Singapore Budget. Commentary 2013

Transcription

1 Singapore Budget Commentary 2013

2 SINGAPORE BUDGET 2013 Commentary by MGI Menon & Associates Executive Summary Finance and Deputy Prime Minister Mr Tharman Shanmugaratnam presented the 2013 Budget on 25 February Focus The main focus of this year s Budget is on achieving continued economic growth with a commitment for an inclusive society with greater social mobility and better incomes and jobs for Singaporeans of all classes, especially the lower and middle income classes. Productivity continues to be a running theme with the stated objective of reducing reliance on foreign workers. Disclaimer and Scope This Report is for the guidance of clients of MGI Menon & Associates. Anyone reading this Report should not place any reliance on its contents. They should instead seek appropriate professional advice. We will not be responsible for the results of any decisions or actions taken or omitted by anyone who had relied on the information provided herein. This Report excludes Budget initiatives announced for the following: 1. Financial Services Sector 2. Benefits for Individuals and Households 3. Construction Industry All figures are in Singapore Dollars. 1

3 BUDGET 2013 HIGHLIGHTS Corporate Tax The headline tax rate remains at 17%. The existing concessions for new companies and companies with Chargeable Income (CI) of $300,000 will continue. Changes A 30% tax rebate up to a maximum of $30,000 per Year of Assessment (YA) would be given to companies for YAs 2013 to The effective tax rates and comparison of corporate tax rates are as follows: Chargeable Income $ Table 1 - Effective Tax Tates Effective Tax Rate * % 300, , ,000, *After partial exemption of $152,500 and rebate of 30% (capped at $30,000) Table 2 - Comparison of Corporate Tax Rates Tax Rate (%) Ireland Hong Kong Singapore Taiwan Thailand UK China Malaysia Indonesia India USA 2

4 Table 2 shows that Singapore s corporate tax headline rate already compares favourably with rates in other countries. However, as shown in Table 1, with the existing exemptions and new rebate, a company with CI of $1,000,000 will be taxed at an effective rate of 11.4%, one of the lowest by international comparisons. Full Tax Exemption The full tax exemption on $100,000 of CI granted to newly incorporated companies would continue. However, investment holding or property development companies incorporated on or after 26 February 2013 shall not be eligible for full tax exemption. Productivity and Innovation Credit (PIC) Scheme Benefits under the PIC scheme, first introduced in 2010 and subsequently enhanced in 2011 and 2012, were further enhanced in The benefits are: (a) 400% tax deduction for up to $400,000 qualifying expenditure on the following activities: (1) Acquisition of Intellectual Property (IP) (2) Investment in Automation (3) Investment in Design (4) Registration of IP (5) Research and Development (6) Staff training (b) Cash payout option Instead of claiming the tax deduction, businesses can opt for a cash payout of 60% on qualifying expenditure up to $100,000 (ie maximum cash payout of $60,000). (c) PIC Bonus (New benefit) Businesses that spend a minimum of $5,000 on qualifying expenditure in any YA from 2013 to 2015 will receive a dollar-for-dollar matching cash bonus up to a maximum of $15,000 for the 3 YAs. 3

5 Liberalisation of Scope of PIC equipment Any equipment that enhances productivity and automates or mechanises the work processes of a business shall qualify for PIC benefits. Expiry and Withdrawal of Schemes As the following schemes are now considered not to have any relevance/merits, they will be allowed to expire/withdrawn on the following dates: - Tax Incentive Scheme for Family-Owned Investment Holding Companies (31 March 2013) - Overseas Enterprise Incentive Scheme (25 February 2013) - Approved Cyber Trader Scheme (25 February 2013) Marine Sector The existing Maritime Sector Incentive for approved International Shipping Enterprise Award (MSI-AIS) will be increased from 30 years to 40 years. Companies granted the MSI-AIS for a tenure of 10 years can now renew them up to 40 years, subject to approval. Workfare Income Supplement (WIS) The WIS scheme was introduced to supplement the income of low-wage workers. The scheme will be enhanced as follows: (a) The income cap is now increased from $1,700 a month to $1,900 a month. (b) The WIS payout will also be increased from $2,800 to $3,500 per year for employees aged 60 years and above. There are also increases to the maximum WIS payout for employees who fall within other age bands and for the self-employed. 4

6 Increase in CPF Contribution for Low-Wage Workers From 1 January 2014, the CPF contribution rates for employees earning between $50 and $1,500 will be as follows: Table 3 - New CPF Contribution Rates Income Band >$50 to $500 CPF Contribution rates Employer Employee CPF contributions are not mandatory >$500 to $750 Full CPF contribution rates of workers earning $1,500 and above Increases gradually from 0% to the full contribution rates >$750 to <$1,500 Full CPF contribution rates of workers earning $1,500 and above Wage Credit Scheme (WCS) As part of a push for productivity increase, the WCS will be introduced wherein the Government will co-fund 40% of wage increases given to Singaporean employees earning a gross monthly wage of up to $4,000. Wage increases given in 2013 to 2015 shall qualify for WCS. The qualifying conditions are as follows: (a) The wage increase must be at least $50; (b) The employee must be a Singapore Citizen, earning a gross monthly wage of up to $4,000; (c) The employee was employed for at least 3 months in 2012 and is on the employer s payroll for at least 3 months in 2013; and (d) The employer will be automatically included under WCS if it is an entity registered in Singapore and is not a Government-related entity. Example for WCS If a wage increase of $100 is given to a staff in 2013, the Government would co-fund $40 for the years 2013 to If an additional increase of $100 is given each in 2014 and 2015, the co-funding will increase to $80 and $120 in 2014 and 2015 respectively. 5

