To implement the recommendations of the Committee on the Future Economy a $2.4 billion budget has been set aside over the next four years.

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1 FOR CLIENTS INFORMATION ONLY 20 February 2017 Dear Sirs THE 2017 SINGAPORE BUDGET COMMENTARY The Minister for Finance presented a budget with a focus to drive long term economic growth and development of Singapore, so as to meet the challenges posed by the looming global economic uncertainties whereby countries such as the United Kingdom and United States have voted for their national interest over globalization. To implement the recommendations of the Committee on the Future Economy a $2.4 billion budget has been set aside over the next four years. We are pleased to highlight in the following pages the tax and certain other changes as proposed in the 2017 Budget. It should be noted that the views expressed in this commentary are based on our interpretation of the Finance Minister s Budget Speech. Until the proposals are enacted, we cannot be definitive about the proposed changes. Please do not hesitate to contact us should you require any assistance. Yours faithfully WENDY WONG DIRECTOR OF TAXES Enc.

2 2017 BUDGET COMMENTARY CONTENTS A CORPORATE TAXATION 1. Corporate Tax Rate 2. Corporate Income Tax Rebate 3. Start-Up Tax Exemption Scheme 4. Allowing the Productivity and Innovation Credit ( PIC ) Scheme to Lapse 5. Enhancing the Global Trader Programme ( GTP ) 6. Introducing a Safe Harbour Rule for Payments under Cost Sharing Agreements ( CSAs ) for R&D Projects 7. Introducing an Intellectual Property ( IP ) Regime for IP from Research and Development ( R&D ) Activities 8. Withdrawing the Accelerated Depreciation Allowance for Energy Efficient Equipment and Technology ( ADA-EEET ) Scheme 9. Allowing the Accelerated Writing-Down Allowances ( WDA ) for Acquisition of IP Rights ( IPRs ) for Media and Digital Entertainment ( MDE ) Content Scheme to Lapse 10. Allowing The International Arbitration Tax Incentive ( IArb ) to Lapse 11. Extending and Refining the Aircraft Leasing Scheme ( ALS ) 12. Extending and Refining the Integrated Investment Allowance ( IIA ) Scheme 13. Extending the Withholding Tax ( WHT ) Exemption on Payments for International Telecommunications Submarine Cable Capacity under an Indefeasible Rights of Use ( IRU ) Agreement 14. Extending the Withholding Tax Exemption on Payments Made to Non-Resident Non- Individuals for Structured Products Offered by Financial Institutions 15. Refining the Finance and Treasury Centre Scheme 16. Extending the Tax Incentive Schemes for Project and Infrastructure Finance

3 CONTENTS (Cont d) B INDIVIDUAL TAXATION 1. Personal Tax Rates 2. Withdrawing the GST Tourist Refund Scheme ( TRS ) for Tourists Departing by International Cruise C OTHERS 1. Allowing the Approved Building Project ( ABP ) Scheme to Lapse 2. Withdrawing the Tax Deduction for Computer Donation Scheme 3. Extending the Additional Special Employment Credit ( ASEC ) 4. Central Provident Fund ( CPF ) Contribution Rates APPENDIX I Rates of Income Tax for Resident Individuals (Singapore)

4 - 1 - A CORPORATE TAXATION 1. CORPORATE TAX RATE Current : 17% from the Year of Assessment ( YA ) Also, partial tax exemption is granted as follows on up to $300,000 of a company s chargeable income ( CI ): (i) 75% of up to the first $10,000 CI; and (ii) 50% of up to the next $290,000 CI. The partial tax exemption does not apply to the following: (i) CI of a company that is subject to tax at a concessionary tax rate; (ii) Income earned by a non-resident company that is subject to a final withholding tax. Such income earned by a non-resident company, which includes interest and royalties, are taxed at the rates of 15% and 10% respectively or the reduced rate provided in a tax treaty; and (iii) All dividends received from Singapore companies. With effect from 1 January 2008, all dividends paid by Singapore companies are already exempt from tax in the hands of shareholders. Proposed : No change to the corporate tax rate of 17% and partial tax exemption on the first $300,000 of a company s chargeable income. 2. CORPORATE INCOME TAX REBATE Current : A 50% corporate income tax rebate is granted subject to a cap of $20,000 per YA for the YAs 2016 and Proposed : To raise the rebate cap from $20,000 to $25,000 for the YA 2017 with the rebate rate unchanged at 50%. The rebate will be extended for another year to YA 2018, but at a reduced rate of 20% of tax payable and capped at $10,000. The rebate is enhanced and extended to help companies cope with economic uncertainty and continue restructuring.

