Corporate Income Tax Rate

The tax rate stays at 17% and the partial tax exemption threshold remains as before.

New Start Up Companies

To encourage local entrepreneurship, Singapore Government has declared a full tax exemption for newly incorporated companies. Full tax exemption is granted on the first S$100,000 of Chargeable Income for qualifying new companies for the first three years of assessment consecutively.

Productivity and Innovation Credit (PIC)

PIC is a new broad-based tax incentive which will be available for all businesses from YA2011 to YA2015.

250% tax deduction for the first $300,000 of expenditure in EACH of 6 qualifying activities:


• Research & Development (R&D) (e.g. Salaries for R&D personnel)


• Registration of Intellectual Property (e.g. Fees to intellectual Property Office of Singapore for registering trademark or patent)


• Acquisition of Intellectual Property (e.g. Price paid to buy an overseas trademark to accelerate inroad into the offshore market)


• Design activities (e.g. Fees to engage external designer to create new product design, must be approved by Design Singapore)


• Automation through technology or software (e.g. Purchases of office and graphics software, computers and laptops, payments to buy a point of sales system to be installed in a restaurant)


• Training of employees (e.g. External course fees or internal WSQ courses for employees’ skill upgrading)


• Can claim all or any of the 6 activities


• Lower taxable income by $750,000 for the first $300,000 spent on each activity. So, if $300,000 each is spent on 2 activities, taxable income can be reduced by $1.5 million ($750,000 x 2)


• Reduce tax bill by $42.50 for every $100 spent on each activity


• For businesses without adequate taxable income, they can use their excess tax deductions for future years. OR they can convert up to $300,000 of Productivity and Innovation Credit into a cash grant of up to $21,000 (7% conversion rate). This cash component of the scheme will be reviewed after three years.


• Businesses can combine the $300,000 cap per Year of assessment (YA) for the first two years into a $600,000 cap for 2 years. They can therefore deduct from their taxable income 250% of the first $600,000 expenditure on each activity for YA2011 and YA2012 combined.

 

Merger & Acquisition (M&A) allowance and stamp duty remission

The M&A allowance will be granted to qualifying M&As executed from 1 April 2010 to 31 March 2015 (both dates inclusive).

• A new one-off tax incentive to defray part of acquisition costs for qualifying M&As.


• Allowance will be based on 5% of the value of the M&A deal, capped at $5 million per YA, and written down over 5 years.

Stamp duty on transfers of unlisted shares for qualifying M&A deals executed from 1 April 2010 to 31 March 2015 will also be remitted.

• The remission is capped at $200,000 of stamp duty per year

 

Phase out of Industrial Building Allowance (IBA)

IBA will be phased out with immediate effect. Qualifying capital expenditure incurred by businesses on or before 22 February 2010 on the construction or purchase of industrial buildings or structures will continue to qualify for IBA, subject to existing IBA rules.

With the phase-out, IBA will not be allowed on capital expenditures on the construction or purchase of industrial buildings or structures which are incurred after 22 February 2010 except in specified scenarios.

IRAS will release more details of the phasing out of IBA in April 2010.

Land Intensification Allowance (LIA) Scheme

LIA will be introduced to support enhanced land productivity among industrial users. Businesses may claim LIA on qualifying capital expenditure incurred for the construction of a qualifying building or structure.

• All businesses in 9 sectors* will be eligible if they meet or exceed the benchmark Gross Plot Ratios (GPRs) for their sector;
  
  * The 9 sectors are pharmaceuticals, petroleum, other chemicals, aerospace, solar cell manufacturing petrochemicals, chemical specialties, semiconductor-wafer fabrication as well as offshore engineering


• All businesses in 9 sectors* will be eligible if they meet or exceed the benchmark Gross Plot Ratios (GPRs) for their sector;

Extension of and enhancement to listed Real Estate Investment Trust (REITs) concession

The existing income tax, stamp duty and GST concessions for listed REITs, which expired on 17 February 2010, will be renewed from 18 February 2010 to 31 March 2015 (both dates inclusive).

The Foreign-Sourced Income Exemption (FSIE) income tax concession for listed REITs will be subject to a sunset clause of 31 March 2015. This means that for the FSIE to apply to listed REITs or wholly-owned subsidiary companies of listed REITs, which have been granted or will be granted the FSIE, the qualifying foreign-sourced income should be remitted on or before 31 March 2015.

Enhancement to Financial Sector Incentive (FSI) Scheme

With effect from 1 January 2011, the Qualifying Base (QB) will be removed and instead the concessionary tax rate under the FSI Standard Tier award will be changed in tandem from 10% to 12% as a revenue neutral change. The list of qualifying activities will also be updated. These changes will help to simplify the rules for the FSI scheme and to lower compliance costs for financial institutions.

Review of tax concession for offshore insurance business

Approval general, life and composite insurers can enjoy a concessionary tax rate of 10% on qualifying income derived from offshore insurance business conducted from Singapore. There is no sunset clause for the scheme and incentive recipients and incentivized indefinitely.

In line with the Government’s policy to review tax incentives on a regular basis and to encourage companies to grow their presence in Singapore, the Government will introduce the following changes to the tax incentive with effect from 1 April 2010:

• The incentive will be subject to a sunset clause of 5 years till 31 March 2015.


