Budget 2016 whose core focus is to forge partnership with businesses to stay ahead of the transformation, was announced by the Minister for Finance, Mr. Heng Swee Keat on Thursday, 24 Mar 2016.
We hereby outline the key changes affecting individuals and businesses announced in Budget 2016.
Introducing a cap of $80,000 on personal income tax reliefs
To enhance the progressivity of our Personal Income Tax regime, the total amount of personal income tax reliefs that an individual can claim will be capped at $80,000 per Year of Assessment (YA). This change will take effect from YA 2018.
Removing the tax concession on home leave passages for expatriate employees
The tax concession of taxing only 20% of the value of home leave passages for expatriate employees will be removed with effect from YA 2018.
For All Businesses
Enhancing the Corporate Income Tax Rebate for YA 2016 and YA 2017
To help companies, especially Small and Medium Enterprises (“SMEs”), the Corporate Income Tax rebate will be raised to 50% for YA 2016 and YA 2017, subject to a cap of $20,000 rebate per YA.
Allowing the Productivity and Innovation Credit ("PIC") Scheme to lapse and lowering the cash payout rate
The cash payout rate will be lowered from 60% to 40% for qualifying expenditure incurred from 1 August 2016. All other conditions of the scheme remain unchanged. The PIC scheme, which has been extended for YA2016 to YA2018, will expire thereafter. It will not be available from YA2019.
Introducing mandatory electronic-filing (“e-Filing”) for CIT returns (including Estimated Chargeable Income, Form C and Form C-S)
In line with Government’s direction for more effective delivery of public services and to be aligned with the Smart Nation vision to harness technology to enhance productivity, mandatory e-Filing of CIT returns will be implemented in stages as follows:
Introducing mandatory e-Filing for PIC cash payout application
To streamline and expedite processing of PIC cash payout applications, mandatory e-Filing of PIC cash payout applications will be introduced. This is also aligned with the Smart Nation vision to harness technology to enhance productivity. The mandatory e-Filing of PIC cash payout applications will be effective from 1 August 2016.
100% Investment Allowance (“IA”) under the Automation Support Package
To support firms to automate, drive productivity and scale up, qualifying projects may be eligible for an IA of 100% on the amount of approved capital expenditure, net of grants under the Automation Support Package. This IA is in addition to the existing capital allowance for plant and machinery. The approved capital expenditure is capped at $10 million per project.
The 100% IA is one of the four components in the Automation Support Package. MTI will announce more details of the Automation Support Package at the Committee of Supply.
Enhancing the Mergers & Acquisitions (M&A) scheme
To support more M&As, the existing cap for qualifying M&A deals will be doubled from $20m to $40m, such that:
These changes will apply to qualifying M&A deals made from 1 April 2016 to 31 March 2020.
Extending the upfront certainty of non-taxation of companies’ gains on disposal of equity investments under Section 13Z of the Income Tax Act (“ITA”)
To provide upfront certainty to companies in their corporate restructuring, the scheme under Section 13Z will be extended till 31 May 2022 (to cover disposal of equity investments from 1 June 2017 to 31 May 2022). All conditions of the scheme remain the same.
Extending the Double Tax Deduction (“DTD”) for Internationalisation scheme
To support businesses in their internationalisation efforts, the DTD for Internationalisation scheme will be extended for another four years from 1 April 2016 to 31 March 2020. The existing automatic (no need for approval from IES or STB) DTD on expenses up to $100,000 will also be extended to qualifying expenditure incurred during this same period (1 April 2016 to 31 March 2020). All other conditions of the scheme remain the same.
IE Singapore will release further details of the change by June 2016.
Enhancing the Land Intensification Allowance (“LIA”) scheme
a) To encourage higher industrial land productivity, the LIA scheme will be extended to buildings used by a user or multiple users, who are related, for one or multiple qualifying trades or businesses, if certain conditions are met. This change will take effect for LIA applications if:
The qualifying capital expenditure for which an allowance may be made excludes any expenditure incurred before 25 March 2016.
b) A new criterion requiring LIA applicants to be related to the qualifying user or users of the building will also be introduced. This change will take effect for LIA applications if:
EDB will release further details of the changes by July 2016.
Providing an election for the writing-down period for intellectual property rights (“IPRs”) under Section 19B of the ITA
To recognise the varying useful lives of IPRs, while maintaining a simple and certain tax regime, companies or partnerships may elect for their Section 19B WDA to be claimed over a writing-down period of 5, 10, or 15 years.
The election must be made at the point of submitting the tax return of the YA relating to the basis period in which the qualifying cost is first incurred. The election, once made, is irrevocable.
This change will apply to qualifying IPR acquisitions made within the basis periods for YA 2017 to YA 2020.
IRAS will release further details of the change by 30 April 2016.