October 2001 Off Budget Tax And Property Measures The Singapore economy has contracted by 5.6% compared to last year. Economic conditions are worsening. Accordingly, on 12 October 2001, Deputy Prime Minister Lee Hsien Loong announced a package of Off- Budget Measures aimed at helping the economy to withstand the downturn. This update discusses those measures. Introduction...1 Measures For Companies...1 Measures To Help Local Enterprises...1 Measures Aimed At The Property Market...2 Measures For Individuals...3 Miscellaneous Measures... 4 Introduction The Singapore economy has contracted by 5.6% compared to last year. Economic conditions are worsening. Accordingly, on 12 October 2001, Deputy Prime Minister ( DPM ) Lee Hsien Loong announced a package of Off- Budget Measures ( Measures ) aimed at helping the economy to withstand the downturn. This update discusses those Measures. The Measures announced fall in the following categories: tax and fee rebates and reductions for businesses and individuals; assistance to local enterprises; property market-related measures; acceleration of infrastructure projects; employment assistance for workers and executives; help for the lower income and unemployed; new Singapore shares; and measures related to wage costs. Later in the day on 12 October 2001, the Ministry of National Development announced further measures relating to property and land in a supplementary press release to the Measures ( Supplementary Press Release ). Categorised according to the segment of the economy towards which they are aimed, the Measures and the Supplementary Press Release are discussed in this update under the following headings: measures for companies; measures to help local enterprises; measures aimed at the property market; measures for individuals; and miscellaneous measures. Measures For Companies Corporate Tax Rebates For the Year of Assessment ( YA ) 2001, the government has announced a rebate of 50% on the first S$25,500 of tax payable, and 5% for any subsequent tax payable beyond that. For YA 2002, a corporate tax rebate of 5% will be granted. This is in addition to the rebate and reduction of tax rate announced in the 2001 Budget. Measures To Help Local Enterprises A number of Measures have been introduced to assist all local enterprises, whether sole proprietorships, partnerships or companies. These are generally Page 1
Soon Choo Hock Executive Partner Contact Details Direct: (65) 62320656 Facsimile: (65) 64380248 E-mail: choo.hock.soon @rajahtann.com Sundareswara Sharma Partner Contact Details Direct: (65) 62320453 Facsimile: (65) 64380248 E-mail: sundareswara.sharma @rajahtann.com aimed at the smaller scale enterprises. Some of the existing schemes that are to be enhanced are Local Enterprise Finance Scheme ( LEFS ), set up to help the local enterprises access to funds. Interest rates on LEFS loans will be reduced and the government s share of risk on these loans will be increased. A loan insurance scheme for LEFS loans will also be launched; and The Hawker Centre Upgrading Projects. Rental Rebates By Government Landlords Various government agencies will also be extending assistance to tenants of properties under their charge. For example, JTC and HDB will give, inter alia, a 10% rental rebate across the board to all their tenants from November 2001 until December 2002. Rebates will also be given by BCA, AVA, NParks, MPA, SLA and the Singapore Sports Council, although the amount of the rebates was not announced by the DPM. Measures Aimed At The Property Market Government Land Sales Programme Reviewed To prevent oversupply in the property market, the government has reviewed its land sales programme for 2001 and 2002. Tenders will proceed for residential sites for which tenders have already been launched. However, residential land for which tenders have not yet been received will be put on a reserve list. The Supplementary Press Release identifies the residential land that has been moved to the reserve list. Land sales for commercial and industrial land will be deferred for the years 2001 and 2002. Further, the project completion date for all government industrial land sales projects has been extended by two years. Anti-Speculative Measures On Property Removed Some of the restrictions that had been introduced in 1996 to curb speculation have been removed. Essentially, the effect of the Measures mean that: there will be no income tax on gains from property sold within three years of purchase for contracts entered into after 13 October 2001; permanent residents are no longer limited to one Singapore dollar loan for the purchase of residential property; and foreigners and non-singapore companies are now eligible for Singapore dollar loans for the purchase of residential property. Another anti-speculative measure that had been put in place was a restriction on successful local tenderers from disposing off the land or more than 50% of the shares in the company formed to develop the site to a single purchaser before obtaining TOP. Similarly, foreign housing developers who wished to purchase private residential land or properties for development were not allowed to dispose of the land or change the shareholding of the company without the prior written approval of the Controller Of Housing. The restrictions are lifted to allow a one-time reassignment for each site in the period between 13 October 2001 and 31 December 2002 provided Page 2
