Among other things, he introduced a slew of measures amounting to $5.6 billion, to deal with the coronavirus outbreak. This includes a $4 billion – Stabilisation and Support Package – to help firms with cash flow and retain workers; a $1.6 billion – Care and Support Package – for household expenses; as well as some additional support to sectors directly affected by the outbreak which are tourism, aviation, retail, food services, and point-to-point transport services.
Additionally, Minister Heng Swee Keat noted, “Our Transformation and Growth effort, costing $8.3 billion over three years, will support our longer-term plans to position Singapore as a Global-Asia node of technology, innovation, and enterprise.”
He also called the Budget a “more expansionary” one, with this year’s overall budget deficit projected to be $10.9 billion (2.1% 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.
Read Here Financial & Operational Resiliency to help businesses deal with COVID-19 outbreak »
Below is the exhaustive summary of the major changes.
Tax changes in Singapore Budget 2020
1) Goods and Services Tax (GST) to remain at 7% in 2021.
In 2018, the minister announced his plans to raise the GST by two percentage points, to 9%, sometime from 2021 to 2025. “After reviewing our revenue and expenditure projections, and considering the current state of the economy, I have decided that the GST rate increase will not take effect in 2021. In other words, the GST rate will remain at 7% in 2021,” he said.
The Government has also assured that whenever the GST is raised, a $6 billion Assurance Package will be introduced to offset the increase, which will give every adult Singaporean a cash payout of $700 to $1,600 over five years.
This will be in addition to the permanent GST Voucher or GSTV scheme, already in place.
2) Grant Corporate Income Tax (“CIT”) Rebate
To help companies with cash flow, a CIT Rebate of 25% of tax payable, capped at $15,000, will be granted for Year of Assessment (“YA”) 2020.
Read More Talk to our Tax Experts to know more »
3) Extension of interest-free instalment for CIT
Grant automatic extension of interest-free instalments of 2 months for payment of CIT on Estimated Chargeable Income (ECI) filed within three months from the companies’ financial year-end (FYE). This automatic extension of instalment plan by 2 more months will apply to:
- Companies that file their ECI from 19 February 2020 to 31 December 2020; and
- Companies that file their ECI before 19 February 2020, and have ongoing instalment payments to be made in March 2020.
4) Enhancement of carry-back relief scheme
The carry-back relief scheme will be enhanced for YA2020. Under the enhanced scheme, qualifying deductions for YA2020 may be carried back up to 3 immediate preceding YAs, capped at $100,000 of qualifying deductions and subject to conditions. Taxpayers may elect to carry back to the relevant preceding YAs an estimated amount of qualifying deductions available for YA2020, before the actual filing of their income tax returns for YA2020.
IRAS will provide the details of the change by end-March 2020.
5) Option to Accelerate Write-off of the Cost of Plant & Machinery (P&M) Acquisition
A taxpayer which incurs capital expenditure on the acquisition of P&M (plant and machinery) in the basis period for YA2021 (i.e. financial year (“FY”) 2020) will have an option to accelerate the write-off of the cost of acquiring such P&M over 2 years. This option, if exercised, is irrevocable.
6) Option to claim Renovation & Refurbishment (R&R) deduction
A taxpayer which incurs qualifying expenditure on R&R during the basis period for YA2021 (i.e. FY2020) for the purposes of its trade, profession or business will have an option to claim R&R deduction in 1 YA (i.e. accelerated R&R deduction). The cap of $300,000 for every relevant period of 3 consecutive YAs will still apply. This option, if exercised, is irrevocable.
7) Extension and Enhancement of Double Tax Deduction for Internationalisation (DTDi) Scheme
To continue encouraging internationalisation, the DTDi scheme will be extended till 31 December 2025. In addition, the scope of the DTDi scheme will be enhanced to cover the following:
- Third-party consultancy costs relating to new overseas business development to identify suitable talent and build up the business network; and
- New categories of expenses incurred for overseas business missions (i.e. fees incurred on speaking spots to pitch products/services at overseas business and trade conferences, transporting materials/samples used during the business missions, and third-party consultancy costs to arrange business networking events to promote products/services). The expanded scope will take effect for expenses incurred on or after 1 April 2020. Enterprise Singapore will provide further details of the changes by end-March 2020.
