Singapore’s Finance Minister Heng Swee Keat while delivering the country’s annual budget on February 2019, called it an “expansionary” one, with increased spending in defence, educating and the heath sector. As such, he indicated that in contrast to last year’s overall budget surplus of $2.1 billion (0.4% of GDP), this year the overall budget deficit would be $3.5 billion (0.7% of GDP).
During his speech, the minister also announced several changes, extensions, expansions, and modifications in the country’s tax regime and schemes for Singapore-incorporated companies – affecting foreign and local individuals, entrepreneurs and businesses. Below is the exhaustive summary of the major changes.
Related Read: Singapore budget 2019 overview of schemes for business
Tax changes in Singapore Budget 2019
As a representative of a government which has ensured that the country comes regularly among the top three countries in the world – in World Bank’s Ease of Doing Business rankings – the minister noted that Singapore’s tax system “will be made more progressive and resilient to enhance its business sector’s competitiveness”.
Not Ordinarily Resident (NOR) scheme to be discontinued after 2020
Access to global talent has always been key to maintaining Singapore’s competitiveness and drive its economic growth. In a bid to achieve that, the government had introduced the NOR scheme in 2002, under which, an eligible individual granted the NOR status for a five-year period received several tax concessions, subject to conditions. Now, it has been decided that the NOR scheme will lapse after (Year-of-Assessment) YA 2020.
“The last such NOR status will be granted for YA 2020 and expire in YA 2024. Individuals who have been accorded the NOR status will continue to be granted NOR tax concessions until their NOR status expires, if they continue to meet the conditions of the concessions. Singapore will continue to build a conducive environment to attract and retain highly-skilled individuals. This includes a competitive tax regime, stable political, economic and social environment, strong regional connectivity, and high standards of healthcare, housing and education,” announced the minister.
Tightening of GST import relief for international travellers
To ensure that Singapore’s tax system continues to remain resilient amidst rising international travel, the minister has revised the quantum of GST import relief for travellers, to take effect from 12.00 am, February 19, 2019.
Travellers who spend less than 48 hours outside Singapore will get GST import relief for the first $100 (instead of $150 currently) of the value of goods bought overseas. Travellers who spend at least 48 hours outside Singapore will get GST import relief for the first $500 (instead of $600 currently) of the value of goods bought overseas.
Personal Income Tax rebate for resident taxpayers for YA 2019
As part of the Bicentennial Bonus announced by the minister, a Personal Income Tax rebate of 50% of tax payable will be granted to all tax resident individuals for YA 2019 (i.e. for income earned in 2018). The rebate will be capped at $200 per taxpayer.
Removing the cap on a child’s age for Grandparent Caregiver Relief
Working mothers with handicapped and unmarried dependent children, can now claim Grandparent Caregiver Relief in respect of a handicapped and unmarried dependent child, regardless of the child’s age, if they have met all other conditions. This will take effect from YA 2020 (i.e. for income earned in 2019). Earlier the age of the child had to be 12 years old or below during the year preceding the YA of claim.
There will be no change in the prevailing Singapore corporate tax rate of 17 percent. But the minister announced several changes in his speech (affecting a Singapore incorporated company’s overall tax liability) to help make innovation pervasive and businesses scale-up.
Extension of the Writing Down Allowance (WDA)
In recognition that Intellectual Property Rights (IPRs) are important creators of value in a knowledge-based economy, the WDA under section 19B will now be extended to cover capital expenditure incurred in respect of qualifying IPRs acquired on or before the last day of the basis period for YA 2025, from the existing basis period for YA 2020.
Notably, under section 19B of the Income Tax Act, companies and partnerships are granted WDA on capital expenditure incurred in acquiring qualifying IPRs for use in its trade or business. The expenditure can be written down over five, 10 or 15 years. The qualifying IPRs are patents, trademarks, registered designs, copyrights, geographical indications, layout designs of integrated circuits, trade secrets or information that has commercial value, and grant of protection of plant varieties.
Extension of the 100% Investment Allowance (IA) under the Automation Support Package
In Budget 2016, an Automation Support Package was introduced for a period of three years to support companies to automate, drive productivity and scale up. The package includes 100% IA support on the amount of approved capital expenditure, net of grants, on projects approved by Enterprise Singapore during April 1, 2016, to March 31, 2019. The approved capital expenditure is capped at $10 million per project.
To maintain support to companies in their automation, productivity and scale-up efforts, the 100% IA measure under the Automation Support Package will be extended by two years, for projects approved by Enterprise Singapore from April 1, 2019, to March 31, 2021. The approved capital expenditure will remain capped at $10 million per project.
