprovedfundvehiclesonspecifiedincomederivedfromdesignatedinvestments.

Amongst other conditions, each approved fund must meet certain economic conditions (e.g., minimum localbusinessspending,minimumfundsize).

Asaconcession,master-feederfundstructures(excludingSPVsheldbythem)mayapplyfortheSchemeand meet the economic conditions on a collective basis.

ProposedToaccommodatemaster-feederfundstructuresthatholdtheirinvestmentsviaSPVs,theexistingconcessionformaster-feederfundstructureswillbeenhancedtoapplytoSPVsheldbythemasterfund,subject to conditions.

Withthisenhancement,masterandfeederfundsandSPVswithinamaster-feederfundstructuremayapplyfortheSchemeandmeettheeconomicconditionsonacollectivebasis.

This change will take effect for applications made from 1 April 2015.

TheMASwillreleasefurtherdetailsbyMay2015.

Points of view ► Inpractice,forcommercialandlegalreasons,fundsoftensetupseparateSPVstoholdunderlyinginvestments.Currently,ifsuchSPVsintendtoenjoytheScheme,eachSPVmustmeetcertaineconomicconditions(e.g.,minimumlocalbusinessspending,minimumfundsize).Theproposalisawelcomemoveasitimprovesoperationalefficienciesbyallowingtheeconomicconditionstobemetonacollectivebasis within the group.

► PendingthedetailstobereleasedbytheMASbyMay2015,itisanticipatedthatsomeoftheeconomicconditions to be met on a collective basis (e.g., minimum business spending) may correspond to the numberofSPVsandfundentitieswithinthemaster-feederfundstructurethatseektoenjoytheScheme.

► Currently,afundmanagerthatmanagesfundsenjoyingtheSchememustsatisfycertainconditionssuch as maintaining a minimum headcount of investment professionals. Hopefully, if there are additional conditionsimposedonthesefundmanagersundertheproposedenhancementstotheScheme,suchconditions will not be too stringent.

► While the proposed enhancement applies to master-feeder fund structures that hold their investments viaSPVs,itishopedthatastandalonefundapprovedundertheSchemewhichproposestoinvestviaSPVswouldalsobeabletoavailofthisconcessionifitsatisfiestherelevantconditions.

Improving the Enhanced-Tier Fund tax incentive scheme


Financial services

► Forcommercialreasons,somefundsapprovedundertheSchememayownpart(i.e.,not100%)ofanSPV.Presumably,theproposedenhancementwouldapplytosuchSPVsthatarenot100%ownedbythemaster fund.

► WhileitisproposedthattheeconomicconditionscanbemetonacollectivebasissuchthateachSPVneednotincuraminimumlocalbusinessspendingofS$200,000,taxauthoritiesincertaincountriesrequiretheSPVconcernedtodemonstratesubstanceinitshomejurisdictioninordertoclaimbenefitsunderarelevanttaxtreaty.Forinstance,undertheIndia-Singaporetaxtreaty,aSingaporeSPVisrequired to incur a minimum level of business spending. It is thus still necessary to ensure that the SPVsconcerneddomeettherelevantconditionsonastandalonebasis.Onealsoneedstoconsidertheapplication of transfer pricing regulations, which generally require transactions between related parties to be based on arm’s length principles.

► AsnewSPVsmaynotnecessarilybeincorporatedonthefirstdayofthefinancialyear,timeapportionmentoflocalbusinessspendingrequirementsforthefirstfinancialyearshouldbemadeavailable for purposes of satisfying the economic conditions on a collective basis.

► To reduce administrative burden and compliance costs, we hope that once a fund structure has been approvedbytheMASundertheproposednewtreatment,therewillnotbeaneedtosubmitafreshapplicationtotheMASwheneveranewSPVisincorporated.

► Ontheadministrativefront,weanticipatethattheannualdeclaration,incometaxreturn,andGSTremissionfilingscanalsobemadeonacollectivebasis.


Personal income tax

Personal income tax


Personal income tax

Current TheincometaxratesforSingaporetaxresidentindividualsrangefrom0%forthefirstS$20,000ofchargeableincometo20%forchargeableincomeexceedingS$320,000.TherewasnoincometaxrebateaccordedforYA2014.

ProposedTheGovernmenthasannouncedthatapersonalincometaxrebateof50%,cappedatS$1,000pertaxpayer,willbegrantedtoalltaxresidentindividualtaxpayersforYA2015.

WitheffectfromYA2017,anewpersonalincometaxratestructurewillbeintroduced.Inparticular,thetop marginal rate will be raised by two percentage points, from 20% to 22% for the highest income earners withachargeableincomeaboveS$320,000.Thistaxincreaseistoenhanceprogressivityofourpersonalincome tax rate regime and strengthen future revenues.

Points of view ► TheincometaxrebateannouncedinBudget2015bringsmorebenefittothemiddleandupper-middleincomegroupsastherebateiscappedforallatS$1,000.ThiscapislowerthanthatsetinYA2013(S$1,500)andinearlieryears,anddemonstratestheGovernment’scontinuedfocustobenefitaspecificworking population. An individual1whoearnsS$88,068ormorewillenjoythemaximum rebateofS$1,000forYA2015.

► ThepersonalincometaxratestructurehasnotchangedsinceYA2012.Further,thetopmarginalratehasremainedat20%sinceYA2007.Underthenewincometaxratestructure,individualsearningatleastS$160,000willpaytaxathigherrates,withlargerincreasesforhigherincomeearners.NochangeshavebeenproposedtothetaxbandsandratesforchargeableincomebelowS$160,000. AcomparisonofthecurrenttaxpayableonequivalentincomelevelsandthatofYA2017issetoutin Chart 1 below.

► AlthoughtheMinisterhasreiteratedoverthepastfewyearstheneedtobuildupSingapore’srevenues,thisisthefirsttimeanincreaseinthetopmarginalratehasbeenannounced.Basedonacomparisonofthe2014/2015taxratesforHongKongandYA2015ratesforSingapore,anindividualwhoearnsmorethanS$495,000willpaymoretaxinSingaporethaninHongKong.Withtheproposedchangeinthepersonal income tax structure, the earnings level by which an individual will be subject to higher tax in SingaporeisloweredtoS$384,000,asillustratedinChart2below.TheupperthresholdcouldbehigherforindividualswhoqualifyforthetaxbenefitsundertheNotOrdinarilyResidentscheme.

Personal income tax rate and rebate

1ActiveNSreservist,marriedtonon-workingspouse,with2dependantchildren.


