(1) ONE-OFF MEASURES FOR BUSINESSES
(A) Helping Companies with Rising Costs
(A1) Corporate Income Tax Rebate or (A2) SME Cash Grant [$560 million]
Recognising that many companies have seen significant cost pressures in the last year, the Government will provide a set of one-off measures for companies this year:
- 20% corporate income tax rebate, capped at $10,000 for Year of Assessment (YA) 2011;or
- SME Cash Grant amounting to 5% of their revenues in YA2011, subject to a cap of $5,000. This is meant to help small companies which may not benefit fully from the corporate tax rebate as they pay very little taxes. To qualify, these companies must have made CPF contributions in YA2011.
Companies will automatically receive the higher of the corporate tax rebate or the grant when IRAS assesses their tax returns.
(B) Encouraging Employment of Older, Low-wage Workers
(B1) Special Employment Credit [$35 million in FY2011]
To encourage employers to attract and keep older workers, the Government will provide employers with a one-off Special Employment Credit (SEC) for older workers covered by the Workfare scheme. Employers will receive a SEC of up to 50% of employer CPF contributions for workers aged 55 to 59, and up to 80% of employer CPF contributions for workers aged 60 and above. The Credits will be paid out over three years.
More details will be announced by the Ministry of Manpower.
The Government will provide a boost to help industries, enterprises and workers to restructure, upgrade their efficiency and create more value. Enterprises will also benefit from enhanced support to grow their revenues, through internationalisation and innovation.
(C) Boosting Skills and Productivity
(C1) Doubling our Investment in the National Productivity Fund [$1 billion]
To ensure continued support beyond the first five years for the long-term effort to restructure our industries, the Government will top up the National Productivity Fund (NPF) with another $1 billion this year. This will bring the total fund size to its target of $2 billion.
(C2) Enhancing Productivity and Innovation Credit [$520 million a year in total]
From YA2011, the Government will make the following enhancements to the Productivity and Innovation Credit (PIC), which was introduced last year to promote investments in six categories of productivity and related activities, namely:
- Research and Development
- Approved Design
- Acquisition of Intellectual Property
- Registration of Intellectual Property
- Purchase/Lease of Prescribed Automation Equipment
- Training of Employees
Tax Deduction, Tax Deferral Option & Cash Payout Option
Businesses will be allowed to deduct from their taxable income 400% of the first $400,000 of expenditure for each of the above six categories, up from the 250% tax deduction and the cap of $300,000 of expenditure for each category currently. A company can now get $680 in tax savings for every $1,000 invested, up from $425 currently.
For up to $100,000 of qualifying expenditure incurred in the current year, businesses can apply to defer the same quantum of tax payable in the same year. This deferred tax is paid next year. The tax deferral applies for expenditures incurred for YA 2012 to YA 2015.
The Government will also enhance the current cash payout option under the PIC scheme, which was introduced to benefit SMEs who pay little or no taxes, but wish to invest in productivity. Instead of claiming tax deduction, businesses can opt for a cash payout of up to $30,000 for the first $100,000 of their investments, up from a maximum grant of $21,000 currently.
Other Changes to PIC
- Currently, businesses can combine the annual expenditure cap for each category for YA2011 and YA2012. This is further extended such that businesses can combine the annual expenditure cap for YA2013 to YA2015. This means that businesses can claim 400% tax deduction on up to $800,000 expenditure per category for YA2011 and YA2012 combined; and up to $1,200,000 expenditure per category for YA2013 to YA2015 combined.
- PIC benefits can now be claimed for expenditure on R&D done abroad, in addition to spending on R&D done in Singapore.
(C3) Raising Employer CPF Contribution Rate
The employer CPF contribution rate will be raised by 0.5 percentage points, bringing the total CPF contribution rate to 36%.
(C4) Revision in CPF Salary Ceiling
The CPF salary ceiling will be revised from $4,500 to $5,000 per month to keep pace with income growth in recent years.
Both changes in contribution rate and salary ceiling will take effect in September 2011, to give employers sufficient time to adjust to the changes.
(C5) Further Increases in Foreign Worker Levy
The Government will introduce further Foreign Worker Levy increases for all sectors. Most of the additional measures will be phased-in at six-monthly intervals from 1 January 2012 till 1 July 2013.
The average levy per foreign worker will be further raised by $60 for the Manufacturing sector, $180 for the Services sector and $200 for the Construction sector. These are over and above the earlier increases announced in Budget 2010.
To manage the continued increase in demand for S Pass holders, the Government will also increase the levy rates for this category from $50 prior to the adjustments made on 1 July 2010, to $300–$450 by July 2013.
The Ministry of Manpower and Ministry of National Development will release more details on 21 February 2011.
(D) Supporting Enterprise Growth
(D1) Enterprise Development Fund[$850 million]
The Government will commit $850 million as part of the Enterprise Development Fund (EDF) over the next five years, to be administered by SPRING Singapore and IE Singapore. This is a substantial increase of about 45% from the previous five-year tranche. One of the priorities of the EDF is to help high-growth enterprises in their overseas expansion.
(D2) Foreign Tax Credit Pooling[$22 million a year]
To support businesses that are globalising and earning a larger share of their income overseas, the Government will introduce foreign tax credit pooling to facilitate remittance of foreign income to businesses’ Singapore bases. Such pooling will give businesses greater flexibility in the use of their foreign tax credits, reduce their tax payable, as well as simplify tax compliance. This measure will take effect from YA2012.
