Pre-Budget Brief 2016 Singapore
Contents Economic indicators 1 Economic trends 2 Singapore tax rates a history 3 Co rporate tax Prevailing corporate income tax rates in selected countries 5 as at 1 January 2016 Personal tax Personal income tax rates in selected countries in the region 7 Comparison of effective income tax rates (in percentages) in selected 8 countries with employment income of S$75,000, S$100,000, S$200,000 and S$400,000 Break-even salary to pay no Singapore income taxes for year of assessment 9 (YA) 2016 Progressive personal income tax system 10 Personal income tax rates for year of assessment (YA) 2016 and YA 2017 11 Common personal income tax reliefs 12 Central Provident Fund (CPF) rates 13 Comparative analysis (2015/2016 Hong Kong versus Singapore 14 YA 2016 tax rates) GST Prevailing standard GST/VAT rates in selected countries as at 1 January 2016 16
Economic indicators Over the first three quarters of 2015, government budget expenditures expanded by 11% compared to the same time period in 2014. Operating expenditures rose by 9%, boosted by spending on social development and security and external relations. Development expenditures, which account for between one quarter to one-fifth of the overall budget, rose by 18% in the first three quarters of 2015 compared to the same period in the prior year. Government revenues have grown approximately 6% annually since 2011 and in aggregate have comprised nearly one-fifth of overall GDP on average. Strong revenue expansion and modest public spending is expected to result in a budget surplus, though the surplus is expected to be smaller than in recent years. The government debt-to-gdp ratio has grown over the past several years and is expected to exceed 24% in 2016. 1 Budget 2 Government allocation Total in Q1-Q3 2015: S$40b S$ b 60 40 20 0 46.8 47.3 35.0 34.8 Total Operating expenditure 52.3 54.8 40.4 41.8 11.8 12.5 11.9 13.0 2011 2012 2013 2014 2015 revenue 80 60 40 20 51.0 54.3 57.1 Development expenditure S$ b CAGR 2011 -- 2016f: 6% 100 60.0 63.4 68.2 0 2011 2012 2013 2014 2015e 2016f 3 Primary budget surplus % of GDP 2.5 2.0 2.0 1.5 1.2 1.3 1.4 1.0 0.5 0.0 0.5 0.1 2011 2012 2013 2014 2015e 2016f Notes: e = estimate f = forecast Sources: Accountant-General's Department, Ministry of Finance Singapore Department of Statistics, Haver Analytics (via Oxford Economics) 4 Government debt/gdp ratio % 30 25 24.4 20.1 20 16.2 15 12.2 13.3 10 6.8 5 0 2011 2012 2013e 2014e 2015e 2016f Pre-Budget Brief 2016 1
Economic trends Real GDP vs. CPI % 18 15 12 9 6 3 0-3 *2016 GDP: 2.3%* CPI: 0.5%* 2006 2007 2008 2009 2010 2011 2012 2013 2014e 2015e 2016f Current macro conditions imply that real GDP growth in 2016 could range between 2.1-2.3%, with the outlook tempered by weakening prospects for global trade and a slowdown in China. A projected increase in government spending, however, could boost growth. For 2016, inflation expectations are low due to global and domestic factors. Trade (goods and services) *2016 S$ b 1000 800 600 Exports: 776.5* Imports: 671.6* 400 200 0 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015e 2016f Singapore s exports may face significant headwinds in 2016 due to weak economic activity in key export markets such as China and Malaysia. Nonetheless, with increased regional integration via the ASEAN Economic Community and free trade agreements, Singapore can further position itself as the region s preeminent services producer, thus strengthening the rest of ASEAN as a manufacturing base. Net international reserves S$ b 400 300 200 *As of 18 Jan 2016 2016: 264.4* Singapore s foreign reserves are forecast to continue to grow. The current account surplus, which accounts for the equivalent of one-quarter of GDP, is expected to remain sizeable over the next several years. 