Moving forward together

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 2017. Singapore s economy grew by two percent in 2016. The Ministry of Trade and Industry expects the Singapore economy to grow between one and three percent for the year 2017. 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

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$10,000. 2. 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 2021. 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 2022. 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 2017. The Monetary Authority of Singapore (MAS) will release further details by May 2017. 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 2017. Existing incentive recipients will continue to have such income covered under their existing incentive awards until 30 June 2021. 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 2017. 6. 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 2017. The EDB will release further details by May 2017. 2 l Budget 2017 News Alert

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 2017. The International Enterprise Singapore (IE Singapore) will release further details by May 2017. 8. 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 2017. 9. 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 2018. 10. 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

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 2017. 12. 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 2017. 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 2017. The Inland Revenue Authority of Singapore (IRAS) will release further details by May 2017. 14. 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 2023. 15. 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 2022. 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 2017. 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 2022. The EDB will release further details by May 2017. 4 l Budget 2017 News Alert

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 2022. 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 2017. 17. 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 2017. 19. 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 2017. 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 2017. E-TRS facilities at the cruise terminals will be removed after 31 August 2017. The IRAS will release further details by April 2017. 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 2019. 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

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 +65 6309 8807 siew-moon.sim@sg.ey.com Singapore Tax Partners, Executive Directors and Directors Business Tax Services Angela Tan +65 6309 8804 angela.tan@sg.ey.com Lim Gek Khim +65 6309 8452 gek-khim.lim@sg.ey.com Russell Aubrey +65 6309 8690 russell.aubrey@sg.ey.com Helen Bok +65 6309 8943 helen.bok@sg.ey.com Choo Eng Chuan +65 6309 8212 eng.chuan.choo@sg.ey.com Goh Siow Hui +65 6309 8333 siow.hui.goh@sg.ey.com Latha Mathew +65 6309 8609 latha.mathew@sg.ey.com Lim Joo Hiang +65 6309 8654 joo-hiang.lim@sg.ey.com Ang Sau Tze +65 6309 8489 sau-tze.ang@sg.ey.com Toh Ai Tee +65 6309 8486 ai-tee.toh@sg.ey.com Toh Shuhui +65 6309 8375 shu-hui.toh@sg.ey.com Business Incentives Advisory Tan Bin Eng +65 6309 8738 bin-eng.tan@sg.ey.com Global Compliance and Reporting Soh Pui Ming +65 6309 8215 pui.ming.soh@sg.ey.com Chai Wai Fook +65 6309 8775 wai-fook.chai@sg.ey.com Chia Seng Chye +65 6309 8359 seng.chye.chia@sg.ey.com Ivy Ng +65 6309 8650 ivy.ng@sg.ey.com Tan Ching Khee +65 6309 8358 ching-khee.tan@sg.ey.com Teh Swee Thiam +65 6309 8770 swee-thiam.teh@sg.ey.com Nadin Soh +65 6309 8630 nadin.soh@sg.ey.com Grace Ng +65 6309 8080 grace-aw.ng@sg.ey.com Chionh Huay Kheng +65 6309 8320 huay.kheng.chionh@sg.ey.com Corporate Services David Ong +65 6309 6180 david.ong@sg.ey.com Financial Services Organisation Amy Ang +65 6309 8347 amy.ang@sg.ey.com Stephen Bruce +65 6309 8898 stephen.bruce@sg.ey.com Desmond Teo +65 6309 6111 desmond.teo@sg.ey.com Louisa Yeo +65 6309 6479 louisa.yeo@sg.ey.com Ben Ellis Mudd +65 6718 1054 bmudd@sg.ey.com Reina Lim +65 6309 8162 reina.lim@sg.ey.com Michele Chen +65 6309 8582 michele.chen@sg.ey.com Mriganko Mukherjee +65 6309 8013 mriganko.mukherjee@sg.ey.com Tan Peh Huang +65 6309 8287 peh-huang.tan@sg.ey.com Indirect Tax Customs and International Trade Adrian Ball +65 6309 8787 adrian.r.ball@sg.ey.com GST Services Yeo Kai Eng +65 6309 8208 kai.eng.yeo@sg.ey.com Kor Bing Keong +65 6309 8606 bing-keong.kor@sg.ey.com Chew Boon Choo +65 6309 8764 boon-choo.chew@sg.ey.com Tracey Kuuskoski +65 6309 6746 tracey.kuuskoski@sg.ey.com International Tax Services International Tax Chung-Sim Siew Moon +65 6309 8807 siew-moon.sim@sg.ey.com Chester Wee +65 6309 8230 chester.wee@sg.ey.com Jerome van Staden +65 6309 6386 jerome-van.staden@sg.ey.com Aw Hwee Leng +65 6309 8791 hwee-leng.aw@sg.ey.com Wong Hsin Yee +65 6309 8138 hsin-yee.wong@sg.ey.com Transfer Pricing Luis Coronado +65 6309 8826 luis.coronado@sg.ey.com Henry Syrett +65 6309 8157 henry.syrett@sg.ey.com Stephen Lam +65 6309 8305 stephen.lam@sg.ey.com Jonathan Bélec +65 6309 6175 jonathan.belec@sg.ey.com Sharon Tan +65 6309 6375 sharon.tan@sg.ey.com 6 l Budget 2017 News Alert