8) Extension of Merger & Acquisition (M&A) Scheme
To continue encouraging companies to consider M&A (Mergers & Acquisitions) as a strategy for growth and internationalisation, the M&A scheme will be extended to cover qualifying acquisitions made on or before December 31, 2025. The scheme will remain unchanged for acquisitions made on or after 1 April 2020, except for the following:
- Stamp duty relief will lapse for instruments executed on or after 1 April 2020; and
- No waiver will be granted for the condition that the acquiring company must be held by an ultimate holding company that is incorporated in and is a tax resident of Singapore. This will apply for acquisitions made on or after 1 April 2020.
9) Extension of Scheme to Cover Disposals of Ordinary Shares
To provide upfront certainty to companies in their corporate restructuring, the scheme under Section 13Z will be extended to cover disposals of ordinary shares by companies from 1 June 2022 to 31 December 2027. In addition, to ensure consistency in the tax treatment for property-related businesses, the scheme will not apply to disposals of unlisted shares in an investee company that is in the business of trading, holding or developing immovable properties in Singapore or abroad. The tax treatment of such share disposals will be based on the facts and circumstances of the case. The change will apply to shares disposed on or after 1 June 2022.
All other conditions and exclusions of the scheme remain the same. IRAS will provide further details of the changes by end-June 2020.
10) Extension of Insurance Business Development (IBD) & IBD-Captive Insurance (IBD-CI) Schemes
To support Singapore’s value proposition as an Asian insurance and reinsurance centre, the IBD and IBD-CI schemes will be extended till 31 December 2025. The concessionary tax rate remains at 10%.
11) Extension of Maritime Sector Incentive (MSI) Scheme
To continue developing Singapore as an international maritime centre, the MSI scheme will be extended till 31 December 2026. Similarly, the withholding tax (“WHT”) exemption will be extended for qualifying payments made on qualifying financing arrangements entered into on or before 31 December 2026. MPA will provide further details of the changes by May 2020.
12) Enhancement of Withholding Tax (WHT) Exemption
To further develop Singapore’s derivative market, the scope of the WHT exemption for interest on margin deposits will be enhanced.
13) Extension of Finance & Treasury Centre (FTC) Scheme
To continue encouraging finance and treasury activities in Singapore, the FTC scheme will be extended till 31 December 2026, with the following enhancements from 19 February 2020:
- The list of qualifying sources of funds will be expanded to include funds raised via convertible debt issued on or after 19 February 2020; and
- The list of qualifying FTC activities will be expanded to include transacting or investing in private equity or venture capital funds that are not structured as companies. Income derived on or after 19 February 2020 by approved FTCs from this activity will qualify for the concessionary tax rate.
14) Extension of Global Trader Program (GTP)
To further strengthen Singapore’s position as a global trading hub and to encourage more structured commodity financing (“SCF”) activities to be done in Singapore, the GTP will be extended till 31 December 2026. The following changes will be made to the GTP:
- The qualifying activities of GTP(SCF) will be subsumed under GTP with effect from 19 February 2020;
- The GTP(SCF) will lapse after 31 March 2021; and
- The concessionary tax rate of 5% on income from qualifying transactions in LNG will lapse after 31 March 2021. With the lapsing of this concession, LNG will be treated no differently from other GTPqualifying commodities under the GTP.
15) Extension and Enhancement of Section 13H Scheme and Fund Management Incentive
To continue encouraging venture capital funding for Singapore-based companies, the Section 13H scheme and Fund Management Incentive have been enhanced and will be extended till 31 December 2025.
16) Extension of Land Intensification Allowance (LIA)
The objective of the LIA scheme remains relevant given the scarcity of land in Singapore. The LIA scheme will be extended till 31 December 2025. This refers to the last date a building or structure may be approved for LIA.