5 START-UP TAX EXEMPTION SCHEME Current : Full tax exemption on the first $100,000 of CI and 50% tax exemption of up to the next $200,000 CI for qualifying new companies including companies limited by guarantee for the first 3 consecutive YA upon incorporation. A qualifying new company must fulfil the following conditions: (a) It is incorporated in Singapore; (b) It is a tax resident of Singapore; and (c) It has total share capital which is beneficially held directly by no more than 20 shareholders (i) all of whom are individuals; or (ii) at least one of whom is an individual holding at least 10% of the total number of issued ordinary shares of the company throughout the basis period relating to the YA of claim. However, the start-up tax exemption scheme is no longer available to the following companies incorporated after 25 February 2013:- (i) Property development companies that buy or lease land and arrange for a building to be built on the land in order to lease, manage or sell the building; and (ii) Investment holding companies whose principal activity is that of investment holding and derive only investment income such as rental, dividend or interest income. Property development and investment holding companies will still be able to enjoy the partial tax exemption available to all companies. All existing conditions of the start-up tax exemption scheme remain unchanged. Proposed : No change to the existing start-up exemption scheme.

6 ALLOWING THE PRODUCTIVITY AND INNOVATION CREDIT ( PIC ) SCHEME TO LAPSE Current : The PIC Scheme is currently available to businesses on qualifying expenditure incurred during the basis periods for YAs 2011 to 2018 in any of the following 6 activities. Acquisition/leasing of information technology ( IT ) and automation equipment Training of employees Acquisition/in-licensing of intellectual property rights ( IPRs ) Registration of qualifying IPRs Research and development ( R&D ) activities Design projects (approved by DesignSingapore Council) Enhanced tax deduction or allowance is available at 400% of eligible expenditures on each of these activities, with a cap of $400,000 expenditure per activity per YA. Businesses are allowed to combine their annual expenditure caps for YAs 2011 and 2012 into a ceiling of $800,000, YAs 2013 to 2015 into a ceiling of $1,200,000 and YAs 2016 to 2018 into a ceiling of $1,200,000. PIC+ Scheme The PIC+ Scheme is available from YA 2015 to YA 2018, where qualifying Small and Medium Enterprises ( SMEs ) are allowed an additional $200,000 of qualifying expenditure incurred. This means that the expenditure cap will be raised from $400,000 to $600,000 per qualifying activity for YAs 2015 to The higher expenditure cap for PIC+ is combined across the relevant 3 YAs as follows. YAs (Combined) Combined Expenditure Cap Per Qualifying Activity 2013 to 2015 $400,000 + $400,000 + $600,000 = $1,400,000 # 2016 to 2018 $600,000 + $600,000 + $600,000 = $1,800,000 # The combined expenditure cap of $1,400,000 is only applicable for YA 2015 as the additional expenditure cap of $200,000 is not available for YAs 2013 and 2014 An entity is a qualifying SME if: (a) its annual turnover is not more than S$100 million; or (b) its employment size is not more than 200 workers. This criterion will be applied at the group level if the entity is part of a group. Businesses will self-assess their eligibility for the PIC+ scheme to claim the relevant benefits.

7 - 4 - Any unutilised trade loss and / or allowance arising from PIC that cannot be fully offset against the income of a business for the current year can be transferred under group relief, carried back or carried forward, subject to the relevant conditions being satisfied. PIC Cash Payout Businesses are allowed the option to convert qualifying expenditure into a non-taxable payout as follows. YA Expenditure cap Conversion Rate $200,000 30% 2013 $100,000 60% 2014 $100,000 60% 2015 $100,000 60% 2016 $100,000 60% 2017 $100,000 60% ( 1 Jan to 31 Jul 2016) 40% (1 Aug to 31 Dec 2016) 2018 $100,000 40% To be eligible for the PIC cash payout, businesses must have: (a) incurred PIC-qualifying expenditure (net of grant or subsidy by the Government or any statutory board ) during the basis period for the YA in which the cash payout is claimed; (b) active business operations in Singapore; and (c) at least 3 local employees (Singapore citizens or Singapore permanent residents with CPF contributions) excluding soleproprietors, partners under contract for service and shareholders who are directors of the company. A business is considered to have met the 3-local-employees condition if it contributes CPF on the payroll of at least 3 local employees: YAs 2011 to in the last month of the quarter or combined consecutive quarters. YAs 2016 to in all 3 months of the quarter or the last 3 months of the combined consecutive quarters. (d) put the PIC IT and Automation equipment to use (i.e. "in-use" condition) for PIC cash payout claims relating to YA 2016 onwards. The minimum qualifying expenditure for each PIC cash payout application is $400. The PIC Scheme will expire after YA As announced in Budget 2016, the scheme will be allowed to expire after YA 2018.