Asia-Pacific Tax Center Australia Tax Desk David Scott +65 6309 8788 david-edwin.scott@sg.ey.com India Tax Desk Gagan Malik +65 6309 8524 gagan.malik@sg.ey.com Japan Tax Desk Kenji Ueda +65 6309 6005 kenji.ueda@sg.ey.com Korea Tax Desk Hoonseok Chung +65 6718 1072 hoonscoko.chung@sg.ey.com UK Tax Desk Billy Thorne +65 6718 1132 billy.thorne@sg.ey.com Indirect Tax Customs and International Trade Donald Thomson +65 6309 8636 donald.thomson@sg.ey.com Life Sciences Richard Fonte +65 6309 8105 richard.fonte@sg.ey.com Operating Model Effectiveness Nick Muhlemann +65 6309 6709 nick.muhlemann@sg.ey.com Paul Griffiths +65 6309 8068 paul.griffiths@sg.ey.com Braedon Clark +65 6505 2453 braedon.clark@sg.ey.com People Advisory Services Mobility Grahame Wright +65 6309 8701 grahame.k.wright@sg.ey.com Wu Soo Mee +65 6309 8917 soo.mee.wu@sg.ey.com Kerrie Chang +65 6309 8341 kerrie.chang@sg.ey.com Panneer Selvam +65 6309 8483 panneer.selvam@sg.ey.com Sarah Lane +65 6309 8041 sarah.lane@sg.ey.com Tina Chua +65 6309 8823 tina.chua@sg.ey.com Grenda Pua +65 6309 8753 grenda.pua@sg.ey.com Talent and Reward Samir Bedi +65 6309 6648 samir.bedi@sg.ey.com Transaction Tax Darryl Kinneally +65 6309 6800 darryl.kinneally@sg.ey.com Sandie Wun +65 6309 8081 sandie.wun@sg.ey.com Pang Ai Lin +65 6309 8694 ai-lin.pang@sg.ey.com Industry sectors Real Estate Lim Gek Khim +65 6309 8452 gek-khim.lim@sg.ey.com Ivy Ng +65 6309 8650 ivy.ng@sg.ey.com Technology, Media and Telecommunications Chia Seng Chye +65 6309 8359 seng.chye.chia@sg.ey.com Resources Angela Tan +65 6309 8804 angela.tan@sg.ey.com Consumer Products & Retail Soh Pui Ming +65 6309 8215 pui.ming.soh@sg.ey.com Life Sciences Tan Ching Khee +65 6309 8358 ching-khee.tan@sg.ey.com Diversified Industrial Products Russell Aubrey +65 6309 8690 russell.aubrey@sg.ey.com Government & Public Sector Tan Bin Eng +65 6309 8738 bin-eng.tan@sg.ey.com Hospitality Helen Bok +65 6309 8943 helen.bok@sg.ey.com Shipping Goh Siow Hui +65 6309 8333 siow.hui.goh@sg.ey.com Emerging & Private Enterprise Chai Wai Fook +65 6309 8775 wai-fook.chai@sg.ey.com Insurance Amy Ang +65 6309 8347 amy.ang@sg.ey.com Wealth & Asset Management Desmond Teo +65 6309 6111 desmond.teo@sg.ey.com Banking & Capital Markets Stephen Bruce +65 6309 8898 stephen.bruce@sg.ey.com 7 l Budget 2017 News Alert

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