(D3) Catalysing Cross-Border Financing
The Government aims to work with private sector players to catalyse project financing. The Government is working with Temasek Holdings to develop this initiative. Temasek is in discussions with potential partners on establishing an institution that is financially and commercially viable and sustainable.
Political Risk Insurance
To complement the efforts on project financing, the Government is also in advanced discussions to partner with multilateral agencies to offer political risk insurance for infrastructure projects. This is especially relevant for Singapore corporates venturing into unfamiliar markets.
The Government is exploring a model by which the current trade finance schemes can be outsourced to existing specialist providers. As these providers have well-developed risk assessment and underwriting capabilities, they would be able to provide trade finance solutions that better meet the needs of SMEs. The Government will provide an update on this study by the second half of this year.
(D4) National Research Fund Top Up [$1 billion]
To support the broadening of our research agenda and increasing commercial outcomes from the Research, Innovation and Enterprise 2015 plan, the Government will further top up the National Research Fund by $1 billion this year.
(D5) Enterprise Development Assistance Scheme [$2.5 billion]
The Government will set aside $2.5 billion under the Economic Development Assistance Scheme (EDAS) to enable EDB to continue its efforts to strengthen Singapore’s value proposition as an Asian base for corporate head-quarters and other high-value activities. This will support new efforts, such as developing a talent pool of professionals and executives with a strong understanding of Asian markets and businesses, as well as attracting mid-sized global enterprises to set up their first Asian base in Singapore.
(D6) Key Tax Changes in Strategic Business Sectors
To help banks access more diversified funding sources for their lending business and strengthen Singapore’s position as a regional funding centre, the Government will exempt from withholding tax all interest payments made by banks and similar financial institutions to non residents1 for the purpose of their trade or business. This will take effect from 1 April 2011.
The Government will also extend the tax exemption schemes for Captive Insurers, Specialised Insurers and Marine Hull and Liability Insurers to grow their technical expertise and underwriting capacity in Singapore.
The Government will introduce the Maritime Sector Incentive (MSI) with effect from 1 June 2011. The scheme will streamline and enhance existing maritime tax incentives. New tax benefits, such as certainty of withholding tax exemption for interest payments on loans to build or buy ships, will also be introduced to further entrench international shipping operators and encourage the growth of the shipping-related services sector in Singapore.
To further promote Singapore’s maritime sector, the Government will expand the scope of GST zero-rating to repair and maintenance services performed on ship parts and components. This will take effect from 1 October 2011.
To support growth in the biomedical sector, the Government will grant GST relief for imported clinical trial materials, as well as enhance the Approved Contract Manufacturer and Trader Scheme. This will take effect from 1 October 2011.
Specified Services Supplied to Overseas Persons
The Government will allow GST zero-rating for specified services supplied to overseas persons, if they are performed on goods kept in qualifying specialised warehouses and eventually sent overseas. This scheme will help to promote the use of specialised storage facilities that store high-value collectibles such as art and antiques. This will take effect from 1 October 2011.
To strengthen Singapore’s commodity markets, the Government will enhance the Global Trader Programme (GTP) to qualify all derivative trades under the scheme. This enhancement will apply to income from qualifying trades in the new qualifying derivative instruments, derived by a GTP company from YA2012.
(E) Miscellaneous Tax Initiatives
(E1) Helping Self-Employed Persons
To help self-employed persons (SEPs) increase their savings under the CPF scheme, the Government will grant tax deduction to eligible companies that make voluntary contributions to the Medisave accounts of the SEPs who work with them, up to $1,500 per SEP per year. SEPs will be exempted from paying tax on these contributions. This will take effect from YA 2012.
(E2) Removing Radio and Television Licence Fees
The radio and television licence fees – $110 per television set for non-residential premises and $27 annually for commercial vehicle radios – will be removed permanently from this year. The annual $330 licence fee for dealers that engage in the import or sale of radio and television sets will also be removed. Those who have yet to pay this year’s radio and television fees will not have to make payment, while a refund will be given to those who have already paid. This will cost the Government approximately $120 million per year.
(E3) Tax Deductions on Pre-Commencement Expenses
Businesses will be allowed to claim tax deductions on pre-commencement expenses incurred in the accounting year immediately before the year in which they earn their first dollar of trade receipts. This will take effect from YA2012.
(E4) Tax Deductions for Employee Equity-Based Remuneration Scheme
The Government will allow for tax deductions when companies, for the purpose of their equity-based remuneration schemes, purchase their parent companies’ shares through special purpose vehicles that are set up as trustees to administer the schemes. This will take effect from YA2012.
(E5) Excise Taxes on Non-Cigarette Tobacco Products
The excise taxes on two classes of non-cigarette tobacco products2 will be raised by 5% to 10%. This will take effect from the time of announcement on 18 February 2011.
(E6) Extend Green Vehicle Rebate Scheme
The Green Vehicle Rebate Scheme will be extended for another year until 31 December 2012.
1 Excluding Permanent Establishments in Singapore.
2 The two classes of non-cigarette tobacco products are: (i) Beedies, ang hoon and smokeless tobacco; and (ii) Unmanufactured tobacco, cut tobacco and tobacco refuse. Further details are in Annex A-2.