17) Extension of Writing-Down Allowance (WDA)
The WDA scheme under Section 19D will be extended till 31 December 2025, i.e. WDA will be allowed on qualifying capital expenditure incurred on or before 31 December 2025 for the acquisition of an IRU (Indefeasible Right of Use).
18) Research & Development (R&D) Tax Deduction Scheme
With the previous enhancement in Budget 2018, businesses conducting qualifying R&D projects in Singapore can enjoy up to 250% tax deduction on qualifying expenses from YA2019 to YA2025. Therefore, the further tax deduction scheme for R&D expenditure incurred on approved R&D projects has been allowed to lapse after 31 March 2020.
19) Angel Investors Tax Deduction (AITD) Scheme
The AITD (Allow the Angel Investors Tax Deduction) scheme will lapse after 31 March 2020.
Support for businesses in Singapore Budget 2020
The Finance Minister Heng Swee Keat in his speech announced a plethora of new initiatives along with expanding the existing ones to help companies registered in Singapore grow, innovate, scale-up, internationalise, and build deep capabilities.
1) Executive-in-Residence Programme
The Executive-in-Residence (EIR) Programme is a two-year pilot programme. It will help Trade Associations and Chambers (TACs) and enterprises engage the services of experienced professionals with relevant expertise as EIRs, to drive industry and enterprise transformation efforts. Enterprise Singapore will support TACs in identifying, engaging and matching these professionals with interested enterprises. Enterprise Singapore will defray up to 70% of the TACs’ costs of engaging EIRs. The EIR programme is part of the Local Enterprise and Association Development programme, which supports TACs in spearheading industry transformation projects.
2) Enhancing Digital Connectivity
The following initiatives seek to digitalise trade processes and enhance digital connectivity with overseas traders. They provide businesses and traders in Singapore with more efficient trade processes and expanded market access.
- The Nationwide E-invoicing Network allows suppliers to send e-invoices via this network to the Government, from January 2020.
- The Networked Trade Platform (NTP) supports international trade data exchange. Currently, Singapore is collaborating with China, Indonesia and the Netherlands to allow the international exchange of customs declaration data, and the use of this data by the importing country for both trade facilitation and risk assessment
- Digital Economy Agreements (DEAs) provide a government-to-government (G2G) framework to facilitate seamless end-to-end digital trade, promote digital flows, and foster greater international cooperation on emerging digital issues such as Artificial Intelligence. In January 2020, Singapore, Chile and New Zealand announced the substantial conclusion of the first DEA, called the Digital Economy Partnership Agreement (DEPA).
3) Enhancements to Startup SG Equity (Financing for Early Stage Deep-Tech Startups)
Deep-tech startups usually require larger investments and longer gestation periods relative to general technology startups. This may make deep-tech startups less attractive to private investors, even though they may have strong intellectual property content in their products that can be developed into sustained competitive advantages.
The enhancement to Startup SG Equity dedicates an additional $300 million to catalyse private investment into Singapore-based deep-tech startups in key emerging sectors.
These sectors include pharmbio and medtech, advanced manufacturing, and agri-food tech. Under Startup SG Equity, the Government may partner qualified third-party investors to make direct co-investments into eligible startups, or invest in funds through a fund-of-funds approach.
4) Launch of GoBusiness including e-Adviser
The GoBusiness platform streamlines and digitalises transactions between the Government and businesses. It is envisioned to be a central platform for businesses to transact with the Government. The GoBusiness Licensing portal was launched as a pilot in October 2019 for the food services sector, providing new businesses in the sector with a guided, streamlined journey for licensing applications. The portal will now be made permanent.
5) Expansion of SMEs Go Digital
- Develop more Industry Digital Plans (IDPs) or their equivalents, and pre-approve more digital solutions. Collectively, these will cover the different needs of 23 ITM sectors, up from the current 10 sectors. Some of the new sectors that will benefit are Healthcare, Food Manufacturing, Adult and Early Childhood Education.