Personal income tax

Chart 1: Changes to personal income tax (effective YA 2017)

Current tax structure Tax structure with effect from YA2017

Chargeable income*

(S$)

Tax rate Gross tax payable

(S$)

Chargeable income*

(S$)

Tax rate Gross tax payable

(S$)

Onthefirst 20,000 0.00% 0 Onthefirst 20,000 0.00% 0

On the next 10,000 2.00% 200 On the next 10,000 2.00% 200

Onthefirst 30,000 200 Onthefirst 30,000 200

On the next 10,000 3.50% 350 On the next 10,000 3.50% 350

Onthefirst 40,000 550 Onthefirst 40,000 550

On the next 40,000 7.00% 2,800 On the next 40,000 7.00% 2,800

Onthefirst 80,000 3,350 Onthefirst 80,000 3,350








On the next 40,000 19.50% 7,800

On the next 40,000 20.00% 8,000


In excess of 320,000 20.00% In excess of 320,000 22.00%

* Chargeable income = Income after tax reliefs

► WhilstthisproposedchangeisperceivedtoreduceSingapore’scompetitivenessatthepersonaltaxlevel,Singaporeremainshighlyattractiveinmanyotheraspects,fore.g.,ourworld-classinfrastructure,healthcare system, ease and transparency of doing business.

► With the increase in the top marginal rate to 22%, the difference between the corporate income tax rate of17%haswidenedtofivepercentagepoints.Thismayfurtherencouragesuccessfulentrepreneurstocorporatise their business rather than conducting it through a sole proprietorship or partnership.


Personal income tax

Chart 2: Comparative analysis (2014/2015 Hong Kong versus Singapore YA 2015 and proposed YA 2017 tax rates)

Notes:1. AssumesaSingaporeanmarriedmanwithtwochildren,wifehasnoincomeandsolesourceofincomeisfromhisemployment.2. Hong Kong calculations are based on 2014/2015 tax rates.3. SingaporecalculationsforYA2015includethe50%taxrebatecappedatS$1,000.4. SingaporecalculationsforYA2017includeCPFtaxreliefcalculatedbasedontheproposedBudget2015changes.5. Exchangerateused:S$1:HK$5.9364

0

2

4

6

8

10

12

14

16

18

50 100 150 200 250 300 350 400 450 500 550 600 650

Singapore Hong Kong (2014/2015 tax rates)

Income level (S$ '000)

Effe

ctiv

e ta

x ra

te (

%)

%

(384, 13.65%)

(87, 2.18%)

0

2

4

6

8

10

12

14

16

50 100 150 200 250 300 350 400 450 500 550 600 650

Singapore Hong Kong (2014/2015 tax rates)

Income level (S$ '000)

Effe

ctiv

e ta

x ra

te (

%)

%

(495, 14.38%)

(78, 0.90%)

Comparative Analysis (2014/2015 Hong Kong versus Singapore YA 2015 tax rates)

Comparative Analysis (2014/2015 Hong Kong versus Singapore YA 2017 tax rates)


Personal income tax

Personal income tax rates in selected countries in the region

%

Country

17

202

25

26

30

30

32

35

35

38

40

401

45

45

0 5 10 15 20 25 30 35 40 45 50

Hong Kong

Singapore

Myanmar

Malaysia

Indonesia

India

Philippines

Vietnam

Thailand

Korea

Taiwan

Japan

China

Australia

Notes:The above rates are the top marginal personal income tax rates prevailing as at December 20141 Excludes local inhabitant tax

2 To increase to 22% from year of assessment 2017, as proposed in Budget 2015


Personal income tax

Current TheemployerandemployeeCPFcontributionratesforemployeeswhoareSingaporecitizensorPRs(inthethirdyearofobtainingSingaporePermanentResident(SPR)status)areasfollows:

Employee’s age (years) Contribution rate % (for monthly wages ≥ S$750)

Employer Employee Total

Below 50 17 20 37

Above 50-55 16 19 35

Above55-60 12 13 25

Above60-65 8.5 7.5 16

Above65 7.5 5 12.5

ThemaximumCPFsalaryceilingisS$5,000permonth.

TheannualcontributioncapforSupplementaryRetirementScheme(SRS)isasshownbelow:

Years Absolute income base* Maximum yearly SRS contribution for Singaporean/SPR

Maximum yearly SRS contribution for foreigner

2011 to 2015 (17monthsxS$5,000)=S$85,000

15% of absolute income base(15%xS$85,000)=S$12,750

35%ofabsolute income base(35%xS$85,000)=S$29,750

Proposed Witheffectfrom1January2016,theGovernmentwillincreasetheCPFmonthlysalaryceilingfromS$5,000toS$6,000.

Inaddition,CPFcontributionrateswillberaisedforolderworkersrangingfromage50to65.

For workers aged between 50 and 55, the contribution rates will be restored to the same level as those for younger workers. CPF contribution rates for this group will be increased by 2% (1% from the employer and 1% from the employee).

Forworkersagedbetween55and60,theemployercontributionratewillbeincreasedby1%andforworkersagedbetween60and65,theemployercontributionratewillgoupby0.5%.Theemployee’scontribution rate will remain as before for these two age groups. The increase in employer contributions will gototheSpecialAccount.Theincreaseinemployeecontributions(forworkersagedbetween50and55)will go to the Ordinary Account.

CPF and Supplementary Retirement Scheme changes


Personal income tax

InlinewiththehigherCPFmonthlysalaryceiling,thecontributionSRScapwitheffectfrom1January2016isshownbelow:

Years Absolute income base* Maximum yearly SRS contribution for Singaporean/SPR

Maximum yearly SRS contribution for foreigner

2016onwards (17monthsxS$6,000)=S$102,000

15% of absolute income base (15%xS$102,000)=S$15,300 (increasedbyS$2,550)

35%ofabsolute income base(35%xS$102,000)=S$35,700 (increasedbyS$5,950)

Points of view ► In the past, contribution rates for older workers had been lower than the younger workers to encourage

business to employ them. With better living standards and healthcare, older workers generally are still in good robust health to continue their employment beyond the age 55 and are able to contribute more with the years of experience behind them. The proposed small increase in the employer contributions should therefore not discourage businesses to hire older workers. Moreover, the Temporary Employment Credit is increased and extended to help employers to defray some of the cost increases associated with the increase in CPF monthly salary ceiling as well as the employer contribution rates for older workers.