100 0 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015e 2016f Sector growth % 10 8 6 4 2 0-2 -4-6 -8-2.6-4.8-6.2 Manufacturing -1.6 2.2 1.6 Construction 6.8 5.6 6.0 Wholesale and retail trade 0.9 1.3-0.1-0.9-1.0 0.3 Accomodation Transportation and food services and storage 7.7 6.9 4.8 Finance and insurance 2.9 1.6 1.5 Business services The services sector, which makes up around two-thirds of the economy, is likely to drive growth in 2016, with solid household spending and growth in government-related services being key contributors. An increase in global risk aversion, however, could dampen prospects. 1Q15 2Q15 3Q15 Notes: e = estimate f = forecast Sources: Singapore Department of Statistics, Haver Analytics (via Oxford Economics) Bank for International Settlements, Haver Analytics (via Oxford Economics) Ministry of Trade and Industry Singapore 2 Pre-Budget Brief 2016
Singapore tax rates a history % 45 40 35 30 25 20 15 10 5 0 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 Year of assessment Corporate Individual GST 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Observations: Corporate income tax has been declining while GST has been increasing Personal income tax usually follows corporate income tax, but there has been a divergence in recent years Personal income tax could increase as we look at a more progressive tax system Notes: The above are the top marginal tax rates GST commenced on 1 April 1994 Assumes that there is no change in the corporate income tax and GST rates in 2016 and 2017 Pre-Budget Brief 2016 3
Corporate tax 4 Pre-Budget Brief 2016
Corporate tax Prevailing corporate income tax rates in selected countries as at 1 January 2016 Country US 35 (a) (b) (g) Australia India Philippines 30 (e) 30 (b) (d) 30 (b) New Zealand 28 China Indonesia Malaysia Japan Korea Thailand UK Vietnam 25 (e) 25 (e) 24 (e) (g) 23.9 (e) (i) 22 (a) 20 (e) 20 (f) (g) 20 (g) Singapore Taiwan Hong Kong 17 (h) 17 (b) (c) 16.5 Germany Ireland 15 12.5 (g) 0 5 10 15 20 25 30 35 40 % Notes: (a) Lower income bands are generally (with exception and/or subject to certain conditions) taxed at lower rate(s) (b) An alternative minimum tax is applicable (c) The taxing threshold for taxable income is TWD120,000 and in addition, the income tax payable may not exceed one-half of the taxable income minus the TWD120,000 threshold amount (d) A higher rate (40%) applies for foreign companies (e) Certain income or companies that meet certain conditions enjoy a lower rate of tax (f) To be reduced to 19% from 1 April 2017 and 18% from 1 April 2020 (g) Certain income or companies are taxed at a higher rate (h) Partial tax exemption is available on a specified amount of taxable income (i) To be reduced to 23.4% for taxable years beginning on or after 1 April 2016 (and further reduced to 23.2% for taxable years beginning on or after 1 April 2018) The above rates are the top corporate tax rates, excluding dividend withholding tax, surcharges, trade tax, or other state or local taxes, etc. where applicable Pre-Budget Brief 2016 5
Personal tax 6 Pre-Budget Brief 2016
Personal tax Personal income tax rates in selected countries in the region Country Australia 45 China 45 Taiwan 45 Japan 40* Korea 38 Thailand 35 Vietnam 35 Philippines 32 India 30 Indonesia 30 Malaysia 25 Myanmar 25 Singapore 20 Hong Kong 17 0 5 10 15 20 25 30 35 40 45 50 % Notes: The above rates are the top marginal personal income tax rates prevailing as at December 2015 *Excludes local inhabitant tax Pre-Budget Brief 2016 7