Extension of income tax concessions for S-REITs, and REITs ETFs
To continue to promote the listing of REITs in Singapore and to strengthen Singapore’s position as a REITs hub in Asia, the existing tax concessions for SREITs (Singapore-listed Real Estate Investment Trusts), as well as REITs ETFs (Real Estate Investment Trusts Exchange-Traded Funds), will be extended till December 31, 2025. The sunset clause for the tax exemption on S-REITs and REITs ETFs distributions received by individuals will also be removed. All other conditions for the income tax concessions remain the same. The Monetary Authority of Singapore (MAS) will provide further details of the change by May 2019.
Extension of the GST remission for S-REITs and RBTs in the infrastructure business, ship leasing and aircraft leasing sectors
To continue facilitating the listing of SREITs and RBTs (Singapore-listed Registered Business Trusts ) in the infrastructure business, ship leasing and aircraft leasing sectors, the existing GST remission will be extended till December 31, 2025. All conditions for the GST remission remain the same. MAS will provide further details of the change by May 2019.
Changes in tax incentive schemes for funds managed by Singapore-based fund managers
To continue to grow Singapore’s asset management industry, the tax concessions relating to qualifying funds will be extended till December 31, 2024.
The sections 13CA, 13R and 13X schemes will also be refined to keep the schemes relevant and to ease compliance burden. The key refinements are as follows:
- The condition that a basic tier fund must not have 100% of the value of its issued securities beneficially owned, directly or indirectly, by Singapore persons will be removed.
- The enhanced tier fund scheme will be enhanced to (i) include co-investments, non-company SPVs and more than two tiers of SPVs, (ii) allow debt and credit funds to access the “committed capital concession”, and (iii) include managed accounts.
- The list of DI will be expanded by removing the counter-party and currency restrictions, and including investments such as credit facilities and advances, and Islamic financial products that are commercial equivalents of DI. The condition for unit trusts to wholly invest in DI will be removed.
- The list of SI will be enhanced to include income in the form of payments that fall within the ambit of section 12(6) of the Income Tax Act (ITA).
- Qualifying non-resident funds under sections 13CA and 13X will be able to avail themselves of the 10% concessionary tax rate applicable to qualifying non-resident non-individuals when investing in SREITs and REITs ETFs.
The removal of condition in (a) will be effective from YA 2020. The enhancements in (b) will apply on and after February 19, 2019. The enhancements in (c) and (d) will apply to income derived on and after February 19, 2019.
The enhancements in (e) will apply to SREITs and REITs ETFs distributions made during the period from July 1, 2019 to December 31, 2025. The MAS will provide further details of the changes by May 2019.
Recovery of GST for qualifying funds
As a concession, qualifying funds that are managed by prescribed fund managers in Singapore are allowed, by way of remission, to claim GST incurred on expenses at a fixed recovery rate. The concession is scheduled to lapse after March 31, 2019. This will now be extended till December 31, 2024, and the MAS will release further details of the change by May 2019.
Property Tax (Tourist Projects) Order to be discontinued
The Property Tax (Tourist Projects) Order was introduced in 1987, to promote tourism in Singapore. Under this, the Government granted approval for new tourist projects to have their annual value computed based on 6% of the preceding year’s gross receipts, for the first five years from the completion of the buildings.
This scheme will lapse after February 18, 2019. Though the minister assured that his Government “remains supportive of the tourism industry, and has already put various schemes in place to support tourism projects which have clear economic benefits to Singapore”.
Designated Unit Trust (DUT) and Approved Unit Trust (AUT) schemes to be discontinued
Under the DUT scheme, specified income derived by a unit trust with the DUT status is not taxed at the trustee level, but is taxable upon distribution in the hands of investors. Qualifying foreign investors and individuals are exempt from tax on distributions made by a DUT. Now, the DUT scheme will lapse after March 31, 2019. Though funds in the form of unit trusts may apply for other tax incentives for funds. Existing DUTs will continue to receive the tax deferral benefits under the DUT scheme, on and after April 1, 2019, if they continue to meet all the conditions.
Under the AUT scheme, the trustee is taxed on its investment income, and 10% of the gains derived from the disposal of securities. The remaining 90% of the gains from the disposal of securities are instead taxed in the hands of the unit holders when distributed. Now, the AUT scheme will lapse after February 18, 2019. Though to allow existing AUTs sufficient time to transit to alternative tax incentive schemes, they will continue to receive the tax concession under the AUT scheme for a period of five years from YA 2020 to YA 2024.