► An increase in employee contribution will result in a cut in the employee’s take home pay but an increase in the CPF relief against his taxable income, hence reducing his tax liability. To that effect, the impact ofincreaseintaxratesforincomeearnersaboveS$160,000willbereducedbythehigherCPFrelief.However, as there is a cap to the employee CPF contribution, such an impact will be negated as the salary increases.

► InadditiontoCPFsavings,theSRSwasintroducedtoencouragesupplementarysavingsforretirementonavoluntarybasis.Currently,themaximumcontributionthatmaybemadebyaSingaporecitizentoSRSis15%ofhiswagessubjecttothesalaryceilingsimilartotheCPFcappingrules.InlinewiththehigherCPFsalaryceilings,thecontributioncapwithintheSRSisalsoincreased.AsSRScontributionsare available as a deduction against taxable income, the impact of the proposed change will reduce the personaltaxliabilityforthosewhomakeadditionalcontributionstotheSRS.Thiswillstrengthentheirsavings and income in retirement.


Personal income tax

Current AnindividualwhoderivespassiverentalincomefromaresidentialpropertyinSingaporecan,subjecttoincome tax rules, claim against such income a deduction of the actual deductible expenses incurred during the period of tenancy in producing the rental income.

Examplesofdeductibleexpensesareinterestonmortgageloan,propertytax,fireinsurance,commissionpaid on getting a subsequent tenant, cost of renewing a lease or getting a new tenant (except for the firsttenant),andrepairsandmaintenance(e.g.,painting,pestcontrol,monthlymaintenancechargestomanagement corporations).

Expensesofacapitalnaturearenotallowable.Suchexpensesincludeloanrepayments,depreciationoffurnitureandfittings,costofrenovation,additionsandalterations,agent’scommissionandlegalcostsincurredtosecurethefirsttenant.

An individual taxpayer is required to keep supporting documents to substantiate the rental income reported and expenses claimed.

Proposed Tosimplifytaxcompliance,anindividualwhoderivespassiverentalincomeinthebasisperiodforYA2016orasubsequentYAfromthelettingofaresidentialpropertyinSingapore(referredtoas“qualifyingrentalincome”) can, in lieu of claiming the actual amount of deductible expenses incurred (excluding interest expenses)againsthisqualifyingrentalincome,claimaspecifiedamountofexpensesasaproxyforthedeductibleexpenses.Thesespecifiedexpensesaredeterminedbasedon15%ofthegrossrentalincomederived from the residential property. In addition, the individual can deduct against his qualifying rental income, any deductible interest expense.

This tax change does not apply to any rental income derived by an individual through a partnership in Singaporeorfromatrustproperty.TheIRASwillreleasefurtherdetailsofthechangebyMay2015.

Points of view ► The proposed change removes the burden of keeping records of expenses and the necessity for the

individual to ascertain whether an expense is deductible. This is in line with the Government’s intention tosimplifytaxfilingforindividuals.

► In addition, individuals with actual deductible expenses (excluding interest expenses) less than 15% of thegrossrentalincomewillbenefitfromthischangeasalowernetrentalincomewillbesubjecttotax.

► As it is stated in the Budget announcement that the basis of 15% of gross rental income can be applied in lieu of claiming actual deductible expenses, we are of the view that where the actual expenses are higher, the taxpayer can continue to claim actual expenses by providing details of the expenses claimed with supporting documents. It remains to be seen how such an option is to be administered and the conditionsattachedtomakingthesimplifiedexpenseclaim.

Simplified claim for rental expenses



Current GSTremissioniscurrentlygrantedtoSingapore-listedREITs(S-REITs)andSingapore-listedRegisteredBusiness Trusts (qualifying RBTs) in the infrastructure, ship leasing and aircraft leasing sectors to allow them toclaimGSTontheirbusinessexpenses(exceptforcertaindisallowedexpensesandexpensesattributableto certain exempt supplies), irrespective of whether they hold underlying assets directly or indirectly throughmulti-tieredstructuressuchasSPVs.ThisGSTremissionisalsoapplicabletotheGSTincurredfororbytheSPVsoftheS-REITsandqualifyingRBTsprovidedthattheunderlyingassets(qualifyingassets) helddirectlyorindirectlybytheSPVsmaketaxablesuppliesorout-of-scopesupplieswhichwouldhavebeentaxablesuppliesifsuchsuppliesweremadeinSingapore.

WithouttheGSTremission,S-REITsandqualifyingRBTsthatderivesolelydividend/distributionincomefromSPVsarenoteligibleforGSTregistrationandwillnotbeabletoclaimtheGSTincurredontheirbusinessexpenses.Inaddition,theGSTremissionisnotapplicabletoSPVsthataresetupsolelytoraisefunds(e.g.,mediumtermnotes)onbehalfofS-REITsorqualifyingRBTsassuchSPVsdonotholdanyqualifyingassets.

TheGSTremissionisscheduledtolapseafter31March2015.

ProposedTheexistingGSTremissionwillbeextendedtill31March2020.

Inaddition,theGSTremissionwillbeenhancedtoallowS-REITsandqualifyingRBTstoclaimtheGSTonbusinessexpensesincurredtosetupSPVsthataresetupsolelytoraisefundsfortheS-REITsorqualifyingRBTsnotwithstandingthattheSPVsdonotholdqualifyingassetsoftheS-REITsandqualifyingRBTs,directlyorindirectly.TheseS-REITsandqualifyingRBTswillalsobeallowedtoclaimtheGSTonthebusinessexpensesofsuchSPVs.ThisenhancementwilltakeeffectforGSTincurredfrom1April2015to 31March2020.

MoredetailswillbereleasedbytheIRASbyMarch2015.

Points of view ► TheextensionandenhancementoftheGSTremissiondemonstratetheGovernment’scontinuouseffortinpromotingSingaporeasthepreferredlocationinAsiaforthelistingofREITsandqualifyingRBTs.

► WithouttheenhancementtotheGSTremission,theGSTincurredcouldresultinadditionalcoststotheS-REITsandqualifyingRBTs.TheenhancedGSTremissionwillthereforehelpreducethecostsoffundraisingbyS-REITsandqualifyingRBTsthroughtheSPVs.

► ►WhiletheGSTremissionisextendedto31March2020,thissunsetclausewillcreateuncertaintytotheS-REITsandqualifyingRBTsgiventhattheremovaloftheGSTremissionwouldhaveadirectimpactontheyieldoftheS-REITsandqualifyingRBTs.TheGovernmentcouldconsiderallowingtheGSTremissiontoapplythroughoutthelifeoftheS-REITsandqualifyingRBTs.