- Together with Enterprise Singapore, introduce Grow Digital to enable SMEs to access overseas demand for both business-to-business (B2B) and business-to-consumer (B2C) businesses through global digital marketplaces.
6) Grow Digital
Grow Digital is a new initiative (part of the SMEs Go Digital programme) to enable SMEs to access global markets via B2B and B2C digital channels. The IMDA and Enterprise Singapore will:
- Support SMEs to participate in B2C e-commerce platforms. Eligible SMEs will be co-funded at 70% for Multichannel E-commerce Platform solution packages. These equip SMEs with the capabilities to reach out to new customers online, diversify into new markets, and optimise sales on multiple overseas e-marketplaces.
- Support SMEs to participate in B2B marketplaces to benefit from overseas procurement demand, starting with industrial hardware and food supplies. Details will be announced by IMDA and Enterprise Singapore in 2Q 2020.
7) Enhancement to Market Readiness Assistance (MRA)
To accelerate the internationalisation efforts of SMEs, MRA will be enhanced to:
- Expand the scope of supportable activities to include: (a) Free Trade Agreement (FTA) consultancy services to support companies in better leveraging FTAs; and (b) in-market business development;
- Increase the grant cap from $20,000 per year to $100,000 per new market per company over the enhancement period of FY20-22; and
- Extend 70% support level for another 3 years, until 31 March 2023.
8) GlobalConnect@Singapore Business Federation (SBF)
In partnership with Enterprise Singapore, GlobalConnect@SBF has been set up to assist Singapore enterprises which are looking to internationalise for the first-time, as well as enterprises which are expanding and deepening their presence in key Southeast Asian markets (e.g. Vietnam, Indonesia, Thailand, Myanmar) and emerging markets (e.g. Africa, Middle East, Central Asia).
9) Enhancement to Productivity Solutions Grant (PSG)
The PSG provides support to businesses in their transformation journey through funding support for the adoption of IT solutions, and equipment that have been pre-identified by the Government.
The PSG will be enhanced to offer a more comprehensive suite of pre-approved solutions. PSG’s support will be expanded to include consultancy services, starting with job redesign. The number of sector-specific solutions on the PSG will also be increased.
10) Enterprise Leadership for Transformation (ELT)
The ELT programme is a three-year pilot that supports business leaders of promising SMEs in achieving the next bound of growth. The programme offers:
- Structured modular training in business growth capabilities, with a focus on using frameworks and case studies to address actual business problems;
- Coaching by advisors and industry practitioners, who will guide business leaders in the development of a business growth plan;
- Access to alumni engagement and networking, to enable peer learning and collaboration; and
- Support for implementation of business growth plans, depending on the enterprises’ respective needs. The programme will be delivered in partnership with Institutes of Higher Learning (IHLs), banks, and experienced industry experts. Business leaders with the ambition and commitment to transform their business can apply for the ELT.
11) Expansion of Enterprise Transformation Support
Enterprise Singapore will scale up its support for enterprise transformation by:
- Supporting up to 3,000 enterprises in FY20 in their transformation journey through the Enterprise Development Grant (EDG). The EDG provides SMEs with up to 70% support in three areas: Core Capabilities, Innovation and Productivity, and Market Access.
- Facilitating more than 50 projects in FY20 with a significant multiplier effect, such as a new Foundation programme to be launched by the Intellectual Property Office of Singapore with support from Enterprise Singapore. Over the next three years, this programme will help close to 100 companies identify their intangible assets and develop strategies to harness them.
12) Open Innovation Platform Sector
Wide Challenges Launched in 2018, the Open Innovation Platform (OIP) is a virtual crowd-sourcing platform which bridges business needs with digital solutions. Enterprises place their business challenges on the platform and are matched to tech firms to develop solutions.
For Budget 2020, to accelerate enterprise transformation and co-innovation, IMDA will:
- Provide 70% co-funding of prize monies for sector-wide challenges for industries to co-innovate and develop good digital solutions, with potential to benefit the entire sector. In such challenges, IMDA works with partners like TACs on innovation calls, to allow problem-solvers to tackle issues on a larger scale and deploy good solutions across sectors.