the transaction is not of a speculative nature. Property Tax Exemption On Land Under Development Property tax exemption on land under development, which had been lifted in the 2000 Budget, has been re-introduced. The exemption will be given for projects that started foundation works on 12 October 2001 and will continue until the TOP is granted, or until 11 October 2003, whichever is earlier. The exemption is also available for projects which have already started foundation works, but the exemption only takes effect from 12 October 2001. Stamp Duty Reduced The Measures have reduced the stamp duty rates by 30% on all chargeable instrument executed after 30 October 2001. The new rates expire at the end of 2002. Infrastructure Projects Brought Forward To inject further money into the economy, certain infrastructure projects will be brought forward. These include the upgrading of the NUS campus, expansion of NTU teaching facilities and construction of new polytechnics and hospitals. Measures For Individuals Personal Income Tax Rebate In addition to the rebate and ta Xrate reduction announced in the 2001 Budget, the government has announced a further 5% rebate on all personal income tax, bringing the total personal income ta Xrebate for YA 2001 to 15%. For YA 2002, the government will grant a 10% tax rebate on personal income tax. Education Measures The Education Measures assist not only students but recent graduates as well. For students, the tuition fees for polytechnic and undergraduate courses for the academic year 2002 will be frozen at existing levels, to be reviewed in the second half of 2002. Repayment of tuition fee loans and study loans for all university and polytechnic graduates will be suspended for one year, from 1 November 2001 to 31 October 2002. Non-Singaporean graduates of Singapore universities and polytechnics who are generally required to serve a 3-year employment bond in Singapore, can suspend this bond for one year if they are unable to find a job or become unemployed, as the case may be. After suspension, they will be required to serve out the rest of the bond. Training And Skills Development Programmes Some of the existing training and skills development programs run by the government in collaboration with the industry, are to be expanded. These include the following: The People For Jobs Traineeship Programme helps unemployed workers aged 40 and above to make career transitions. This programme will be expanded beyond lower income production workers, to skilled workers and management staff. The enhanced programme is to run for one year, starting 1 November 2001. The Skills Redevelopment Programme will give increased training allowance to laid off and unemployed workers and greater absentee payroll support to employers who send their employees for the programme. Further, the government will give a onetime top up of S$500 million to the Skills Development Fund. The NTUC Education and Training Fund (or N-ETF) will receive funds of S$15 million. Foreign Worker Policy The government s approach to managing foreign workers and foreign talent is to increase the criteria and quality of foreign workers who are allowed into Singapore and to relax the restrictions progressively for higher skilled workers and professionals. Some of the specific measures announced are as follows: the minimum salary to qualify for an employment pass will be increased from S$2,000 to S$2,500 with effect from 1 December 2001; and the eligibility criteria for work permits which attract the lower foreign worker levy, will be raised by raising the qualifying standards for lower levy work permit holders. This is to ensure that a greater proportion of them have at least completed secondary school education or possess NTC-3 (practical) qualifications. Home Owners, Buyers And Tenants The Measures contain certain rebates and reductions for this group, some of which are as follows: half of the 20% down payment for HBD flat buyers can now be paid later when the keys are collected; Page 3