8 ENHANCING THE GLOBAL TRADER PROGRAMME ( GTP ) Current : The GTP grants a concessionary tax rate of 5% or 10% on qualifying income derived by approved global trading companies from qualifying transactions. Income of a GTP company from physical trading (including sales revenue, brokerage and commission from acting as a broker) qualifies for concessionary tax rate if all the following conditions are satisfied: (a) Physical trading is in an approved commodity; (b) The approved commodity is both purchased from a qualifying person and sold to another qualifying person. If one leg or both legs of a transaction were with non-qualifying persons, the income from such a transaction would be non-qualifying; (c) The approved commodity is not purchased for the purposes of consumption in Singapore or for the supply of fuel to aircraft or vessels within Singapore; (d) The transaction is not one in which the petroleum or petroleum products is both purchased from and sold to any approved petrochemical manufacturing company in Singapore; and (e) The transaction is not one in which the commodity is both purchased from and sold to GTP Other Counterparties (i.e. companies on the List of GTP Other Counterparties on International Enterprise ( IE ) Incentive Portal). The income attributable to value-add activities performed in Singapore, whether as part of qualifying activities or otherwise, does not qualify for concessionary tax rate and is taxable at the normal corporate tax rate. Examples of local value-add activities include physical alteration, addition or improvement (including refining, blending, processing or bulkbreaking). If the GTP company stores inventory on behalf of its customers, the fee charged for such storage is subject to tax at the normal corporate tax rate. Income of a GTP company derived from trading in exchange-traded commodity futures, freight derivatives and specified derivative instruments on any exchange qualifies for concessionary tax rate. In addition, income of a GTP company derived from Over-The-Counter ( OTC ) derivative transactions qualifies for concessionary tax rate if the transactions are cleared through the SGX AsiaClear Facility or are transacted with qualifying persons.

9 - 6 - Proposed : The Minister proposed to enhance the GTP as follows: (a) The requirement for qualifying transactions to be carried out with qualifying persons will be removed. Consequently, the concessionary tax rate will be granted to GTP companies on income derived from qualifying transactions with any counterparty; (b) Concessionary tax rate will be granted to GTP 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) Concessionary tax rate will be granted to GTP companies on physical trading income attributable to storage in Singapore or any activity carried out in Singapore which adds value to commodity by any physical alteration, addition, or improvement (including refining, blending, processing or bulk-breaking); and (d) The substantive requirement to qualify for the GTP will be increased. Effective : The proposed enhancements in (a) to (c) above will apply to qualifying income derived on or after 21 February 2017 by GTP companies from approved transactions. The proposed enhancement in (d) above will apply to new or renewal incentive awards approved on or after 21 February IE will release further details of the change by May The above aims to facilitate and encourage more trading activities in Singapore and to simplify the GTP.

10 INTRODUCING A SAFE HARBOUR RULE FOR PAYMENTS UNDER COST SHARING AGREEMENTS ( CSAs ) FOR R&D PROJECTS Current : Taxpayers claiming tax deduction for R&D expenditure under Section 14D of the Income Tax Act ( ITA ) for payments made under a CSA ( CSA payments ) are subject to specific restriction rules for certain categories of expenditure disallowed under Section 15 of ITA. As such, the breakdown of expenditure covered by the CSA payments is examined so as to exclude the disallowed expenditure. Proposed : The Minister proposed to allow taxpayers the option to claim tax deduction under Section 14D of ITA for 75% of the payments made under a CSA incurred for qualifying R&D projects instead of providing the breakdown of the expenditure covered by the CSA payments. Effective : CSA payments made on or after 21 February IRAS will release further details of the change by May The above is to ease compliance for taxpayers. 7. INTRODUCING AN INTELLECTUAL PROPERTY ( IP ) REGIME FOR IP FROM RESEARCH AND DEVELOPMENT ( R&D ) ACTIVITIES Current : IP income arising from qualifying activities is covered under the Pioneer- Services/Headquarters Incentive and the Development and Expansion Incentive-Services/Headquarters. Proposed : The Minister proposed to introduce a new IP Regime named the IP Development Incentive ( IDI ) from 1 July The IDI incorporates the Base Erosion and Profit Shifting ( BEPS ) compliant modified nexus approach. Accordingly, such income will be removed from the scope of Pioneer Services/Headquarters Incentive and the Development and Expansion Incentive-Services/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 till 30 June EDB will release further details by May Effective : The IDI will take effect on or after 1 July The introduction of the scheme is to incentivise and encourage the use of IPs arising from R&D activities.