• The incentive will be awarded to an approved recipient for a period of 10 years; and


• New headcount requirement will be imposed for incentive recipients (except for captive insurers).

New applicants will be required to meet the headcount criterion at the point of application for the tax incentive from 1 April 2010.

To facilitate the transition of existing recipients to the revised incentive framework, existing incentive recipients will be given a transition period of 3 years from 1 April 2010 to 31 March 2013 to meet the necessary headcount requirement in order to continue qualify for the incentive after 31 March 2013 for the remaining tenure of their awards.

Review of existing tax incentives for futures members of Singapore Exchange (SGX) and members of Singapore Commodity Exchange Limited (SICOM)

Futures members of SGX and members of SICOM are granted a concessionary tax rate of 10% on their qualifying income derived from qualifying transactions under sections 43D and 43K of the Income Tax Act.

To streamline existing tax incentive schemes for better incentive administration, the above 2 existing incentives would be discontinued on 31 December 2010. From 1 January 2011 onwards, these 2 tax incentives will cease and new incentive applicants which engage in qualifying transactions that were incentivized under these 2 tax incentives will have to apply for the Financial Sector Incentive (FSI) scheme and meet economic commitments under the FSI scheme at the point of application.

As a transition measure, on 1 January 2011, existing futures members of SGX and members of SICOM who are incentivized under these 2 existing tax incentives will be allowed to transit to the FSI-ST scheme automatically if they notify the MAS of their intent to transit by 31 July 2010. They will not be subject to the approval criteria for the FST-ST award at the point of transition in January 2011. However, they will be subject to the prevailing FSI-ST renewal criteria, when they apply for renewal of their awards in December 2013, if the FSI scheme is extended.

Removal of approved start-up fund manager scheme

The approved start-up fund manager scheme was introduced in 2005 to allow a fund managed in Singapore by an approved start-up fund manager to be granted a 12 month grace period from the date of set up of the fund to meet the requisite residency conditions on the fund’s investors under the fund management tax incentives. This is meant to provide approved start-up fund managers with certainty of tax exemption of the fund managed by them while they build up their track record and source for mandates

The scheme will be allowed to lapse after its expiry on 17 February 2010. No fund manager will be approved under the scheme after 17 February 2010.

Incentives for ship brokers and Forward Freight Agreement (FFA) traders

Ship brokers and FFA traders are taxed at the prevailing corporate tax rate.

To grow the activities of ship broking and FFA trading in Singapore and further promote Singapore as an International Maritime Centre, a new incentive targeted at ship brokers and FFA traders will be introduced.

Under the new incentive, a company solely carrying out ship broking and/or FFA trading in Singapore will be granted a concessionary tax rate of 10%, subject to conditions.

Interested taxpayers can apply to the MPA for this incentive from 1 April 2010 to 31 March 2015 (both date inclusive). Incentive recipients will enjoy incentive awards for 5 years.

Enhancement to section 13A of the Income Tax Act (ITA) and Approved International Shipping Enterprise (AIS) scheme

Ship management fees derived from rendering ship management services to related Special Purpose Vehicles (SPVs) are taxed at the prevailing corporate income tax rate.

In line with the objective of developing Singapore into an International Maritime Centre, ship management fees derived on or after 22 February 2010 from the rendering of ship management services to related qualifying SPVs will be treated as qualifying income to be exempted from tax under section 13A of the ITA and the AIS scheme, subject to conditions.

Extension of Maritime Finance Incentive (MFI)

Currently, the MFI accords the following tax benefits:

• An approved MFI entity will enjoy either tax exemption or a tax concession (10% or 5%) on its qualifying leasing income;


• An approved manager of the MFI entity will enjoy a tax concession of 10% on its qualifying income.

This scheme will expire on 28 February 2010. Taxpayers applying for the MFI on or before 28 February 2011 will be given approval for a period of not more than 10 years.

To further support Singapore’s development as a maritime financing hub, the expiry date of the MRI scheme will be extended from 28 February 2010 to 31 March 2016.

Taxpayers applying for the MFI during the period from 1 March 2011 and 31 March 2016 (both dates inclusive) will be given approval for a period of not more than 5 years.

Extension of Development Expansion Incentive (DEI) to international Legal Services

The DEI scheme will be extended to cover income derived from the provision of international legal services to encourage law practices to do more international legal work.

The incentive will be available to law practices registered in Singapore as a company or as a branch of a foreign company. Approved law practices will enjoy a 10% concessionary tax rate on incremental income from qualifying international legal services for 5 years. The incentive is valid from 1 April 2010 to 31 March 2015 (both dates inclusive).

The Ministry of Law and EDB will release details of the new incentive in March 2010.

Renewal and enhancement of Investment Allowance (IA) scheme for aircraft rotables

In line with Singapore’s commitment to develop the maintenance, repair and overhaul industry, the IA scheme for aircraft rotables will be renewed for another 5 years from 1 April 2010 to 31 March 2015.

The government will also enhance the IA scheme by removing the “non-swapping condition”. This enhancement removes the administrative difficulties of having to track specific aircraft rotables.

The EDB will release details by March 2010

Enhancement of tax deduction on donations

Tax deduction of 250% will be extended for another year for donations made during the period from 1 January 2010 to 31 December 2010. All existing rules to qualify for the enhanced tax deduction will remain.