Singapore Budget 2018: A Budget for the Future

On Monday, February 19th 2018, Finance Minister Heng Swee Keat delivered the 2018 Budget stement in Parliament.

Coming as a surprise, was his announcement of a budget surplus of S$9.6 billion, far exceeding the forecasted surplus of S$1.9 billion.

As noted by the Finance Minister,  “while we address short term concerns, the Singapore Budget must be a strategic and integrated plan to position Singapore for the future.”

Here are the highlights and key announcement he made in Parliament on Monday 19th Beruary 2018:

  • Every Singaporean aged 21 years and above this year will receive a one-off “hongbao” of between S$100 and S$300 from the Government, as the Republic expects a record surplus for the current financial year.
  • To raise buyer’s stamp duty for residential properties above S$1 million from 3 per cent to 4 per cent. The revised rates will apply to all residential properties acquired on or after Feb 20.
  • To impose a 10% increase on excise duty across all tobacco products with effect from Feb 19.
  • Businesses providing digital services, such as the streaming of entertainment content, will have to pay the Goods and Services Tax (GST) from Jan 1, 2020.
  • The Goods and Services Tax (GST) will be raised by 2 percentage points to 9 per cent sometime between 2021 and 2025.
  • To meet major infrastructure needs, the Government will set up a new Rail Infrastructure Fund to save up for major rail lines, while looking at borrowing by Statutory Boards and Government-owned companies which build infrastructure;
  • Singapore is on a sound fiscal footing for 2011 to 2020;
  • By 2020, Mr Heng pointed out, the total number of elderly in Singapore will increase by about 450,000, to 900,000.
  • To ensure demand for foreign domestic workers (FDWs) is commensurate with need and avoid overreliance on maids, the Government will be increasing the FDW levy for a small group of employers who do not qualify for concessionary rates, or who employ multiple FDWs, from April next year.
  • The Proximity Housing Grant, which provides support for family members to live with or near each other, will be enhanced;
  • Large carbon emitters will be taxed S$5 for each tonne of greenhouse gases generated from next year to 2023;
  • The Government will extend the wage credit scheme, and enhance and extend the corporate income tax rebate, among other measures, in its bid to help firms cope with near-term cost pressures.

Budget at a Glance:

Business:

  • Corporate Income Tax (“CIT”) rebate enhanced and extended:
    • For YA 2018, CIT rebate raise to 40% of tax payable, capped at $15,000
    • CIT rebate extended to YA 2019, at a rate of 20% of tax payable, capped at $10,000;
  • Thresholds for Start-up Tax Exemption and Partial Tax Exemption schemes reduced to first $200,000
  • Wage Credit Scheme extended for three more years to 2020, with government co-funding of qualifying wage increases at 20% for 2018, 15% for 2019 and 10% for 2020;
  • Up to 70% funding support for the adoption of pre-scoped, off-the-shelf solutions to improve productivity;
  • Up to 70% funding support for firms to build a range of capabilities including innovation, talent development and internationalization
  • Funding support for collaborations and partnerships between firms of all sizes;
  • Double Tax Deduction for Internationalisation enhanced with an increase in the expenditure cap for claims without prior approval from $100,000 to $150,000 per year of assessment;
  • Tax deduction for the first $100,000 of qualifying Intellectual Property (“IP”) licensing costs or qualifying IP registration costs raised to 200%;
  • Tax deduction for staff costs and consumables incurred on qualifying R&D projects performed in Singapore raised from 150% to 250%;

Individuals:

  • All Singaporeans aged 21 and above in 2018, will receive a one-off SG Bonus of $100 to $300, with the quantum dependent on annual income thresholds;
  • GST Vouchers to be enhanced for eligible households and seniors;

Goods & Services tax (GST):

  • GST rate to be increased from 7% to 9%, sometime between 2021 and 2025;
  • GST will be introduced on Business-to-Business and Business-to-Consumer imported services on or after 1 January 2020;

Environment & Society:

  • From 2019, there will be a new carbon tax of $5 per tonne of greenhouse gas emissions, for all facilities producing 25,000 tonnes or more in annual greenhouse gas emissions. There are plans to increase the tax to between $10 and $15 per tonne of emissions by 2030;
  • Grants and support to help companies enhance energy efficiency and reduce emissions;
  • Excise duties raised by 10% across all tobacco products;
  • Enhanced 250% tax deduction for qualifying donations extended, for donations made on or before 31 December 2021;
  • 250% tax deduction on qualifying costs incurred for businesses that support staff to volunteer and provide services to Institutions of a Public Character (“IPC”) under Business and IPC Partnership Scheme;

Sector Specific:

Financial and Insurance Sectors

  • Tax framework for Singapore Variable Capital Companies (“S-VACCs”) to be introduced to complement the S-VACC regulatory framework;
  • Tax exemption under the Enhanced-Tier Fund Scheme to be extended to all qualifying fund vehicles;
  • Tax transparency treatment for Singapore-listed REITs to be extended to Singapore-listed REITs Exchange Traded Funds;
  • Tax incentive scheme for Approved Special Purpose Vehicle engaged in asset securitisation to be extended to 31 December 2023;
  • Financial Sector Incentive Scheme to be enhanced and extended to 31 December 2023;
  • Tax deduction for qualifying financial institutions for impairment and loss allowances made in respect of non-credit-impaired financial instruments to be extended;
  • Withholding tax exemptions for the financial sector to be rationalised;
  • Insurance Business Development – Insurance Broking Business scheme to be extended to 31 December 2023 and Specialised Insurance Broking Business scheme to lapse after 31 March 2018;
  • Qualifying Debt Securities incentive scheme to be extended till 31 December 2023 and Qualifying Debt Securities Plus incentive scheme to lapse after 31 December 2018;
  • Tax exemption on income derived by primary dealers from trading in Singapore Government Securities to be extended to 31 December 2023;

Infrastructure sector

  • Investment Allowance scheme to include qualifying investment in submarine cable systems landing in Singapore;
  • New office to connect infrastructure demand in Asia to infrastructure financing, services and expertise;

 Real estate sector

  • Top marginal Buyer’s Stamp Duty rate will be raised from 3% to 4%. Applicable to residential property acquired on or after 20 February 2018, that is valued in excess of $1 million;

Shipping and Maritime sectors

  • Increase in Foreign Workers’ Levy rates deferred for the Marine Shipyard and Process sectors to 30 June 2018;
  • Introduction of 31 December 2022 as the review date for the withholding tax exemption on container lease payments made to non-resident lessors.

 

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