11 WITHDRAWING THE ACCELERATED DEPRECIATION ALLOWANCE FOR ENERGY EFFICIENT EQUIPMENT AND TECHNOLOGY ( ADA-EEET ) SCHEME Current : The ADA-EEET Scheme was introduced in 1996 to accord an accelerated writing down period of one year under Section 19A(6) of the ITA for capital expenditure incurred on certified energy efficient and energy saving equipment. Proposed : The above scheme will be withdrawn after 31 December No ADA-EEET will be granted for equipment installed on or after 1 January Effective : From 1 January 2018 The move is to streamline incentives that promote energy efficiency as new incentives has been introduced over the years, such as the Investment Allowance Energy Efficiency scheme and the Productivity Grant. 9. ALLOWING THE ACCELERATED WRITING-DOWN ALLOWANCES ( WDA ) FOR ACQUISITION OF IP RIGHTS ( IPRs ) FOR MEDIA AND DIGITAL ENTERTAINMENT ( MDE ) CONTENT SCHEME TO LAPSE Current : An approved MDE company or partnership is allowed to claim WDA over a period of two years for capital expenditure incurred in respect of approved IPRs acquired from 22 January 2009 pertaining to films, television programmes, digital animation or games, or other MDE content acquired for use in its business. The scheme is scheduled to lapse after YA Proposed : The accelerated WDA for the MDE content scheme will be allowed to lapse, in respect of IPRs acquired for MDE content after the last day of the basis period for YA Effective : From YA With the expiry of the scheme, MDE companies or partnerships may instead claim WDA over a writing-down period of 5, 10 or 15 years on the capital expenditure incurred to acquire the qualifying IPRs under Section 19B of the ITA. The scheme is allowed to lapse as it is assessed to be no longer relevant.

12 ALLOWING THE INTERNATIONAL ARBITRATION TAX INCENTIVE ( IARB ) TO LAPSE Current : The International Arbitration Tax Incentive ( IArb ) was introduced to encourage the provision of international arbitration services and attract overseas law practices to set up international arbitration services in Singapore. The incentive grants approved law practices 50% tax exemption on qualifying incremental income derived from the provision of legal services in connection with international arbitration. The maximum tax relief period is five years. Proposed : The IArb will be allowed to lapse after 30 June Effective : From 1 July 2017 This follows the Government s regular review of tax incentives. The Government will continue to develop and strengthen Singapore s arbitration landscape through other ways. 11. EXTENDING AND REFINING THE AIRCRAFT LEASING SCHEME ( ALS ) Current : Under the ALS, approved aircraft lessors and aircraft investment managers can enjoy the following tax benefits: (a) Approved aircraft lessors enjoy concessionary tax rate of 5% or 10% on income derived from the leasing of aircraft or aircraft engines and qualifying ancillary activities under Section 43Y of the ITA; and (b) Approved aircraft managers enjoy concessionary tax rate of 10% on income derived from managing the approved aircraft lessor and qualifying activities under Section 43Z of the ITA. Qualifying ancillary activities under Section 43Y of the ITA include incidental income derived from the provision of finance in the acquisition of any aircraft or aircraft engines by any airline company. In addition, automatic WHT exemption is granted on qualifying payments made by approved aircraft lessors to non-tax-residents (excluding a permanent establishment in Singapore) in respect of qualifying loans entered into on or before 31 March 2017 to finance the purchase of aircraft and aircraft engines, subject to conditions. The scheme is scheduled to lapse after 31 March 2017.