Extending and enhancing the GST remission for listed REITs, and listed Registered Business Trusts carrying on qualifying businesses

Singapore Budget 2015 Synopsis 45


Current Ingeneral,GST-registeredbusinessescanonlyclaimpre-registrationGST(beingGSTincurredonpurchasesofgoodsandservicespriortoGSTregistration)ontheportionofgoodsandservicesusedortobeusedtomaketaxablesuppliesafterGSTregistration.WheregoodsandservicesareusedtomakesuppliesstraddlingGSTregistration(i.e.,suppliesbeforeandafterGSTregistration),orwherethegoodsarepartiallyconsumedbeforeGSTregistration(e.g.,propertyrental,utilities),businessesarerequiredtoapportionthepre-registrationGSTonthesegoodsandservicesandcanonlyclaimtheportionattributabletosuppliesmadeafterGSTregistration.

ProposedToeasecompliance,theclaimingofpre-registrationGSTwillbesimplifiedtoallowanewlyGST-registeredbusinesstoclaimpre-registrationGSTinfullonthefollowinggoodsandservicesthatareacquiredwithin sixmonthsbeforetheGSTregistrationdateofthebusiness:

a) GoodsheldbythebusinessatthepointofGSTregistration

and

b) Property rental, utilities and services which are not directly attributable to any supply made by the businessbeforeGSTregistration.

Thus,businessesnolongerhavetoapportionthepre-registrationGSTontheabovegoodsandservicesevenifthesegoodsandserviceshavebeenusedtomakesuppliesstraddlingGSTregistrationorthesegoodshavebeenpartiallyconsumedbeforeGSTregistration.ThisisprovidedtheuseofthesegoodsandservicesafterGSTregistrationisforthemakingoftaxablesuppliesandnotexemptsupplies.

ForotherpurchasesofgoodsandservicespriortoGSTregistration,includingthoseacquiredmorethansixmonthsbeforetheGSTregistrationdateofthebusiness,existingpre-registrationGSTclaimruleswillapply.

ThischangewilltakeeffectforbusinessesthatareGST-registeredfrom1July2015.TheIRASwillreleasefurtherdetailsofthechangebyJune2015.

Points of view ► Currently,formovablepropertiesacquiredandputintousebeforeGSTregistration,thereisalreadyanadministrativeconcessiongrantedbytheIRAStoallowGST-registeredbusinessestoclaimtheGSTincurred on such moveable properties in full if the moveable properties are acquired by the business withinsixmonthsbeforethedateofGSTregistrationandarestillheldbythebusinessatthedateoftheGSTregistration.

Simplifying pre-registration GST claim rules for GST-registered businesses



► Forimmovableproperties(e.g.,land,officebuildings,factories,permanentbuildingfixtures)thatareputintousetomakesuppliesstraddlingGSTregistration,businessesarerequiredtoapportionthepre-registrationGSTincurred.Undertheproposedrules,businesseswouldnolongerberequiredtoapportiontheGSTincurredonimmovablepropertyacquiredwithinsixmonthsbeforetheGSTregistration date of the business even if the immovable property has been used to make supplies straddlingGSTregistration.

► ►Currently,pre-registrationGSTincurredonpropertyrentalandutilitiesisnotclaimableasitisconsideredasconsumedbeforetheGSTregistrationdate.OnlytheGSTincurredafterGSTregistration is claimable (subject to the general input tax conditions). Hence, if the property rental orutilitiesstraddleGSTregistration,thereisaneedtoapportionthepre-registrationGSTasonlytheportionattributabletotheperiodafterGSTregistrationdateisclaimable.Undertheproposedrules,businessesnolongerhavetoapportionthepre-registrationGSTonpropertyrentalandutilitiesacquiredwithinsixmonthsbeforetheGSTregistrationdateofthebusinesseseveniftheyhavebeenconsumedbeforeGSTregistrationaslongastheseexpensesarenotdirectlyattributabletoany supplymadebythebusinessbeforeGSTregistration.

► Similarlyforservices,businessesthathavecommencedmakingsuppliesnolongerhavetoapportionthepre-registrationGSTonservicesacquiredwithinsixmonthsbeforetheGSTregistrationdateaslong as the expenses incurred are not directly attributable to any supply made by the business before GSTregistration.

► The proposed rules on pre-registration input tax claims are subject to the general rules governing input tax claims (e.g., the input tax incurred must not be attributable to exempt supplies, must not be a disallowed input tax).

► ►NewlyGSTregisteredbusinessesfinditchallengingandtimeconsumingtoimplementthecurrentpre-registrationGSTrulesastheyinvolvedifferentapportionmentformula.Thoughtheproposedchangestothepre-registrationGSTrulesdonotentirelyeliminatetherequirementtoapportionpre-registrationGST(e.g.,GSTincurredmorethansixmonthsbeforetheGSTregistrationdatebybusinessesthathavecommencedmakingsuppliesbeforeGSTregistration),itisneverthelessawelcomereliefforbusinessesthatareGSTregisteredfrom1July2015.

Singapore Budget 2015 Synopsis 47


Standard GST/VAT rates in selected countries

5

6 (a)

7 (b)

7

8

10 (c)

10

10

10

12

15

17

0 2 4 6 8 10 12 14 16 18

Taiwan

Malaysia

Thailand

Singapore

Japan

Vietnam

Korea

Indonesia

Australia

Philippines

New Zealand

China

%

Country

%

Country

8

19

20

20

21

22

25

25

0 5 10 15 20 25 30

Switzerland

Germany

France

UK

Netherlands

Italy

Sweden

Denmark

Notes:(a) With effect from 1 April 2015(b) 10% rate will apply from 1 October 2015, unless further extension of the 7% rate is announced(c) 5% for certain goods


Miscellaneous

Miscellaneous 49Singapore Budget 2015 Synopsis

Miscellaneous

InrecognitionthatinnovationforSMEsdoesnotoftentaketheformofmajortechnologicalbreakthroughsbut rather, in other forms of innovation which are equally important such as process improvements and creating new brands, the Government has introduced and enhanced various non-tax measures to assist companies on the path of economic restructuring via innovation and internationalisation. These non-tax incentive progammes are discretionary in nature and applications must be submitted to the respective statutory boards administering the incentives.

Further details on each of these programmes will be released by the respective Ministries or administrating bodies subsequently.

Capability Development Grant (CDG) TheCDGisanexistingfinancialassistanceprogrammethatprovidessupporttoSMEsupgradingtheircapabilities across 10 development areas1 including the enhancement of service standards, adopting technology, staff training and overseas expansion.