Restructuring of diesel taxes
Currently, an excise duty of $0.10 per litre is imposed on diesel fuel conforming to the standard for sulphur for such diesel fuel specified in Part 1 of the Eighth Schedule to the Environmental Protection and Management (Vehicular Emissions) Regulations (Cap 94A, Rg 6). There is also a lump sum special tax on diesel cars and taxis.
With effect from February 18, 2019, Singapore will increase the excise duty on diesel fuel to $0.20 per litre.
But the annual special tax will be permanently reduced for diesel cars and taxis by $100 and $850 respectively.
Moreover, to cushion the impact of the increase in diesel duty in Budget 2019, three years of road tax rebates will be provided for commercial diesel vehicles.
In addition to this three-year road tax rebates, diesel school buses, and eligible diesel private hire and excursion buses, that ferry students, will be also given yearly cash grants to ease the impact of diesel duty on school bus fees.
Support for businesses in Singapore Budget 2019
The Finance Minister Heng Swee Keat in his speech announced a plethora of new initiatives along with expanding the existing ones – amounting to a total of $1 billion – to help companies registered in Singapore grow, innovate, scale-up, internationalise, and build deep capabilities.
Helping Singapore businesses grow and scale-up, and build deep capabilities
Scale-up SG programme
A vibrant start-up ecosystem encourages budding entrepreneurs to try out their business ideas. Such an ecosystem enables entrepreneurs to connect to mentors, prospective business partners, customers, and investors. That’s why, two years ago, the government launched Startup SG to provide holistic support for start-ups and entrepreneurs including co-investments and proof-of-concept grants, mentorship and physical work space.
“As a result, our start-up ecosystem is flourishing. There are now over 220 venture capital deals per year in Singapore, worth close to US$4.2 billion. This is a significant rise from the 80 deals worth US$136 million in 2012. Also, today, more than 150 global venture capital funds, incubators, and accelerators are based in Singapore, supporting start-ups here and in the region,” informed the minister, adding, “Customised support can enable firms to identify and overcome the unique challenges they face, and scale up quickly. That’s why Enterprise Singapore (IE) will launch a Scale-up SG programme in partnership with the private and public sectors. Scale-up SG will work with aspiring, high-growth local firms to identify and build new capabilities, to innovate, grow, and internationalise.” Details of the scheme will be announced by IE soon.
Innovation Agents Programme
This is the other scheme announced by the minister in his speech.
“The Innovation Agents programme is a two-year pilot for enterprises to obtain advice on innovation opportunities from experienced industry professionals who have both technology expertise and business experience (henceforth known as Innovation Agents). To support enterprises in their innovation efforts and accelerate their growth, IE will identify individuals with deep expertise in technology, strong track record in growing businesses, and access to global industry networks.”
These Innovation Agents will then be matched with enterprises that aspire to use technology to improve existing businesses or build new ones.
Innovation Agents will provide mentorship to enterprises to identify innovation opportunities, and facilitate connections to valuable technology and business partners.
“Depending on enterprises’ needs, Innovation Agents may provide consultation on a one-to-one basis, or on a group basis to groups of enterprises or consortia looking to capture new market opportunities through innovation. The duration of an engagement may vary from a few months to a year, depending on its scope,” he added.
More details on this will be shared by IE later this year.
SME Co-Investment Fund III
To catalyse patient growth capital for Singapore-based enterprises through co-investment with the private sector, the Government launched the Co-Investment Programme (CIP) in 2010, comprising the SME Catalyst Fund (CF) and SME Co-Investment Fund (CIF). The SME Mezzanine Growth Fund (MF) and SME Co-Investment Fund II (CIF 2) were subsequently launched in 2014.
The Government has now set aside an additional $100 million for the SME CoInvestment Fund III, to continue supporting firms in their efforts to scale up and internationalise.
“Importantly, the SME Co-Investment Fund III will continue the work of the earlier SME Co-Investment Funds, with the same objective of catalysing active and patient growth capital for Singapore-based SMEs. Similar to existing funds under the CIP, Temasek Holdings will participate as a co-investor in the SME Co-Investment Fund III. Qualifying investee companies must have their key management functions and head-quarter activities based in Singapore, and have revenues of up to $500 million,” the minister informed.
Enterprise Financing Scheme (EFS)
The Enterprise Financing Scheme (EFS), expected to be launched in October 2019, will streamline eight existing SME financing schemes, including the extended SME Working Capital Loan, into a single scheme to help Participating Financial Institutions (PFIs) and SMEs navigate between the various financing schemes.
The new scheme will meet the financing needs of companies across different stages of growth over six financing areas: working capital (for SMEs), fixed assets (for SMEs), trade, venture debt, mergers and acquisitions, and project financing.