13 Proposed : The Minister has proposed to extend the ALS and refined it as follows. (a) The ALS will be extended till 31 December (b) The scope of qualifying ancillary activities for approved aircraft lessors under Section 43Y of the ITA will be updated to cover incidental income derived from the provision of finance in the acquisition of aircraft or aircraft engines by any lessee. The enhancement will apply to income derived on or after 21 February 2017 for all incentive recipients. (c) The concessionary tax rate on income derived from leasing of aircraft or aircraft engines and qualifying ancillary activities will be streamlined from 5% and 10% to a single rate of 8%. All other conditions of the scheme remain the same. The refinement will apply to new or renewal incentive awards approved on or after 1 April In addition, the automatic withholding tax exemption regime will be extended to qualifying payments made on qualifying loans entered into on or before 31 December EDB will release further details by May Effective : Extended from 1 April 2017 to 31 December 2022, with enhancements to the scheme effective from specified dates. The extension of the ALS aims to continue encouraging the growth of the aircraft leasing sector in Singapore.

14 EXTENDING AND REFINING THE INTEGRATED INVESTMENT ALLOWANCE ( IIA ) SCHEME Current : The IIA scheme 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. For the purpose of the IIA scheme, one of the qualifying requirements is that the qualifying productive equipment has to be used by the overseas company solely to manufacture products for the qualifying company under the approved project. Economic Development Board ( EDB ) administers the IIA scheme. The IIA scheme is scheduled to lapse after 28 February Proposed : The Minister has proposed that the IIA scheme be extended till 31 December Also, the Minister has proposed that the qualifying productive equipment may be used by the overseas company primarily to manufacture products for the qualifying company under an approved project. Effective : Project approved on or after 21 February Based on the liberalisation, qualifying productive equipment may now be used by the overseas company primarily, instead of solely, to manufacture products for the qualifying Singapore company. 13. EXTENDING THE WITHHOLDING TAX ( WHT ) EXEMPTION ON PAYMENTS FOR INTERNATIONAL TELECOMMUNICATIONS SUBMARINE CABLE CAPACITY UNDER AN INDEFEASIBLE RIGHTS OF USE ( IRU ) AGREEMENT Current : Exemption from withholding tax is granted on payments to non-residents for international telecommunications submarine cable capacity under an IRU agreement. The Scheme is scheduled to lapse after 28 February Proposed : The withholding tax exemption will be extended to 31 December The WHT exemption on payments for international telecommunications submarine cable capacity under an IRU agreement was introduced to encourage telecommunications operators to provide international connectivity. The extension of the WHT exemption is in line with the Singapore Government s thrust to grow the digital economy and continue to be a key hub for data flow.

15 EXTENDING THE WITHHOLDING TAX EXEMPTION ON PAYMENTS MADE TO NON- RESIDENT NON-INDIVIDUALS FOR STRUCTURED PRODUCTS OFFERED BY FINANCIAL INSTITUTIONS Current : The withholding tax exemption is allowed on payments to non-resident non-individuals for structured products offered by Financial Institutions. The withholding tax exemption is due to expire on 31 March FIs are institutions licensed or approved by MAS, or exempted from such licensing or approval under any Act administered by MAS, and includes an institution approved as a Finance and Treasury Centre under section 43G of the ITA. Proposed : The Minister has proposed to extend this scheme until 31 March Effective : From 1 April 2017 to 31 March 2021 This is in line with the Government s effort to promote Singapore as a financial and wealth management hub. 15. REFINING THE FINANCE AND TREASURY CENTRE SCHEME Current : The Finance and Treasury Centre ( FTC ) scheme grants a 8% concessionary tax rate on qualifying income derived by approved FTCs from qualifying activities or services, and the funds must be obtained from approved offices and associated companies. Proposed : The Minister has proposed to streamline the qualifying counterparties for certain transactions of approved FTCs. EDB will release further details of the change by May Effective : Apply to new or renewal of incentive awards approved on or after 21 February This is to facilitate and reduce the compliance costs and burden of FTCs.