reduction of price cap for large generation companies, thus reducing electricity tariffs by about 6%; rebates on utilities bills and the service and conservancy charges for those living in HDB flats, announced in the 2001 Budget, extended until April 2003. Vehicle Owners: Petrol And Oil Prices The Measures contain the following good news for vehicle owners: petrol excise duty is reduced from 40% to 35% with effect from 13 October 2001; diesel tax for taxis is reduced from S$5,100 to S$4,700 per year; a one-time road tax rebate of S$100 for cars, taxis, goods vehicles and buses is to be implemented from 1 January 2002; and a one-time road tax rebate of S$20 for off-peak and weekend cars, motorcycles and trailers will take effect from 1 January 2002. Hospitalisation Fee Assistance To help Singaporeans meet their medical costs, a 10% rebate on all class B2 and C hospital bills and on subsidised day surgery will be given to all citizens and their immediate family members. EDRS The DPM announced a new Economic Downturn Relief Scheme ( EDRS ). Under the EDRS, Citizens Consultative Committees will help needy Singaporeans meet essential expenses, such as school fees, school transport and food, by providing assistance of up to S$200 per month for 3 months, to be reviewed thereafter. A sum of S$20 million has been set aside for the EDRS. The EDRS will take effect from 1 November 2001 and will run for one year. New Singapore Shares Another new scheme to be implemented is the New Singapore Shares scheme first announced by the Prime Minister at the National Day Rally. This aims to give Singaporeans a share in the country s future growth and prosperity. From 1 November 2001, everyone receiving the CPF top-up will automatically also receive the New Singapore Shares. Adult Singaporeans not receiving the CPF top-up can also receive the New Singapore Shares, provided they contribute at least S$50 to their CPF accounts between 1 January 2001 and 15 October 2001. Citizens who top up their CPF after this date and before 31 December 2001 will receive the New Singapore Shares on 15 January 2002. The New Singapore Shares will be worth S$1 per share. The shares will earn annual dividends for five years, from 2002 to 2007. The dividend rate will be a guaranteed minimum of 3% per annum. In addition, bonus shares will be given to match the performance of the economy (provided that the real GDP growth rate in the preceding year is above zero). Each citizen who qualifies for the shares will receive a basic allocation of the shares, the number of which depends on the income level and housing type of the citizen. In addition, the elderly and National Service men will receive bonus shares. The shares are not transferable but can be cashed with the government for S$1 per share. Before 1 November 2002, citizens may cash in up to half their shares. After that, citizens can cash in their shares at any time without limit. On 1 March 2007, the government will redeem in cash all shares still outstanding at S$1 per share. Wage Costs As a further signal of the seriousness of the crisis and to take the lead in wage restraint, the government has announced that political appointment holders and senior civil servants will have their monthly salaries cut by 10% from 1 November 2001 for 12 months. All other adjustments to their salaries will be frozen during this period. The government has decided against making any present changes to the CPF rates, but has not ruled out the possibility that they may be cut at some point in the crisis. Miscellaneous Measures A 10% landing fee rebate will be given to all airlines landing at Changi or Seletar airports from 15 October 2001 to 15 October 2002. Page 4
Rajah & Tann is one of the largest law firms in Singapore. It is a full service firm and given its alliances, including US premier firm Weil, Gotshal & Manges, is able to tap into resources in a number of countries. Rajah & Tann is firmly committed to the provision of high quality legal services. It places strong emphasis on promptness, accessibility and reliability in dealings with clients. At the same time, the firm strives towards a practical yet creative approach in dealing with business and commercial problems. The information contained in this Update is correct to the best of our knowledge and belief at the time of writing. The contents of the above are intended to provide a general guide to the subject matter and should not be treated as a substitute for specific professional advice for any particular course of action as the information above may not necessarily suit for your specific business and operational requirements. It is to your advantage to seek specific legal advice for your specific situation. In this regard, you may call the lawyer you normally deal with in Rajah & Tann or e-mail the Knowledge & Risk Management Group at eoasis@rajahtann.com. Page 5