Businesses may apply for the EFS through PFIs. Additional details related to EFS will be announced closer to launch. In the interim, companies can continue to apply for the existing financing schemes.
SME Working Capital Loan
In 2016, the Government enhanced support for SMEs to access financing for working capital needs by introducing the SME Working Capital Loan (access to unsecured working capital financing of up to S$300,000 to support daily operations). This will be extended for another two years till March 31, 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,” said the minister. Notably, SME Working Capital Loan scheme will form part of EFS after it is launched.
Expansion of the SMEs Go Digital Programme
The SMEs Go Digital programme, announced in Budget 2017, helps SMEs grow digital capabilities. Its key components are Industry Digital Plans (IDPs), Pre-approved Digital Solutions, and Digital Sector Projects. As of end-2018, IDPs have been developed for 7 sectors: environmental services, retail, food services, wholesale trade, logistics, security and media. The SMEs Go Digital programme has supported around 4,000 SMEs to adopt pre-approved digital solutions.
This scheme will now be expended by developing IDPs for more sectors, starting with accountancy, sea transport and construction. Info-communications Media Development Authority (IMDA) will announce more sectors later in the year.
The Authority will also extend the range of pre-approved solutions that can be readily adopted by SMEs, to include more advanced digital solutions such as artificial intelligence (AI)-infused solutions and cybersecurity solutions.
SMEs can apply for funding support under PSG to adopt these pre-approved solutions.
Digital Services Lab (DSL)
As announced by the minister, DSL is a three-year pilot that will work with the industry to address digitalisation challenges in services sectors, such as logistics, retail and media, using digital capabilities. It will focus on projects with industry-wide impact, involving multiple stakeholders, where there are barriers to digitalisation.
By translating research and integrating existing technologies, DSL engineers and system architects, in collaboration with industry partners, will develop solutions that address the identified problem statements.
“Developing these solutions in partnership will help companies manage the risks of early-stage technology development, while catalysing digital transformation in the industry. Companies participating as demand users and technology solutions providers may apply for funding support of up to 70% of qualifying costs,” said the minister.
One-stop portal for the food services sector
To make it easier for businesses to transact with the Government, the Ministry of Trade and Industry, and relevant agencies are developing a one-stop portal, with a pilot to be launched for the food services sector by the third quarter of 2019. After this, businesses will deal with only one point of contact, instead of up to the 14 different ones today. This is an initiative similar to the Business Grants Portal, launched in 2017, which provides a one-stop shop for businesses to identify and apply for the right grant for their plans.
Extension and enhancement of Productivity Solutions Grant (PSG)
The PSG, which was announced at Budget 2018, aims to support enterprises to adopt pre-scoped, off-the-shelf productivity solutions and technologies. Depending on the sector which the PSG solution falls under, the support level (currently up to 70%) would have dropped to 50% after March 31, 2020. To support firms in making the transition, the PSG support level of up to 70% will be extended to March 31, 2023.
To further support firms, the scheme will be enhanced to include a component that supports worker upgrading. Eligible enterprises will be able to receive a subsidy for up to 70% of their out-of-pocket training expenses (i.e. the remaining amount which is not already covered by other government training subsidies such as those under SkillsFuture), capped at $10,000 per enterprise. This will last until March 31, 2023.
Enhancing Singapore’s position as an innovation node
In an effort to bring the global innovation community together in Singapore to collaborate on projects, this year, the Singapore Week of Innovation and Technology (Switch) and the Singapore FinTech Festival will be held in the same week in mid-November. Combining the events, will draw more entrepreneurs, investors and innovators (compared to the last year) from around the world to explore partnership opportunities, and to collaborate in technological innovation in the Fourth Industrial Revolution.
Last year – 350 exhibitors, 1,000 start-ups and financiers from 75 countries attended Switch; and 500 exhibitors, 250 speakers, and 45,000 delegates from more than 125 countries, attended the Singapore FinTech Festival.
Local Enterprise and Association Development (LEAD) programme
The Government will strengthen its support for Trade Associations and Chambers (TACs) through the LEAD programme, by developing five-year road-maps of a more strategic and longer-term approach in driving industry transformation.
Moreover, TACs will be able to access funding and potentially take in public sector secondees through LEAD.
New Centres of Innovation in aquaculture and energy
Centres of Innovation (COIs) support SMEs with technology innovation by providing assistance to enterprises, especially local SMEs and start-ups, in developing and testing technology products, through access to laboratory facilities, consultancy services and training courses. To date, there are eight COIs in Institutes of Higher Learning (IHLs) and public research institutes (RIs).
“Two new COIs will be set up for aquaculture and energy in Temasek Polytechnic and Nanyang Technological University respectively,” the minister announced.