The current support rate of up to 70% of the qualifying costs (up from the basic support level of 50%) was anenhancementannouncedinBudget2012foraperiodofthreeyears(until31March2015).

TomaketheCDGmoreaccessibletoSMEsengagingininnovationandproductivityimprovements,theGovernmentwillsimplifytheCDGapplicationprocessforprojectsbelowS$30,000.Asanadditionalsweetener, the Government will also extend the enhanced funding support level of up to 70% for three more years,to31March2018.

TheCDGisadministeredbySPRINGSingapore.

Collaborative Industry Projects (CIP)The CIP is an existing program which encourages industry players and partners (such as trade associations) insevenprioritysectorstocollaboratewithSMEsonthedevelopmentanddeploymentofproductiveandinnovative solutions which are scalable across the industry. Approved projects are eligible for up to 70% funding support for qualifying development and adoption costs.

Continuing on a targeted approach towards productivity and innovation, the Government has announced thatitwillincreasethenumberofCIPprojectsperyearfromfiveto15,andwillexpandtheCIPbeyondtheexisting seven priority sectors to cover all industry sectors.

TheCIPprogrammeisadministeredbySPRINGSingapore.

Enhancing support for innovation and internationalisation

1The10developmentareasare:(1)branddevelopment;(2)businessexcellence;(3)businessinnovation;(4)qualityandstandards;(5)financialmanagement;(6)humancapitaldevelopment;(7)intellectualpropertyandfranchising;(8)productivityimprovement;(9)serviceexcellence;and(10)technologyinnovation.


Miscellaneous

Partnerships for Capability Transformation (PACT)The PACT programme was introduced in 2010 to promote collaboration between large enterprises and SMEsinthemanufacturingsector.Itwasenhancedin2013tocovermoreindustrysectorsandoffer three models for collaborative projects in the following areas:

► Partners development - large enterprises help to upgrade the capabilities of new and existing SMEsuppliers

► Knowledgetransfer–largeenterprisessharetheirknow-howorcapabilitieswithlocalSMEs

► Co-innovation–largeenterprisesprovidetest-bedsfornewSMEtechnologiesandbecometheir potential reference customers

Approved PACT projects are eligible for up to 70% funding support for qualifying development costs.

ToencouragecollaborationbetweenmorelargeenterprisesandSMEs,theGovernmentwillextendandenhance PACT.

ThePACTprogrammeisadministeredbyvariousstatutoryboardsincludingSPRINGSingaporeand the EDB.

Market Readiness Assistance (MRA) and Global Company Partnership (GCP) grantsThe MRA and GCP are existing grant schemes to support companies to successfully internationalise through building and enhancing internal capabilities, manpower development, providing market access andaccesstofinancing.

Currently, the Government co-funds up to 50% of qualifying costs. In Budget 2012, the support level was increasedto70%forthreeyears(from1April2012to31March2015)forfourtypesofactivities,namelydesign, branding, intellectual property, and M&As.

The Government will now increase the grant support level from 50% to 70% for all activities under these twograntschemesforthreeyearsto31March2018.

TheMRAandGCPgrantsareadministeredbyIESingapore.

Venture debt risk-sharing programmeThe Government has announced the introduction of a pilot programme for venture debt risk-sharing. Aventuredebtisanalternativecapital-raisingoptiontoequityfinancingandtraditionalbankloans.

Underthisprogramme,theGovernmentwillprovide50%risk-sharingwithselectedfinancialinstitutionsover an initial period of two years to high-growth companies. Over this period, the aim is to catalyse about 100venturedebtloans,totallingapproximatelyS$500m.

ThisprogrammewillbeadministeredbySPRINGSingapore.


Miscellaneous

Revised Carbon Emissions-based Vehicle Scheme UndertheexistingCarbonEmission-basedVehicleScheme(CEVS),firstintroducedinJanuary2013aspartoftheGovernment’sefforttomaintainacleanerenvironmentinSingapore,allnewpurchasesofpassengercarswithlowcarbonemissionsenjoyuptoS$20,000inrebatesontheAdditionalRegistrationFee(ARF).ThosewithhighcarbonemissionshavetopayanARFsurchargeofuptoS$20,000.ThecurrentCEVSwillexpireon30June2015.

To encourage buyers to shift to purchasing low carbon emission models, rebates and surcharges will be increased for very low and high carbon emission vehicles respectively. The Government will extend the CEVSbytwoyearsfrom1July2015to30June2017,withtworefinements:

► Thesurchargeandrebatebandshavebeenupdatedtoreflectimprovementsinvehicleenginetechnology.

► ThehighestrebateandsurchargequantumhaveincreasedfromS$20,000toS$30,000.

FurtherdetailscanbefoundintheLandTransportAuthority’snewsreleasedated23February2015.

Excise duties TheGovernmenthasincreasedexcisedutiesonpremiumgradepetrol(RON97andabove,unleaded)by 20centsperlitreandintermediategradepetrol(RON90andabovebutunderRON97,unleaded)by 15centsperlitre.Thenewdutyrateforpremiumgradepetrolis64centsperlitreandforintermediategradepetrolis56centsperlitre.Assuch,excisedutyincreasesforpremiumandintermediategradepetrolrepresentanincreaseofabout45%and36%respectively.

One-year road tax rebate for petrol vehiclesWith effect from 1 August 2015, owners will be eligible for a one-year road tax rebate for the following petrol vehicles:

► ►20%rebateforcars.

► ►60%rebateformotorcycles.

► ►100%rebateforcommercialvehicles(taxis,busesandgoodsvehiclesincludinggoods-cum-passengervehicles).

The Government is granting the one-year road tax rebate to ease the transition to higher petrol duties.

Changes to vehicle taxes and petrol duties


Miscellaneous

As part of overall tightening of the foreign worker policy framework, gradual increases to the foreign worker levies were introduced by the Government in their bid to encourage long term productivity and reduce relianceonlowerskilledforeignworkers.ThesemeasureshavesucceededinsignificantlyslowingdownthegrowthoftheforeignworkforceinSingapore.Assuch,theGovernmenthasnowrecalibratedtheforeignworker levies to adjust the pace of the tightening measures.

LevyincreasesforbothSPassandWorkPermitholdersthatwerepreviouslyscheduledfor1July2015willbedeferredbyoneyear,to1July2016.ThisdeferralwillbeappliedacrossallsectorswiththeexceptionofWork Permit holder levies in the manufacturing and construction sectors.

Forthemanufacturingsector,levyratesforalltiersandskilllevelswillremainunchangedat1July2014ratesuntil30June2017.

