Moving forward together

Transcription

1 Budget 2017 News Alert Moving forward together At a glance Providing near-term support for businesses Strengthening the competitiveness of the financial sector Simplifying and rationalising Singapore s tax regime Other tax changes Tax changes for individuals Tax changes for environment The Minister for Finance, Mr. Heng Swee Keat, delivered the 2017 Budget for the financial year 1 April 2017 to 31 March 2018 in Parliament on 20 February Singapore s economy grew by two percent in The Ministry of Trade and Industry expects the Singapore economy to grow between one and three percent for the year Budget 2017 focuses on repositioning Singapore for the future as the economy matures. Amidst swift and unpredictable changes in the global landscape, Budget 2017 aims to prepare Singapore for the future by building strong capabilities in our firms and workers and forging deep partnerships within the business community, whilst not forgetting to sustain a quality living environment and build a caring and inclusive society in the years to come. The Budget also recognises the need for Singapore to play its part in the global economy against the backdrop of environmental pollution and worsening climate change. A number of tax changes were announced to provide near-term support for businesses and to strengthen capabilities in our enterprises and people to equip Singapore with the resilience and adaptability to navigate the increasingly complex and rapidly changing world. 1 l Budget 2017 News Alert

2 Providing near-term support for businesses 1. Enhancing and extending the corporate income tax (CIT) rebate: The CIT rebate cap will be raised from S$20,000 to S$25,000 for the year of assessment (YA) 2017 with the rebate rate remaining unchanged at 50% of tax payable. Further, the CIT rebate will be extended for another year to YA 2018 with a reduced rate of 20% of tax payable capped at S$10, Deferring foreign worker levy (FWL) increases: The FWL increases, which were earlier announced, will be deferred by one more year for the Marine and Process sectors in view of continued weakness in these sectors. Strengthening the competitiveness of the financial sector 3. Extending the withholding tax (WHT) exemption on payments made to non-resident non-individuals for structured products offered by financial institutions (FI): The qualifying period for the WHT exemption on such payments due to end on 31 March 2017 will be extended till 31 March All other conditions of the scheme remain unchanged. 4. Extending the tax incentive schemes for project and infrastructure finance (PIF): The existing package of tax incentive schemes for PIF, which provides (a) tax exemption of qualifying income from qualifying project debt securities, (b) tax exemption of qualifying income from qualifying infrastructure projects or assets received by approved entities listed on the Singapore Exchange (SGX); and (c) concessionary tax rate of 10% on qualifying income derived by an approved infrastructure trustee manager or fund management company, scheduled to lapse after 31 March 2017 will be extended till 31 December All other conditions of the schemes remain unchanged. The existing stamp duty remission for the transfer of qualifying infrastructure projects or assets to qualifying entities listed, or to be listed, on the SGX, will not be extended and will lapse after 31 March The Monetary Authority of Singapore (MAS) will release further details by May Simplifying and rationalising Singapore s tax regime 5. Introducing an intellectual property (IP) regime that encourages the exploitation of IP arising from R&D: To encourage the use of IPs arising from R&D activities, IP income will be incentivised under a new BEPScompliant IP regime named the IP Development Incentive (IDI). IP income will be removed from the scope of Pioneer Services or Headquarters Incentive and the Development and Expansion Incentive Services or Headquarters for new incentive awards approved on or after 1 July Existing incentive recipients will continue to have such income covered under their existing incentive awards until 30 June The IDI will take effect on or after 1 July 2017 and it will be administered by the Economic Development Board of Singapore (EDB). EDB will release further details by May Refining the Finance and Treasury Centre (FTC) scheme: The qualifying counterparties for certain transactions of approved FTCs will be streamlined to ease the compliance burden of approved FTCs. This change will apply to new or renewal incentive awards approved on or after 21 February The EDB will release further details by May l Budget 2017 News Alert