Personal tax Comparison of effective income tax rates (in percentages) in selected countries with employment income of S$75,000, S$100,000, S$200,000 and S$400,000 Employment income S$75,000 Employment income S$100,000 Country Country Australia 23.07 Australia 26.80 India 25.73 India 27.10 China 18.40 China 20.00 Thailand 15.60 Thailand 18.60 Malaysia 16.00 Malaysia 18.00 Hong Kong 0.00 Hong Kong 1.60 Singapore 1.60 Singapore 2.90 Employment income S$200,000 Employment income S$400,000 Country Country Australia 33.85 Australia 41.43 India 29.00 India 33.53 China 26.10 China 35.03 Thailand 25.15 Thailand 30.08 Malaysia Hong Kong Singapore 9.30 8.15 21.40 Malaysia Hong Kong Singapore 13.15 13.30 23.20 Notes: Assumes a married man with two children, wife has no income and whose sole source of income is from his employment Difference in definitions of taxable income, allowable deductions and like factors can distort effective tax rate comparisons between different countries All figures are approximate and based on latest tax rates applicable to tax years ending in calendar year 2015 8 Pre-Budget Brief 2016
Personal tax Break-even salary to pay no Singapore income taxes for year of assessment (YA) 2016 Single S$ Married with one child S$ Married with two children S$ Annual salary 30,000 37,500 42,500 Personal reliefs Earned income 1,000 1,000 1,000 Wife 2,000 2,000 Children 4,000 8,000 Central Provident Fund (CPF) 6,000 7,500 8,500 Reservist 3,000 3,000 3,000 Chargeable income 20,000 20,000 20,000 Net tax payable Nil Nil Nil Assumptions: Sole source of income is from employment Annual salary is calculated on 13 months Less than 50 years old Wife is not working Active reservist No tax rebate for YA 2016 Pre-Budget Brief 2016 9
Personal tax Progressive personal income tax system Comparison of tax payable on employment income of S$25,000, S$75,000, S$150,000, S$250,000 and S$500,000 over a period from year of assessment (YA) 2007 to YA 2016 Effective personal income tax rate YA S$25,000 (%) S$75,000 (%) S$150,000 (%) S$250,000 (%) S$500,000 (%) 2016 0 1.9 6.0 10.2 14.8 2015 0 0.9 5.3 9.8 14.6 2014 0 1.9 6.0 10.2 14.8 2013 0 1.3 5.0 9.6 14.5 2012 0 1.9 6.1 10.3 14.8 2011 0 2.2 6.0 10.0 14.5 2010 0 2.7 7.4 10.8 14.9 2009 0 2.2 6.0 10.0 14.5 2008 0 2.5 6.4 10.3 14.6 2007 0 3.1 7.7 11.1 15.0 Assumptions: Assumes a married man who is less than 50 years old, has two children, wife is not working and whose sole source of income is from his employment YA 2016 assume no tax rebate is announced in Budget 2016 10 Pre-Budget Brief 2016
Personal tax Personal income tax rates for year of assessment (YA) 2016 Band S$ Rate (%) 0 20,000 0.0 20,001 30,000 2.0 30,001 40,000 3.5 40,001 80,000 7.0 80,001 120,000 11.5 120,001 160,000 15.0 160,001 200,000 17.0 200,001 320,000 18.0 Above 320,000 20.0 Personal income tax rates for year of assessment (YA) 2017 Band S$ Rate (%) 0 20,000 0.0 20,001 30,000 2.0 30,001 40,000 3.5 40,001 80,000 7.0 80,001 120,000 11.5 120,001 160,000 15.0 160,001 200,000 18.0 200,001 240,000 19.0 240,001 280,000 19.5 280,001 320,000 20.0 Above 320,000 22.0 Pre-Budget Brief 2016 11