Fortheconstructionsector,theforeignworkerlevyforaBasicSkilled(R2)workerwillberaisedfromS$550toS$650on1July2016andthereaftertoS$700on1July2017.TheMan-YearEntitlementwaiverlevyrateforaHigherSkilled(R1)workerwillbereducedfromS$750toS$600from1July2015.All other levy rates for this sector will remain unchanged. These levy changes are consistent with the Government’sdirectionforconstructionfirmstoupgradetheirexistingR2workersandretainR1workers.

Recalibrating foreign worker levies


Miscellaneous

To give employers more time to restructure and to adjust to rising costs in the tight labour market, theWageCreditScheme(WCS)willbeextendedfortwoyears(2016and2017).TheGovernmentwill co-fund20%(downfrom40%)ofthewageincreasesforSingaporeanemployeesearningagrossmonthlywageofuptoS$4,000subjecttoaminimumgrossmonthlywageincreaseofS$50.

Wageincreasesgivenin2015andsustainedin2016and2017willcontinuetobeco-fundedat20%.Likewise,wageincreasesgivenin2016andsustainedin2017willbeco-fundedat20%(seeTable1).

As with the current scheme, employers do not need to apply for the credit. They will receive their yearly payoutsautomatically,attheendofMarch2015,2016,2017and2018.

Theco-fundingisreducedtophaseoutWCSgraduallybeforetheschemeends.

Table 1: Illustration of extension of WCS benefits

Extension of the Wage Credit Scheme

Gross monthly wage increase

S$200 S$200 S$200

S$200 S$200

S$200

2015 2016 2017

Amount co-funded by the Government (40%) under existingWCS

S$80/month

Amount co-funded by the Government (20%) under extensionofWCS

S$80/month S$120/month


Miscellaneous

The Temporary Employment Credit (TEC) was announced in 2014 as a one-year measure to help employers cope with higher wage costs arising from a 1% increase in the CPF employer contribution rate from 1January2015.UndertheoriginalTEC,employerswouldreceiveanoffsetof0.5%ofwagesforSingaporeanandSingaporePRworkersin2015.

The TEC will be raised to 1% of wages in 2015. The TEC will also be extended by two years to help employers adjust to cost increases associated with the increase in CPF salary ceiling and the employer CPF contribution rates for older workers.

The CPF Board will automatically assess employers’ eligibility for the TEC, based on the regular monthly CPFcontributionsfortheirSingaporeanandSingaporePRemployees.TheTECpayoutswillbemadeinOctober(forwagespaidfromJanuarytoJuneofthesameyear)andApril(forwagespaidfromJulytoDecember of the preceding year).

Extension and enhancement of the Temporary Employment Credit

TheSpecialEmploymentCredit(SEC)wasfirstintroducedinBudget2011toencourageandsupportemployerstovoluntarilyemployolderSingaporeans.InBudget2014,theSECwasenhancedwithemployersbeingentitledtoanSECofupto8.5%ofanemployee’smonthlywagewheretheemployeeisaSingaporeanagedabove50years.

TheGovernmenthasraisedtheSECbyanadditional3%foremployerswhohireSingaporeanworkersaged65yearsandabovefrom1January2015to31December2015.TheSECpayoutis11.5%ofwagesforsalariesuptoS$3,000permonth.ForthosewithmonthlysalariesbetweenS$3,000andS$4,000,theSECpayoutreduceslinearlyfrom11.5%ofthewages(orS$345)toS$0.

Employers who make regular CPF contributions for their workers need not take further action to receive theSEC.TheCPFBoardwillautomaticallyassessanemployer’seligibilityandnotifythembeforepaymentsaremade.TheSECwillbepaidinSeptember2015forworkdonefromJanuarytoJune2015andMarch2016forworkdonefromJulytoDecember2015.

Enhancement of the Special Employment Credit


If you would like to know more about our services or the issues discussed please contact:

Adrian Ball Managing Partner – Tax, Asean [email protected]

Chung-SimSiewMoonPartnerandHeadofTax,[email protected]

Tax leadership

Singapore Tax Partners and Directors Business Tax Services

Tan Lee [email protected]

Lim Gek [email protected]

Angela [email protected]

Helen [email protected]

Choo Eng [email protected]

[email protected]

[email protected]

Latha [email protected]

Tan Bin Eng [email protected]

Tan Ching [email protected]

Tax Performance AdvisoryMichele Chen [email protected]

Global Compliance and Reporting

[email protected]

Ang Lea Lea [email protected]

Chai Wai [email protected]

Cheong Choy [email protected]

[email protected]

[email protected]

[email protected]

[email protected]

Corporate ServicesDavid [email protected]

Corporate Secretarial Support [email protected]

Financial Services Organization

Amy [email protected]

[email protected]

[email protected]

Desmond [email protected]

Hugh von [email protected]

Ben Ellis [email protected]

Human Capital

Grahame [email protected]

[email protected]

Kerrie [email protected]

Tina [email protected]

Lee [email protected]

Pang Ai [email protected]

Grenda [email protected]

[email protected]

[email protected]

Indirect Tax

Global TradeAdrian [email protected]

[email protected]

GST [email protected]

Kor Bing Keong [email protected]

Chew Boon Choo [email protected]


International Tax Services

International TaxChung-SimSiewMoon +6563098807 [email protected]

Chester [email protected]

Aw Hwee [email protected]

[email protected]

Transfer PricingLuis [email protected]

[email protected]

[email protected]

SenakaSenanayake+6563098040senaka-k.senanayake@ sg.ey.com

Asia-Pacific Tax CenterAustralia Tax [email protected]

India Tax Desk Gagan Malik [email protected]

Korea Tax Desk Cho Hyun-Mi [email protected]

UK Tax DeskDaniel Dickinson [email protected]

Life SciencesRichard Fonte [email protected]

Operating Model EffectivenessMatthew [email protected]

Paul [email protected]

Transaction Tax

Russell Aubrey +6563098690 [email protected]

Darryl Kinneally [email protected]

[email protected]

AseanAdrian Ball [email protected]

GuamLance Kamigaki [email protected]

[email protected]

[email protected]

MyanmarU Tin Win+951371293/604/[email protected]

Kasem [email protected]

PhilippinesWilfredoVillanueva+6328948180wilfredo.u.villanueva@ph.ey.com

Singapore (including Brunei)[email protected]

Sri LankaDuminda Hulangamuwa+94115578101duminda.hulangamuwa@ lk.ey.com

ThailandYupaWichitkraisorn+6622640777(Ext.77002)[email protected]