3 7. Enhancing the Global Trader Programme (GTP): To facilitate and encourage more trading activities in Singapore and to simplify the GTP, the GTP will be enhanced as follows: a) The requirement for qualifying transactions to be carried out with qualifying counterparties will be removed. Consequently, concessionary tax rate will be granted to approved global trading companies on income derived from qualifying transactions with any counterparty. b) The concessionary tax rate will be granted to approved global trading companies on physical trading income derived from transactions in which the commodity is purchased for the purposes of consumption in Singapore or for the supply of fuel to aircraft or vessels within Singapore. c) The concessionary tax rate will be granted to approved global trading companies on physical trading income attributable to storage in Singapore or any activity carried out in Singapore that adds value to commodity by any physical alteration, addition or improvement (including refining, blending, processing or bulk-breaking). d) The substantive requirement to qualify for the GTP will be increased. The enhancements in (a) to (c) will apply to qualifying income derived on or after 21 February 2017 by approved global trading companies from qualifying transactions; and (d) will apply to new or renewal incentive awards approved on or after 21 February The International Enterprise Singapore (IE Singapore) will release further details by May Withdrawing the tax deduction for computer donation scheme: As the objective of the scheme has been achieved, the 250% tax deduction granted on donation of computers by any company to an Institution of Public Character or prescribed educational, research or other institution in Singapore will be withdrawn after 20 February Withdrawing the Accelerated Depreciation Allowance for Energy Efficient Equipment and Technology (ADA- EEET) scheme: To streamline incentives that promote energy efficiency, the ADA-EEET scheme introduced in 1996 will be withdrawn and will not be granted for equipment installed on or after 1 January Allowing the accelerated Writing-Down Allowances (WDA) for acquisition of IP Rights (IPR) for Media and Digital Entertainment (MDE) content scheme to lapse: As the scheme is assessed to be no longer relevant and to simplify our tax regime, the accelerated WDA for the MDE content scheme will not be available in respect of IPRs acquired for MDE content after the last day of the basis period for YA 2018 (i.e., after financial year ending in 2017). Further, MDE companies or partnerships may elect to claim WDA over a writing-down period of five, ten or fifteen years (in lieu of two years) on the capital expenditure incurred to acquire the qualifying IPRs. 3 l Budget 2017 News Alert

4 11. Allowing the international arbitration tax incentive (IArb) to lapse: The IArb, which currently grants approved law practices 50% tax exemption on qualifying incremental income derived from the provision of legal services in connection with international arbitration, will be allowed to lapse after 30 June Allowing the Approved Building Project (ABP) scheme to lapse: The ABP scheme, which currently provides property tax exemption for land under development for a period of up to three years (subject to conditions), will be allowed to lapse after 31 March Other tax changes 13. Introducing a safe harbor rule for payments under Cost Sharing Agreements (CSAs) for R&D projects: To ease compliance, taxpayers may opt to claim tax deduction for 75% of the payments made under a CSA incurred for qualifying R&D projects instead of being subject to the general deduction rules whereby certain categories of expenditure (e.g., accounting depreciation, stock option expenses) may be disallowed. The change will apply to CSA payments made on or after 21 February The Inland Revenue Authority of Singapore (IRAS) will release further details by May Extending the WHT exemption on payments for international telecommunications submarine cable capacity under an indefeasible rights of use (IRUs) agreement: In line with the Singapore government s thrust to grow the digital economy and maintain the country s status as a key hub for data flow, the WHT exemption on payments for international telecommunications submarine cable capacity under an IRU agreement, scheduled to lapse after 27 February 2018, will be extended till 31 December Extending and refining the Aircraft Leasing Scheme (ALS): To continue encouraging the growth of the aircraft leasing sector, the ALS will be extended and refined as follows: a) The ALS will be extended till 31 December b) The scope of qualifying ancillary activities for approved aircraft lessors will be updated to cover incidental income derived from the provision of finance in the acquisition of aircraft or aircraft engines by any lessee. c) The concessionary tax rate on income derived from leasing of aircraft or aircraft engines and qualifying ancillary activities will be streamlined from five and ten percent to a single rate of eight percent. The enhancement for (b) will apply to income derived on or after 21 February 2017 for all incentive recipients. The refinement in (c) will apply to new or renewal incentive awards approved on or after 1 April In addition, the automatic WHT exemption regime on qualifying payments made on qualifying loans entered into on or before 31 March 2017 to finance the purchase of aircraft and aircraft engines (subject to conditions) will be extended to qualifying payments made on qualifying loans entered into on or before 31 December The EDB will release further details by May l Budget 2017 News Alert

5 16. Extending and refining the Integrated Investment Allowance (IIA) scheme: The IIA scheme, which grants a qualifying company an additional allowance in respect of the fixed capital expenditure incurred on qualifying productive equipment placed with an overseas company for an approved project, scheduled to lapse after 28 February 2017, will be extended till 31 December Further, the qualifying productive equipment may be used by the overseas company primarily to manufacture products for the qualifying company under an approved project. The above liberalisation in the qualifying requirement will apply to expenditure incurred on a qualifying productive equipment for a project approved on or after 21 February Digital economy: The Singapore government has announced that it is studying into adjusting the Goods and Services Tax (GST) system in respect of digital transactions and cross-border trades to ensure a level playing field between local GST-registered businesses and non-gst-registered foreign-based ones. Tax changes for individuals 18. Granting a personal income tax rebate for resident individual taxpayers: A personal income tax rebate of 20% of tax payable (capped at S$500) will be granted to all individual tax residents for YA Withdrawing the GST Tourist Refund Scheme (TRS) for tourists departing by international cruise: The GST TRS will be withdrawn for tourists who are departing by international cruise from the cruise terminals and whose purchases are made on or after 1 July Tourists who are departing by international cruise from the cruise terminals will have until 31 August 2017 to claim refunds on purchases made before 1 July E-TRS facilities at the cruise terminals will be removed after 31 August The IRAS will release further details by April Tax changes for environment 20. Restructure diesel taxes: Diesel Duty (DD) will be introduced to incentivise users to reduce their usage of diesel. With effect from 20 February 2017, the DD on automotive diesel, industrial diesel and diesel component of diesel is S$0.10 per litre. The annual Special Tax (levied on diesel cars) will also be revised. To ease the transition to the introduction of DD, certain offset measures (e.g., road tax rebates) will be provided. 21. Introduce carbon tax: The government aims to implement carbon tax on the emission of greenhouse gases from The expected tax rate of between S$10 and S$20 per ton of greenhouse gas emissions will generally be applied upstream, for example, on power stations and other large direct emitters, rather than electricity users. The final carbon tax and exact implementation scheme will be decided after public consultations and further studies. By: Chester Wee, Partner and International Tax Services Leader, Singapore and Toh Ai Tee, Director, Tax Services, Singapore, Ernst & Young Solutions LLP 5 l Budget 2017 News Alert