7 If the wage increase results in the employee s gross monthly wage crossing the $4,000 threshold, then that portion of the wage increase will not be eligible for co-funding. Employers should note that after 2015, the entire increase will have to be borne by the employer. Hence, in a practical sense, the expectation is that the productivity of the employee must increase to the extent of the total wage increase. Work Passes Eligibility criteria for S Pass and Employment Pass holders will be tightened. The minimum qualifying salary for S Pass will increase from $2,000 to $2,200 per month. The number of S Passes will continue to be subject to caps. Granting of Employment Passes would also be tightened to allow for qualified Singaporeans to be given a fair chance to be employed. More details will be provided by the Ministry of Manpower. Foreign worker levies will also be increased in July 2014 and July In addition, the Dependency Ratio Ceiling (DRC), which is the number of foreign workers allowed relative to the local employees, will also be tightened as shown below: Table 4 - Changes to DRC Sector Changes Marine The present ratio of 1 foreigner to 5 locals will be reduced to 1 foreigner to 4.5 locals from January 2016 and further reduced to 1 foreigner to 3.5 locals from January 2018 Work permits Reduced from 45% to 40% Services S Pass Reduced from 20% to 15% The new DRCs will take effect from 1 July 2013 for new applicants and from 1 July 2015 for existing permit holders and renewals. All other sectors No change 6

8 Commercial Vehicles Certificates of Entitlement (COEs) for commercial vehicles can now be renewed for a period of two five-year tenures. Previously the COEs could only be renewed for five years with no further extension or for 10 years at a correspondingly higher cost. A 30% road tax rebate will be granted for goods vehicles, buses and taxis for one year. Other Matters The following new initiatives have also been introduced: (a) Collaborative Industry Project To encourage the likes of trade associations to form consortia to develop scalable solutions for mass adoption. (b) Partnerships for Capability Transformation This is to support the productivity and capabilities of SMEs by allowing them to work with Large Enterprises (large local enterprises and MNCs), and the likes of BCA, EDB, IDA and SPRING Singapore. (c) Intellectual Property (IP) Scheme The Government will partially underwrite the value of patents that are used as collaterals in financing for SMEs. (d) Land Productivity Grant This would support consultancy fees and overseas relocation costs for companies that relocate some operations offshore, resulting in land intensification of at least 0.1 hectares in Singapore. Enhanced Training Support for SMEs (ETS) SMEs with staff strength of not more than 200 employees will be eligible for ETS. Certifiable courses supported by the Workforce Development Agency (WDA) will be eligible for the following: - 90% course fee subsidy, capped at $30 per hour - 90% course fee subsidy for courses at Continuing Education and Training centres - $15 per hour for in-house certifiable training - Absentee payroll of 80% basic hourly salary, capped at $7.50 an hour 7

9 Individual Taxation (for Resident Individuals) For YA 2013, a personal tax rebate of 30%, capped at $1,500, will be given to individuals below 60 years. The rebate will be increased to 50% for those aged 60 years and above, but subject to the same cap of $1,500. Accommodation Benefits From YA 2015, accommodation benefits will be taxed (brought to taxable income) at their market values as follows: (a) The taxable value of housing accommodation will be the Annual Value of the premises less any rent paid by the employee. (b) The taxable value of hotel accommodation will be the actual cost of the hotel stay. (c) The taxable value of furniture and fittings will be based on a percentage of the Annual Value of the accommodation. More details on the above will be announced by IRAS by October Property Taxes The property tax structure for residential properties will be amended for both owner occupied and non-owner occupied properties as follows: Table 5 - Property Tax Rates for Owner Occupied Residential Properties Annual Value Tax Rates From 1 Jan 2014 From 1 Jan 2015 First $8,000 0% 0% Next $47,000 4% 4% Next $5,000 5% 6% Next $10,000 6% 6% Next $15,000 7% 8% Next $15,000 9% 10% Next $15,000 11% 12% Next $15,000 13% 14% In excess of $130,000 15% 16% 8

10 Table 6 - Property Tax Rates for Non-owner Occupied Residential Properties Annual Value Tax Rates From 1 Jan 2014 From 1 Jan 2015 First $30,000 10% 10% Next $15,000 11% 12% Next $15,000 13% 14% Next $15,000 15% 16% Next $15,000 17% 18% In excess of $90,000 19% 20% Vacant Properties The tax refund concession for vacant properties has been removed/streamlined as follows: (a) For residential and commercial properties that are vacant, the prevailing rates of property tax shall apply. However, if a residential property is undergoing repairs for owner occupation, a concession may be granted for up to 2 years provided the property is owner occupied for at least one year after the repairs. (b) Owners of residential properties fit for occupation but undergoing building works can apply to IRAS to be taxed at the owner occupied property tax rates for up to 2 years, provided the owner occupies the property for at least one year after the building works. (c) The same concession as above shall apply for vacant land undergoing residential development. More details as the above will be announced by IRAS by June