Vietnam (including Cambodia and Laos)Christopher [email protected]

Financial Services OrganizationAmy Ang [email protected]

Government & Public SectorTan Bin Eng [email protected]

ResourcesBen [email protected]

Asean Tax Market Segment Leaders

Business Tax ServicesTan Lee [email protected]

Global Compliance and [email protected]

Human CapitalGrahame Wright+6563098701 [email protected]

Indirect TaxAdrian Ball [email protected]

International Tax [email protected]

Transaction [email protected]

Asean Sub-Service Line Leaders



Tax services in SingaporeOurtaxprofessionalsinSingaporeprovideyouwithdeeptechnicalknowledge,bothglobally and locally, combined with practical, commercial and industry experience. We draw on our global insights and perspectives to build proactive, truly integrated directandindirecttaxstrategiesthathelpyoubuildsustainablegrowth,inSingaporeand wherever else you are in the world.

usedtopreparestatutoryfinancialand taxfilingsincountriesaroundtheworld.These include:

• Statutoryaccountingandreporting• Book-keeping and accounting support• Corporate secretarial• Tax accounting and provisions• Taxcompliancefiling

Business Tax Compliance Our market-leading approach to tax compliance combines a standard global compliance process and web-based tools to give you and your team the visibility and control you need to manage your tax compliancefunctioneffectively.Youcanaccess the resources of our dedicated compliance and reporting professionals in one country or globally with a single point of contact.

Tax Accounting To help you respond to today’s increasing demands for transparency, we provide assistance in these areas:

• Supportingquarterlyandannualtaxprovision calculations

• Preparing and/or review of deferred tax provisionsunderUSGAAPandIFRS

• Provision-to-return analyses• Training and advising on tax accounting

principles and tax accounting implications of new accounting standards

• Assisting in evaluating and/or review of uncertain tax positions under USGAAPandIFRS

Corporate Services OurCorporateServicesteamsupportsyour business in the following areas: entity formation and company secretarial matters, the preparation of management andstatutoryfinancialstatements,monthly book-keeping and payroll outsourcing. We work with all stakeholders to help you meet deadlines and comply with statutory requirements.

Company secretarial: We help our clients andtheirofficerscomplywiththeSingaporeCompaniesActrequirementsprincipally and other relevant regulations from a company secretarial perspective. In addition to compliance matters, we are often involved in corporate structuring work such as share capital reduction and share buy-back initiatives.

Accounting: From day-to-day to complex transactions, our accounting professionals assist to facilitate that the transactions are recorded accurately, timely and in accordance with applicable accounting standards. We are also familiar with all aspects of the accounting function like management reporting, debtors/ creditors controlandXBRLconversion.

opportunities based on project parameters for our clients, provide suggestions to avail of incentive opportunities, strategise the approach for discussions with the authorities, facilitate meetings with the authorities and our clients, assist in applications for relevant incentives, and assist in the process design for incentive maintenance, tracking and reporting obligations. We also conduct regional incentive studies where we provide cross-country comparisons of potential incentives for site location. We also assist technical personnel to assess the potential qualifying R&D projects, workwithyourfinanceandtaxteamsto identify qualifying R&D expenditure, prepare or review the R&D plans for submission to tax authorities, and assist you with queries raised by the authorities surrounding the claims.

Private Client Services OurPrivateClientServicespracticeofferstax-related domestic and cross-border planning and compliance assistance to business-connected individuals and their associated entities. With dedicated resources in major markets around the world, we assist individual clients needing a wide range of tax services including tax compliance, tax planning, and tax advice relating to their business interests,investmentsandotherfinancial-related assets. Our approach provides professionally prepared returns, related calculations and advice, as well as integrated tax planning.

Business Tax Advisory Our Business Tax Advisory professionals draw on their diverse skills and experience to deliver advice tailored to your business, from planning through to helping with implementation, reporting and maintaining effective relationships with the tax authorities. We bring a deep understanding of critical tax issues and key sectors. We canhelpyoureduceinefficiencies,mitigaterisk and make the most of opportunities, building sustainable tax strategies that can help your business succeed.

Global Compliance and ReportingOur Global Compliance and Reporting (GCR) practice can help you meet you reporting requirements wherever you do business. GCR comprises the key elements ofacompany’sfinanceandtaxprocesses

Business Tax ServicesTax Policy and Controversy Our global tax policy network has extensive experience helping develop policy initiatives, both as external advisors to governments and companies, and as advisors inside government. Our dedicated tax policy professionals and business modelerscanhelpaddressyourspecificbusiness environment and improve the chance of a successful outcome.

Our global tax controversy network helps you address your global tax controversy, enforcement and disclosure needs. We focusonpre-filingcontroversymanagement to help you properly and consistentlyfileyourreturnsandpreparethe relevant back-up documentation. We leverage the network’s collective knowledge of how tax authorities operate, and increasingly work together to help resolvedifficultorsensitivetaxdisputes.

Tax Performance Advisory Our Tax Performance Advisory practice focuses on helping your tax function enhance performance. We help you build strong compliance and reporting foundations, effective risk management protocols and a high performing tax function. We have experience delivering projectstocompaniesofallsizesacrossall aspects of the tax life cycle: planning, provision, compliance and controversy. Our holistic approach allows us to speak thesamelanguageasyourtax,finance,information technology and business professionals, which is necessary to drive enhanced tax function performance across the enterprise.

Quantitative Services OurQuantitativeServicesnetworkassistsyou with analysing tax opportunities, typically related to large data sets, efficientlyandsystematicallyidentifyingmulti-country tax regulations and the benefitsthatcanbeattained.Ourservicesinclude assistance with: accounting methods and inventory, research incentives,flow-throughentityplanning,and capital assets and incentives. These approaches can help our clients improve cashflow,planforcashtaxandeffectivetax rates and create refund opportunities.

Our Business Incentives Advisory team assists in incentives negotiations for our clients.ForSingaporeincentives,weevaluate and assess possible incentive


Payroll: Together with our Human Capital and Accounting professionals, we provide comprehensive and holistic payroll outsourcing services. We assist to facilitate that your employee payrolls are computed inaccordancewiththeSingaporeEmployment Act and with the Ministry of Manpower regulations.

Financial Services TaxOurFinancialServicesTaxteamisdedicated to delivering value to our clientsinthefinancialservicesindustrywho are facing a constantly evolving tax landscape. Whether you are in Banking and Capital Markets, Asset Management, or the Insurance sector, we will be able to assist you in issues including managing your direct and indirect tax obligations and tax risks, navigating the complex tax rules across jurisdictions, pursuing tax incentives or concessions, dealing with transfer pricing issues, handling tax authority queries, assessing your tax provisions, and analysing your uncertain tax positions.