6 Tax leadership If you would like to know more about our services or the issues discussed, please contact: Chung-Sim Siew Moon Partner and Head of Tax, Singapore Singapore Tax Partners, Executive Directors and Directors Business Tax Services Angela Tan Lim Gek Khim Russell Aubrey Helen Bok Choo Eng Chuan Goh Siow Hui Latha Mathew Lim Joo Hiang Ang Sau Tze Toh Ai Tee Toh Shuhui Business Incentives Advisory Tan Bin Eng Global Compliance and Reporting Soh Pui Ming Chai Wai Fook Chia Seng Chye Ivy Ng Tan Ching Khee Teh Swee Thiam Nadin Soh Grace Ng Chionh Huay Kheng Corporate Services David Ong Financial Services Organisation Amy Ang Stephen Bruce Desmond Teo Louisa Yeo Ben Ellis Mudd Reina Lim Michele Chen Mriganko Mukherjee Tan Peh Huang Indirect Tax Customs and International Trade Adrian Ball GST Services Yeo Kai Eng Kor Bing Keong Chew Boon Choo Tracey Kuuskoski International Tax Services International Tax Chung-Sim Siew Moon Chester Wee Jerome van Staden Aw Hwee Leng Wong Hsin Yee Transfer Pricing Luis Coronado Henry Syrett Stephen Lam Jonathan Bélec Sharon Tan l Budget 2017 News Alert

7 Asia-Pacific Tax Center Australia Tax Desk David Scott India Tax Desk Gagan Malik Japan Tax Desk Kenji Ueda Korea Tax Desk Hoonseok Chung UK Tax Desk Billy Thorne Indirect Tax Customs and International Trade Donald Thomson Life Sciences Richard Fonte Operating Model Effectiveness Nick Muhlemann Paul Griffiths Braedon Clark People Advisory Services Mobility Grahame Wright Wu Soo Mee Kerrie Chang Panneer Selvam Sarah Lane Tina Chua Grenda Pua Talent and Reward Samir Bedi Transaction Tax Darryl Kinneally Sandie Wun Pang Ai Lin Industry sectors Real Estate Lim Gek Khim Ivy Ng Technology, Media and Telecommunications Chia Seng Chye Resources Angela Tan Consumer Products & Retail Soh Pui Ming Life Sciences Tan Ching Khee Diversified Industrial Products Russell Aubrey Government & Public Sector Tan Bin Eng Hospitality Helen Bok Shipping Goh Siow Hui Emerging & Private Enterprise Chai Wai Fook Insurance Amy Ang Wealth & Asset Management Desmond Teo Banking & Capital Markets Stephen Bruce l Budget 2017 News Alert

8 EY Assurance Tax Transactions Advisory About EY EY is a global leader in assurance, tax, transaction and advisory services. The insights and quality services we deliver help build trust and confidence in the capital markets and in economies the world over. We develop outstanding leaders who team to deliver on our promises to all of our stakeholders. In so doing, we play a critical role in building a better working world for our people, for our clients and for our communities. EY refers to the global organisation, and may refer to one or more, of the member firms of Ernst & Young Global Limited, each of which is a separate legal entity. Ernst & Young Global Limited, a UK company limited by guarantee, does not provide services to clients. For more information about our organisation, please visit ey.com Ernst & Young Solutions LLP. All Rights Reserved. APAC No ED None Ernst & Young Solutions LLP (UEN T08LL0784H) is a limited liability partnership registered in Singapore under the Limited Liability Partnerships Act (Chapter 163A). This document contains general information and should not be construed as legal, tax, accounting or any other professional advice or service. You should consult with a professional advisor familiar with your particular factual situation for advice concerning specific tax or other matters before making any decision. Ernst & Young Solutions LLP disclaims all liability and responsibility to you in respect of the content in this document. 8 l Budget 2017 News Alert