- Lower the barrier to entry to innovation, by taking on upfront innovation risk in tech firms’ prototype development phase.
IMDA will pay out the first tranche (30%) of the prize monies to shortlisted tech firms at the point of award, before prototype delivery. The remaining 70% will be paid out after prototype delivery. This will be effective for the current 5th Innovation Call, as well as 3 future Innovation Calls from 1 April 2020 to 31 March 2021. IMDA is planning 6 new sector-wide challenges between April 2020 to March 2021.
13) Our Singapore Fund (OSF)
Building on the good traction of the SG50 Celebration Fund, the OSF was announced at Budget 2016, with a top-up of $10 million, to support meaningful projects developed by citizens who have the passion to meet community needs, strengthen community spirit, and contribute to nation-building.
The OSF supports a wide range of projects from events, to programmes, and publications, and is open to all Singaporeans and Singapore-registered organisations. To date, the OSF has committed close to $4.3 million for over 240 ground-up projects across domains such as arts, heritage, sports, volunteerism, and digital readiness.
Refer to www.sg/oursingaporefund for more information on the projects.
The Government will now provide a $20 million top-up to the OSF and extend it to 2025, to encourage the development and implementation of citizen-led initiatives across a wider range of domains.
14) Enhanced Support for Deepening and Strengthening Partnerships
The Government will set aside a budget of $150 million to further expand and scale partnerships, including meritorious projects supported by the OSF and other ground-up funds1.
With enhanced support, the Government will co-invest with committed partners to build their capabilities and do more for the community.
15) SkillsFuture Credit (SFC) Top-up
The SFC was introduced in Budget 2015 to encourage individuals to take ownership of their skills development and lifelong learning. To continue to support Singaporeans in this national movement, we will provide a one-off SFC top-up of $500 to every Singapore Citizen aged 25 years and above as at 31 December 2020.
Eligible individuals can start using the additional $500 SFC from 1 October 2020. This SFC top-up will be valid for five years to encourage Singaporeans to take timely action to reskill and upskill, and be better equipped to seize new career opportunities.
16) SkillsFuture Enterprise Credit (SFEC)
The SFEC encourages employers to undertake enterprise and workforce transformation initiatives in tandem. Eligible employers will receive a one-off $10,000 credit to cover up to 90% of out-of-pocket expenses for supportable enterprise capability development and workforce transformation programmes. To encourage employers to undertake workforce transformation to reskill and upskill their workers, $3,000 of the SFEC will be reserved for workforce transformation programmes.
17) SkillsFuture Mid-Career Support Package
The new SkillsFuture Mid-Career Support Package aims to create more career transition opportunities for locals in their 40s to 50s, and help them remain employable and be able to access good jobs.
By 2025, we aim to double the annual placements for this group through reskilling programmes to 5,500.
18) Hiring incentive
Employers play a key role in supporting career transitions. The new hiring incentive aims to encourage more employers to step up efforts to recruit, retrain, and retain mature workers. Employers who hire new local workers aged 40 and above through select reskilling programmes can receive 20% salary support for 6 months, capped at $6,000 in total.
19) SkillsFuture Credit (SFC) top-up for the 40s and 50s
To improve individuals’ access to career transition programmes, we will provide a one-off SFC top-up of $500 to every Singapore Citizen (SC) aged 40 to 60 (inclusive) as at 31 December 2020.
Conclusion on Budget 2020
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.
“There are deep structural shifts taking place in the world today, coupled with near-term concerns over economic uncertainties and the COVID-19 outbreak. All nations, big or small, will have to devise strategies and mobilise their people to navigate these changes and turbulence. Singaporeans have enjoyed more than half a century of stability and prosperity because we have seized the opportunities from an increasingly open and interconnected world. Every decade or so, when a test comes, we have rallied and passed it together. I am confident that together, we can ensure that Singapore remains exceptional,” concluded the minister in his Singapore Budget 2020 speech.