Personal tax Common personal income tax reliefs Tax reliefs Year of assessment 2016 S$ Earned income relief Under age 55 1,000 55 to age 59 6,000 Age 60 and above 8,000 Handicapped earned income relief Under age 55 4,000 55 to age 59 10,000 Age 60 and above 12,000 Spouse/handicapped spouse relief 2,000/5,500 Child/handicapped child relief Qualifying child relief (each) 4,000/7,500 Dependent parent/handicapped parent relief Living with taxpayer in the same household (each parent) 9,000/14,000 Not living with taxpayer in the same household (each parent) 5,500/10,000 Handicapped sibling relief 5,500 Course fee relief 5,500 Central Provident Fund (CPF) cash top-up relief By self or employer to self's account Up to 7,000 To spouse, sibling, parents' and grandparents' account Up to 7,000 Foreign maid levy Without foreign domestic worker levy concession Up to 6,360 With foreign domestic worker levy concession Up to 1,920 Grandparent caregiver relief 3,000 NSman relief No in-camp training in previous year (non-key appointment holder) 1,500 Attended in-camp training in previous year (non-key appointment holder) 3,000 No in-camp training in previous year (key appointment holder) 3,500 Attended in-camp training in previous year (key appointment holder) 5,000 NSman (wife/parent) relief 750 Central Provident Fund (CPF) relief Age 50 and below Up to 17,000 Age 51 to 55 Up to 16,150 Age 56 to 60 Up to 11,050 Age 61 to 65 Up to 6,375 Above 65 Up to 4,250 Supplementary Retirement Scheme (SRS) relief Singaporean/Singapore permanent resident Up to 12,750 Foreigner Up to 29,750 12 Pre-Budget Brief 2016
Personal tax Central Provident Fund (CPF) rates CPF rates for wages S$1,500 and above, up to ceiling of S$65,000 for ordinary wages and S$102,000 for total wages Singaporean/Singapore permanent resident* With effect from 1 January 2016 (A) Employees age 55 years and below Employee 20.0% Employer 17.0% Total 37.0% (B) Employees age above 55 to 60 years Employee 13.0% Employer 13.0% Total 26.0% (C) Employees age above 60 to 65 years Employee 7.5% Employer 9.0% Total 16.5% (D) Employees age above 65 Employee 5.0% Employer 7.5% Total 12.5% * Please note in the case of permanent residents, the CPF rates may be lower in the first two years Pre-Budget Brief 2016 13
Personal tax Comparative analysis (2015/2016 Hong Kong versus Singapore YA 2016 tax rates) 18 % 16 14 Effective tax rate (%) 12 10 8 6 (378, 12.91%) 4 (118.7, 4.04%) 2 0 50 100 150 200 250 300 350 400 450 500 550 600 650 700 Income level (S$ '000) Singapore Hong Kong (2015/2016 tax rates) Notes: Assumes a Singaporean married man with two children, wife has no income and sole source of income is from his employment Hong Kong calculations are based on 2015/2016 tax rates Hong Kong calculations for 2015/2016 increase child allowance from HK$70K to HK$100K for each child Singapore calculations are based on YA 2016 tax rates Exchange rate used: S$1:HK$5.6309 14 Pre-Budget Brief 2016
GST Pre-Budget Brief 2016 15
GST Prevailing standard GST/VAT rates in selected countries as at 1 January 2016 Asia-Pacific Country China 17 New Zealand 15 Philippines 12 Australia Indonesia Korea Vietnam 10 10 10 10 Japan 8 Singapore Thailand 7 7 (a) Malaysia 6 Taiwan 5 0 2 4 6 8 10 12 14 16 18 % Europe Country Denmark Sweden 25 25 Italy 22 Netherlands 21 UK France 20 20 Germany 19 Switzerland 8 0 5 10 15 20 25 30 % Notes: (a) Until 30 September 2016, pending an extension of the period by the Thai Government 16 Pre-Budget Brief 2016
Notes Pre-Budget Brief 2016 17
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. 2016 Ernst & Young Solutions LLP. All Rights Reserved. APAC No. 12000678 Ernst & Young Solutions LLP (UEN T08LL0784H) is a limited liability partnership registered in Singapore under the Limited Liability Partnerships Act (Chapter 163A). This material has been prepared for general informational purposes only and is not intended to be relied upon as accounting, tax, or other professional advice. Please refer to your advisors for specific advice. ey.com