16 EXTENDING THE TAX INCENTIVE SCHEMES FOR PROJECT AND INFRASTRUCTURE FINANCE Current : The package of tax incentives schemes for Project and Infrastructure Finance includes: (a) Exemption of qualifying income from qualifying project debt securities; (b) Exemption of qualifying income from qualifying infrastructure projects/assets received by approved entities listed on the Singapore Exchange ( SGX ); (c) Concessionary tax rate of 10% on qualifying income derived by an approved Infrastructure Trustee Manager/Fund Management Company from managing qualifying SGX-listed Business Trusts/Infrastructure funds in relation to qualifying infrastructure projects/assets; and (d) Remission of stamp duty payable on the instrument of transfer relating to qualifying infrastructure projects/assets to qualifying entities listed, or to be listed, on the SGX. The scheme is scheduled to lapse after 31 March Proposed : Except for the stamp duty remission in (d), the current package of tax incentive schemes for Project and Infrastructure Finance will be extended till 31 December The stamp duty remission in (d) will lapse after 31 March MAS will release further details of the extension by May Effective : From 1 April 2017 to 31 December 2022 The Government is continuing to encourage project and infrastructure financing activities and give boost to the construction and building sector.

17 B INDIVIDUAL TAXATION 1. PERSONAL TAX RATES Current : Residents are taxed at graduated rates from 0% to 22% (refer to attached Appendix I) from the YA Proposed : No change to the existing personal income tax rates. A one-off personal income tax rebate of 20%, subject to a cap of $500 per taxpayer, will be given to all resident individual taxpayers for the YA The personal income tax rebate aims to reduce the tax bills of individuals. 2. WITHDRAWING THE GST TOURIST REFUND SCHEME ( TRS ) FOR TOURISTS DEPARTING BY INTERNATIONAL CRUISE Current : Departing tourists may claim GST refunds on their goods purchased in Singapore, subject to the tourists eligibility and conditions of the TRS. The GST TRS is available to tourists departing Singapore via air, from Changi International Airport and Seletar Airport or by international cruise, from the Marina Bay Cruise Centre Singapore and the International Passenger Terminal at Harbourfront Centre ( cruise terminals ). Proposed : 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 Effective : From 1 July 2017 IRAS will release further details of the change by April The GST TRS will be withdrawn for tourists who are departing by international cruise from the cruise terminals due to the very low transaction volume at the cruise terminals for tourist refunds.

18 C OTHERS 1. ALLOWING THE APPROVED BUILDING PROJECT ( ABP ) SCHEME TO LAPSE Current : Land under development is granted property tax exemption for a period of up to three years under the ABP Scheme, subject to conditions. The exemption had been given for large scale industrial projects where substantial economic spin offs would be generated and benefit the economy. Proposed : The property tax exemption under the ABP Scheme will be allowed to lapse after 31 March This is in recognition that property tax is a tax on property ownership and it should apply when the land is being developed. 2. WITHDRAWING THE TAX DEDUCTION FOR COMPUTER DONATION SCHEME Current : Tax deduction of 250% is granted on donation of computers (including computer software and peripherals) by any company to an Institution of Public Character (IPC) or prescribed educational, research or other institution in Singapore. Proposed : The tax deduction scheme for donation of computers is withdrawn with effect from 21 February A company that donates computers to an Institution of Public Character (IPC) or prescribed educational, research or other institution in Singapore on or after 21 February 2017 will not be eligible for any tax deduction. Companies that donated computers before 21 February 2017 will enjoy the 250% tax deduction subject to existing conditions. Effective : From 21 February As the objective of the scheme has been achieved, the scheme was withdrawn.

19 EXTENDING THE ADDITIONAL SPECIAL EMPLOYMENT CREDIT ( ASEC ) Current : The Additional Special Employment Credit (ASEC) provides wage offsets to employers hiring older Singaporean workers earning up to $4,000 a month, who are older than the re-employment age of 65 years (67 years with effect from 1 July 2017). This is on top of the Special Employment Credit (SEC) of up to 8% for eligible Singaporean workers aged 55 and above. Proposed : The ASEC will be extended for two and a half years, from 1 July 2017 to 31 December This seeks to: (i) continue to support workers older than the re-employment age, and (ii) support those who are above 65 years old as of 1 July 2017 and hence not covered by the increase in re-employment age to 67. Table 1 explains who is eligible for the ASEC, and when they are eligible for it. Table 1: Eligibility for the ASEC: Age Criteria Date of Birth Age as of 1 July 2017 Before 1 July 1952 (not covered by the new re-employment age) On or after 1 July 1952 (covered by the new re-employment age until they turn 67) Quantum of ASEC Period of Eligibility for ASEC 65 or older In the month they turn 65, till 31 December 2019 Younger than 65 In the month they turn 67, till 31 December 2019 Employers who hire eligible workers with monthly wages of not more than $3,000 per month will receive ASEC of 3% of their eligible employees monthly wages. A lower ASEC is provided for workers who earn between $3,000 and $4,000. The details are provided in Table 2.

