As well as detailing individual and business tax changes for the year ahead, there is a significant focus in the 2019 budget on providing support and incentives for small and medium-sized enterprises.
Singapore is celebrating its Bicentennial (200 years since Sir Stamford Raffles first landed on its shores) and the country's 2019 fiscal budget for the 12 months from 1 April 2019 is focused on building a 'Strong, United Singapore'. As well as announcing individual and business tax changes for the year ahead, there is a significant focus on providing support and incentives for small and medium-sized enterprises (SMEs) to foster innovation and promote the scaling up of businesses.
Key tax changes for individuals
To celebrate the bicentennial, all individual resident taxpayers will receive a tax rebate of 50% of tax payable, capped at S$200. This will be based on income earned in 2018 (Year of Assessment (YA) 2019).
The Not Ordinarily Resident (NOR) incentive scheme, introduced in 2002 to attract global talent, will lapse after 31 December 2019. Individuals who have been accorded the NOR status will continue to be granted the NOR tax concession until their NOR status expires. This removes tax exemptions for days working outside of Singapore and for contributions to non-mandatory overseas pension schemes.
Key tax changes for businesses
Singapore-listed Real Estate Investment Trusts (S-REITS) currently benefit from tax concessions, provided they distribute at least 90% of their taxable income within the year in which the income is derived by the trustee. These concessions were due to end after 31 March 2020 but have now been extended until 31 December 2025. At the same time, Goods and Services Tax (GST) remission for S-REITS and Registered Business Trusts involved in infrastructure, ship and aircraft leasing businesses will be extended until 31 December 2025.
The current tax incentive schemes under Sections 13CA, 13R and 13X and the recovery of GST for qualifying funds by way of remission, for funds managed by Singapore-based fund managers, are extended to 31 December 2024. The Monetary Authority of Singapore is working on the full details of these business incentives, due for publication in May 2019.
Enterprise Financing Scheme
A major objective of this budget is to build 'deep enterprise capabilities' and to ensure that financial support goes into SMEs to enable them to continue to innovate, grow and expand internationally.
With different financing schemes available under the various government agencies, the government will streamline the existing funding schemes offered by Enterprise Singapore into a single scheme, to be known as the Enterprise Financing Scheme (EFS), which will be formally launched in October 2019. This will cover trade, working capital, fixed assets, venture debt, mergers and acquisitions and project financing.
The EFS will also provide stronger support for companies incorporated for less than five years, with the government taking on up to 70% of the bank loan risk, compared to the current 50% under most of the existing loan schemes. There is also good news for SMEs, with the Working Capital Loan scheme being extended until 31 March 2021. This will help address Singapore SMEs' near-term cash flow concerns and growth financing needs through unsecured working capital loans, while encouraging business growth and restructuring activities.
Automation Support Package (ASP)
The ASP was first introduced in the 2016 Budget for a period of three years, expiring 31 March 2019, to support companies using automation to drive productivity efficiency and stimulate growth.
In order to maintain support, the 100% investment allowance measure under the ASP will be extended by two years – for projects approved by Enterprise Singapore – to 31 March 2021. The approved capital expenditure will remain capped at S$10 million per project.
Enterprise Development Grant (EDG) and Productivity Solutions Grant (PSG)
The government has set new targets to reduce the Dependency Ration Ceiling (DRC) for the services sector from 40% to 38% from 1 January 2020 and to 35% from 1 January 2021. Meanwhile the S-Pass sub-DRC will be reduced from 15% to 13% from 1 January 2020 and to 10% from 1 January 2021.
The government has recognised that this could be costly for some firms and so they are extending the scheme that provides for 70% funding support for the EDG for a further period of three years, up to 31 March 2023.
The PSG aims to support enterprises to adopt off-the-shelf productivity solutions and technologies. To support firms in making the transition, the PSG support level of up to 70% will be extended to 31 March 2023. Eligible enterprises will be able to receive a subsidy for up to 70% of their out-of-pocket training expenses capped at S$10,000 per enterprise.
This will enable firms to skill-up local staff as foreign worker numbers are reduced.
Special Employment Credit and Additional Special Employment Credit
The government also recognises the importance of older workers continuing in employment for longer, especially with the additional aim of reducing dependence upon foreign workers. This not only helps to address the planned demographic changes to the workforce but also the need for older people to be able to fund a longer period of retirement as life expectancy continues to rise.
It first made a move to encourage firms to employ older workers with the introduction of the Special Employment Credit (SEC) scheme in 2011, and the later Additional Special Employment Credit (ASEC) scheme. The government is keen to seek better forms of support to continue to help workers to remain productive, earn more, and save more for retirement. It has commissioned a review of the SEC and ASEC schemes to see if they can be improved upon in the future. While this review is being performed, the government has extended the SEC and ASEC schemes until 31 March 2020 and added S$366 million to the SEC fund to support this.
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With the details of many of the changes still to be published, it can be challenging for businesses to fully appreciate the effect the 2019 Budget will have on their companies, and how they will need to react to implement changes and take advantage of new and extended incentive schemes.
TMF Singapore can help you to comply and take advantage where the changes can provide additional support to your company's growth and innovation.
Need more information? Contact us today.
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