We can also advise you on the tax implicationsofnewfinancialproductsor transactions, and assist in applying for Revenue rulings where applicable. We can advise on the structuring of your new businesses and new funds, or on the review of such structures in an internal reorganisation or in the event of mergers or acquisitions, from the tax perspective.

Human CapitalOur Human Capital services offer a “total picture” perspective, integrating global mobility and talent and reward. Through our comprehensive approach, we can help you make the most of your investment in your people.

Mobility Services Our Mobility services help our clients manage the complex compliance, reporting and risks inherent in deploying a globally mobile workforce. We offer a suite of mobility services that can help make your global mobility program more strategic, including: global mobility tax and advisory, global immigration, assignment services, international social security and business traveller services.

Talent and Reward Services Our Talent and Reward services help clients address the range of issues that are associated with reward strategies, talent programs and maintaining workforce effectiveness. To reach its potential, an organisation must continuously improve its performance — and sustain that improvement. We can help clients optimise these particular business areas.

Indirect TaxGlobal Trade Our network of Global Trade professionals help you to operate more effectively in moving goods around the world. We develop and implement strategies to help you to manage duty costs by utilising free trade agreements, special programs, and transactional structuring. We can help you proactively manage the risks of global trade, improve your international trade compliance and increase the operational effectiveness of your supply chains.

Our core offerings include strategic planning tomanagecustomsandexciseduties;tradecompliancereviewsforimportsandexports;internalcontrolsandprocessimprovement;and participation in customs supply chain security programs.

GST Services Our network of dedicated Indirect Tax professionalscanadviseontheGSTtreatment of transactions and supplies andhelpresolveclassificationorotherdisputes and issues with the authorities. We provide assistance in identifying risk areas and sustainable planning opportunities for indirect taxes throughout the tax lifecycle, helping you meet your compliance obligations and your business goals around the world.

We provide you with effective processes to help improve your day-to-day reporting for indirect tax, reducing attribution errors, reducing costs and ensuring indirect taxes are handled correctly. We can support full orpartialGSTcomplianceoutsourcing,identify the right partial exemption method and review accounting systems.

International Tax ServicesInternational Tax Our dedicated International Tax professionals assist our clients with their cross-border tax structuring, planning, reporting and risk management. We can help you build proactive and integrated global tax strategies that address the tax risks of today’s business and achieve sustainable growth.

Global Tax Desk Our market-leading Global Tax Desk network — a co-located team of highly experienced professionals from multiple countries — is located strategically in major business centers so that our desks can respond to your challenges immediately and cost-effectively,avoidingtimezonebarriersand the high price of international travel.

The desks work as a team — tackling the same problem from all sides — thoughtfully identifying considerations with your cross-border transaction. We work with you to help you manage global operational

changes and transactions, capitalisation and repatriation issues, transfer pricing and your supply chain — from forward planning, through reporting, to maintaining effective relationships with tax authorities.

Transfer Pricing Our Transfer Pricing professionals help you build, manage, document, review and defend your transfer pricing policies and processes — aligning them with your business strategy.

Here’s how we can help you:

• Strategyandpolicydevelopment• Governance optimisation and decision

making process to help: • Reduce impact of year-end

adjustments• Monitor transfer pricing footprint• Coordinate across organisation

• Global or regional assistance to support transitions to new documentation requirements

• Controversy risk assessment, remediation or mitigation as a result of documentation requirements

• Global transfer pricing controversy and risk management

Operating Model Effectiveness Our multi-disciplinary Operating Model Effectiveness teams work with you on operating model design, business restructuring, systems implications, transfer pricing, direct and indirect tax, customs,humanresources,financeandaccounting. We can help you build and implement the structure that makes sense for your business, improve your processes and manage the cost of trade.

Transaction TaxEvery transaction has tax implications, whether it’s an acquisition, disposal, refinancing,restructuringorinitialpublicoffering. Understanding and planning for these implications can mitigate transaction risk, enhance opportunity and provide crucial negotiation insights. Our Transaction Tax practice helps you make informed decisions and navigate the tax implications of your transaction.

We mobilise wherever needed, assembling a personalised, integrated global team to work with you throughout the transaction life cycle, from initial due diligence through post-deal implementation. Our local teams employ a consistent approach globally to provide you with a coordinated understanding of the relevant jurisdictional and multi-disciplinary tax issues. We can suggest structuring alternatives to balance investor sensitivities, promote exit readiness and help improve prospective earnings or cash flows—raisingopportunitiesforimprovedreturns on your investment.

Glossary of termsThefollowingdefinitionsapplythroughoutthisbudgetsynopsisunlessotherwisestated:

CPF – Central Provident FundEDB – SingaporeEconomicDevelopmentBoardFRS – FinancialReportingStandardsFY – FinancialyearGovernment – GovernmentofSingaporeGST – GoodsandservicestaxIESingapore – InternationalEnterpriseSingaporeIRAS – InlandRevenueAuthorityofSingaporeITA – Income Tax ActM&A – Merger and acquisitionMAS – MonetaryAuthorityofSingaporeMinister – Minister for Finance MNC – MultinationalcorporationMoF – Ministry of FinancePE – Permanent establishmentPIC - Productivity and Innovation Credit PR – Permanent Resident R&D – Research and developmentREIT – Real estate investment trustSGX – SingaporeExchangeSME – SmallandmediumenterpriseSPRING – Standards,ProductivityandInnovationBoard(SPRINGSingapore)SPV – SpecialpurposevehicleWHT – Withholding tax YA –YearofAssessmentYAs –YearsofAssessment


Tax thought leadership

Ernst&YoungSolutionsLLP’sTaxpracticeaimstogiveyouinsightson the tax issues that matter in today’s fast-changing business environment.Tofindouthowthesetaxissuesimpactyourbusiness, read You and the Taxman.

Past issues of You and the Taxmancanbedownloadedfromhttp://www.ey.com/SG/en/Services/Tax/Library---You-and-the-taxman

YouandtheTaxman Issue 1, 2015

YouandtheTaxman Issue2,2013








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This document contains general information and should not be construed as legal, tax,accountingoranyotherprofessionaladviceorservice.Youshouldconsultwithaprofessional advisor familiar with your particular factual situation for advice concerning specifictaxorothermattersbeforemakinganydecision.Ernst&YoungSolutionsLLPdisclaims all liability and responsibility to you in respect of the content in this document.

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