24th March, 2016
Budget 2016 - Overview of Tax Changes for All Businesses
| Tax Changes | Summary |
| 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: YA 2018
YA
2019
YA
2020
|
| 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: (a) Tax allowance of 25% will be granted for up to $40m of consideration paid for qualifying M&A deals per YA; and (b) Stamp duty relief will be granted for up to $40m of consideration paid for qualifying M&A deals per financial year. These changes will apply to qualifying M&A deals made from 1 April 2016 to 31 March 2020. IRAS will release further details of the change by June 2016. |
| 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: i) The application for LIA is made from 25 March 2016; and ii) The application for planning permission or conservation permission for the construction or renovation is made from 25 March 2016. 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: i) The application for LIA is made from 25 March 2016; and ii) The application for planning permission or conservation permission for the construction or renovation is made from 25 March 2016. 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. |
| Introducing an anti-avoidance mechanism for IPR transfers under Section 19B of the ITA | To ensure that Section 19B writing down allowances are granted based on transacted values that are reflective of the open market value (“OMV”) of an IPR, an anti-avoidance mechanism for IPR transfers will be included under Section 19B to empower the Comptroller to make the following adjustments to the transacted price of the IPR, if the IPR is not transacted at OMV: a) If the acquisition price of the IPR is higher than the OMV of the IPR, the Comptroller may substitute the acquisition price with the OMV of the IPR and restrict the writing-down allowance based on the OMV of the IPR; and b) If the disposal price of the IPR is lower than the OMV of the IPR, the Comptroller may substitute the disposal price with the OMV of the IPR for the purpose of computing balancing charge. This change will apply to acquisitions, sales, transfers or assignments of IPRs that are made from 25 March 2016. |
| Introducing the Business and IPC Partnership Scheme (“BIPS”) | To incentivise employee volunteerism through
businesses, a pilot BIPS will be introduced from 1 July 2016 to 31 December
2018. Under BIPS, businesses will enjoy an additional 150% tax deduction on wages and incidental expenses when they send their employees to volunteer and provide services to IPCs, including secondments. This will be subject to the receiving IPCs’ agreement, with a yearly cap of $250,000 per business. MOF and IRAS will release further details of the change by June 2016. |