Measures related to foreign workforce in Singapore
Dependency Ratio Ceilings (DRCs) to be reduced for the services sector
The S Pass Dependency Ratio Ceilings (DRCs) will remain unchanged for all sectors except the services sector (to be reduced to 13% on January 1, 2020, and to 10% on January 1, 2021, from the current 15%).
For the rest of the services sector (employment passes), the DRCs will be reduced to 38% on January 1, 2020, and to 35% on January 1, 2021, from the current 40%.
Foreign Worker Levy deferred for the marine shipyard and process sectors
Foreign Worker Levy rates will remain unchanged for all sectors. The earlier announced Foreign Worker Levy increases for the Marine Shipyard and Process sectors will be deferred for another year.
Extension of Enterprise Development Grant (EDG)
To help firms adjust to the impending foreign workforce policy changes that will take effect from January 1, 2020, the Government will extend the enhanced support levels of up to 70% for the Enterprise Development Grant (EDG).
The EDG, announced at Budget 2018, is a holistic grant scheme providing customised support to local enterprises for their growth and transformation. It provides enterprises with up to 70% government funding to undertake projects to strengthen their business capabilities, improve operational efficiencies and internationalise.
It will now be extended for three more years, up to March 31, 2023. Without the extension of the enhanced support level, the support level for the EDG would have reverted to 50% after March 31, 2020.
Measures related to local workforce in Singapore
The minister, emphasising on the need to build deeper capabilities in the local Singaporean workforce, announced several new initiatives, as well as expanded some existing ones.
Launching new Professional Conversion Programmes (PCPs)
One of the measures to help workers in their careers has been the Professional Conversion Programmes (PCPs), which are targeted at professionals, managers, executives and technicians including mid-career switchers, to undergo skills conversion and move into new occupations or sectors that have good prospects and opportunities for progression.
“More than 100 PCPs have been launched in about 30 sectors since its establishment in 2007. This year, the Government will launch new PCPs relating to blockchain, embedded software and prefabrication to prepare Singaporeans to move into new growth areas,” informed the minister.
Extension of the Career Support Programme (CSP), Special Employment Credit (SEC), and Workfare Income Supplement
The CSP was first introduced in 2015, as part of the Adapt and Grow initiative. It provides salary support to encourage employers to hire retrenched mature or long-term unemployed Singapore Citizens for Professional, Manager, Executive and Technician (PMET) jobs. The scheme will now be extended for two more years till March 2021. The support parameters will remain unchanged.
Similarly, the Special Employment Credit will be extended till December 2020.
Moreover, help for the lower-income will be boosted by changes to the Workfare Income Supplement, with a higher qualifying income cap from January 2020 (raised from $2,000 to $2,300 per month) and higher maximum payouts (raised from $3,600 to $4,000).
Global Ready Talent Programme (GRTP)
The minister also announced that the current local and overseas internship programmes will be combined into a single Global Ready Talent Programme (GRTP), which aims to build a pipeline of global-ready talent for Singapore enterprises by helping young Singaporeans excel on the international stage, and supporting Singapore firms with their overseas expansion. It comprises two components:
- Internships: GRTP harmonises existing young talent programmes, namely the SME Talent Programme, Young Talent Programme, and Go Southeast Asia Award, into a single programme. Under GRTP, students can take up local internships provided by local companies or overseas internships provided by local and foreign companies. Students will receive monthly internship stipends and overseas allowances. Students can apply for GRTP through their Institutes of Higher Learning (i.e. universities, polytechnics and Institutes of Technical Education). This scheme is open to students who are Singapore Citizens and permanent residents. Participating local firms can receive funding support of up to 70% of the students’ monthly internship stipends.
- Management Associate Programmes: GRTP also supports local firms in sending young Singaporeans with up to three years of working experience on job postings in key overseas markets. This deepens the in-market knowledge and international work exposure of these young Singaporeans, and supports the international expansion efforts of Singapore firms. Participating firms can receive funding support for part of the expenditure incurred in sending young Singaporeans overseas. More details will be provided at the Ministry of Trade and Industry’s (MTI) Committee of Supply (COS).
In summary, once again, the Singapore Government with its budget has indicated a strong desire to partner businesses and workers to transform the country’s economy, by welcoming the best MNCs and SMEs from around the world, and help start-ups and Singapore established companies to grow, scale, and internationalise. With the above vision in place, and “to catch the wave of the Fourth Industrial Revolution, we are positioning Singapore as a Global-Asia node of technology, innovation and enterprise,” concluded the minister in his Singapore Budget 2019 speech.