20 Table 2: Formula for SEC and ASEC Payout Wage of Payout for the Month for Each Employee Employee in a Given Month ASEC SEC* Total Up to $3,000 3% of wage 8% of wage 11% of wage Between $3,000 and $4,000 $360 (0.09 x wage) $960 (0.24 x wage) $1,320 (0.33 x wage) $4,000 and above Not available * SEC was extended from 1 January 2017 to 31 December 2019, as announced in Budget To better support the employment of Persons with Disabilities (PWDs), employers who hire PWDs receive double the combined monthly SEC and ASEC. The combined monthly SEC and ASEC will be capped at $330 per eligible PWD. When will the ASEC be paid? The extended ASEC will apply to employees on the payroll from 1 July 2017 to 31 December Together with SEC, it will be paid twice a year, in March and September. Eligibility for ASEC is automatically assessed based on the regular monthly CPF contributions that employers make for their employees. More details are given in Table 3. Table 3: Timeline and Payment Dates for SEC & ASEC Employees Deadline for Employers to Payment Date on Payroll make CPF Contributions to for SEC and (2017 to 2019) Receive SEC and ASEC ASEC January to 14 th of the subsequent month September of the June E.g. 14 th February for current year employees on the January payroll July to 14 th of the subsequent month March of the December E.g. 14 th January of the following year following year for employees on the December payroll Employers will automatically receive the ASEC payments in the bank accounts from which they make GIRO payments of their employees CPF contributions. Employers without a valid GIRO arrangement with the CPF Board will receive the ASEC by cheque. Effective : From 1 July 2017 to 31 December 2019 The above aims to provide more support for firms hiring older workers.

21 CENTRAL PROVIDENT FUND ( CPF ) CONTRIBUTION RATES Current : The employer s and employee s CPF contribution rates effective 1 January 2016 are as follows: Employee Age (Years) Contribution Rates (for monthly wages $750) Employer % Employee % Total % 55 and below Above 55 to Above 60 to Above Proposed : No change to the CPF contribution rates.

22 APPENDIX I RATES OF INCOME TAX FOR RESIDENT INDIVIDUALS (SINGAPORE) Tax Rates from YA 2012 to YA 2016 Chargeable Income* ($) Tax Rate (%) Gross Tax Payable ($) Tax Rates from YA 2017 onwards Chargeable Income* ($) Tax Rate (%) Gross Tax Payable ($) On the first 20, On the first 20, On the next 10, On the next 10, On the first 30, On the first 30, On the next 10, On the next 10, On the first 40, On the first 40, On the next 40, ,800 On the next 40, ,800 On the first 80,000-3,350 On the first 80,000-3,350 On the next 40, ,600 On the next 40, ,600 On the first 120,000-7,950 On the first 120,000-7,950 On the next 40, ,000 On the next 40, ,000 On the first 160,000-13,950 On the first 160,000-13,950 On the next 40, ,800 On the next 40, ,200 On the first 200,000-20,750 On the first 200,000-21,150 On the next 120, ,600 On the next 40, ,600 On the first 320,000-42,350 On the first 240,000-28,750 In excess of 320, On the next 40, ,800 On the first 280,000-36,550 On the next 40, ,000 On the first 320,000-44,550 In excess of 320, * Chargeable income = Income after tax reliefs Note: For the Year of Assessment 2013, a one-off income tax rebate is granted to resident individual taxpayers. The amount of rebate granted depends on the age of the resident individual as at 31 December 2012, subject to a cap of $1,500: (a) 30% for resident individuals aged below 60; and (b) 50% for resident individuals aged 60 and above. For the Year of Assessment 2015, a one-off tax rebate of 50% of tax payable, subject to a cap of $1,000, is granted to resident individual taxpayers. For the Year of Assessment 2017, a one-off tax rebate of 20% of tax payable, subject to a cap of $500, is granted to resident individual taxpayers.

23 CONTACT US Wendy Wong N Vimala Devi Director of Taxes Director of Taxes wong.wendy@bsl.sg devi.vimala@bsl.sg DID: (65) DID: (65) Gary Tan Lim Hsee Meang Senior Tax Manager Senior Tax Manager tan.gary@bsl.sg lim.hseemeang@bsl.sg DID: (65) DID: (65)