It has been a day since Singapore’s Finance Minister Heng Swee Keat delivered the country’s annual budget – calling it “expansionary”, and increasing spending in defence, educating and the heath sector. Notably, as projected by him, this fiscal year, Singapore will have an overall budget deficit of $3.5 billion (0.7% of GDP), in contrast to last year’s overall budget surplus of $2.1 billion (0.4% of GDP).
The minister outlined the robust performance of the economy for the past one year, introduced several measures to prepare Singapore for the next decade, and make it the best place to incorporate a company in Asia. “Over the years, our sound monetary and fiscal policies have enabled us to weather global economic crises and keep inflation stable. These provide a stable environment for investors to make long-term investment decisions. That’s why, in tandem with global expansion, our economy grew 3.2% last year. As a result of such a sustained growth over the past five years, the real median income has grown by 3.6% per year,” noted the minister.
Below is the detailed analysis and listing of several measures announced by the minister, including the introduction, extensions, and modifications, in the country’s tax regime and schemes for Singapore-incorporated companies, which come out to a total of $1 billion. The minister hoped these measures will help companies registered in Singapore innovate, scale-up, and build deep capabilities.
Singapore Budget 2019 – helping businesses grow, scale and innovate
Launch of Scale-up SG Programme
Enterprise Singapore (IE) will launch a Scale-up SG programme to help high-growth local firms identify and build new capabilities, innovate, grow, and internationalise. Details of the scheme will be announced by IE soon. This is the continuation of the programme Startup SG launched two years back, which provides holistic support for start-ups and entrepreneurs including co-investments and proof-of-concept grants, mentorship and physical work space. Notably, Singapore now has 150 global venture capital funds, incubators, and accelerators, with over 220 venture capital deals worth close to US$4.2 billion signed every year.
Launch of Innovation Agents Programme
This will be 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. More details on this will be shared by IE later this year.
Launch of SME Co-Investment Fund III
The Government has set aside an additional $100 million for the SME CoInvestment Fund III, to continue supporting firms in their efforts to scale up and internationalise. This 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. It all started in 2010, when the Co-Investment Programme (CIP) was launched, which comprised of 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.
Launch of 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.
Extension of 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.
Launch of Digital Services Lab (DSL)
This 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. Companies participating as demand users and technology solutions providers may apply for funding support of up to 70% of qualifying costs.
Launch of a one-stop portal for the food services sector
The Ministry of Trade and Industry is 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.
Launch of 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. Through the programme, TACs will be able to access funding and potentially take in public sector secondees.
New Centres of Innovation in aquaculture and energy
Two new Centres of Innovation (COIs) will be set up for aquaculture and energy in Temasek Polytechnic and Nanyang Technological University respectively. The existing eight COIs in Singapore 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.
Expansion of the SMEs Go Digital Programme
This scheme announced in Budget 2017 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. Notably, till now, under the programme – which has key components as industry digital plans (IDPs), pre-approved digital solutions, and digital sector projects – IDPs have been developed for 7 sectors: environmental services, retail, food services, wholesale trade, logistics, security and media.
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.
Singapore’s as an innovation node
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, to draw even more entrepreneurs, investors and innovators as compared to the last year. In 2018 – 500 exhibitors, 250 speakers, and 45,000 delegates from more than 125 countries, attended the Singapore FinTech Festival; and 350 exhibitors, 1,000 start-ups and financiers from 75 countries attended the Switch.
Support for hiring foreign workforce
Reduction in services sector Dependency Ratio Ceilings (DRCs)
For the country’s services sector, the DRCs will be reduced to 38% on January 1, 2020, and to 35% on January 1, 2021, from the current 40%. Also, for the services sector S Passes, the DRCs will be reduced to 13% on January 1, 2020, and to 10% on January 1, 2021, from the current 15%.
Foreign Worker Levy deferred for the marine shipyard and process sectors again
Foreign Worker Levy rates will remain unchanged for all sectors, and 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.
Support for building deep capabilities in the local workforce
Launch of new Professional Conversion Programmes (PCPs)
Established in 2007, these programmes 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. In the last decade, more than 100 such programmes have been launched in over 30 sectors. This year, more will be launched in the emerging fields of block-chain, embedded software and prefabrication.
Launch of Global Ready Talent Programme (GRTP)
All the existing local and overseas internship programmes will be combined into a single Global Ready Talent Programme (GRTP), which has two components – (details will be provided at the Ministry of Trade and Industry’s (MTI) Committee of Supply (COS at a later date)
- 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.
Extension of the Career Support Programme (CSP)
The CSP, which was first introduced in 2015, 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.
Extension of Special Employment Credit (SEC)
The SEC scheme will also be extended till December 2020.
Changes to the Workfare Income Supplement (WIS)
To help the lower-income group, WIS will be boosted 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).
Tax changes for businesses in Singapore Budget 2019
While there has been no change in the prevailing Singapore corporate tax rate of 17 percent, the minister did announce several changes in his speech that may affect a Singapore incorporated company’s overall tax liabilities. This money saved can in turn help the Singapore-incorporated company grow and scale-up.
Discontinuation of Property Tax (Tourist Projects) Order
This scheme will lapse after February 18, 2019. It was introduced in 1987, to promote tourism in Singapore, under which approved tourist projects had 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.
Discontinuation of Designated Unit Trust (DUT)
Under this, 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. This scheme will lapse after March 31, 2019, but the existing DUTs will continue to receive the tax deferral benefits, on and after April 1, 2019, if they continue to meet all the conditions.
Discontinuation of Approved Unit Trust (AUT)
Under this, 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. This scheme will lapse after February 18, 2019, but the existing AUTs will continue to receive the tax concessions for a period of five years from YA 2020 to YA 2024.
Restructuring of diesel taxes
With effect from February 18, 2019, Singapore will increase the excise duty on diesel fuel to $0.20 per litre, from the current $0.10. Whereas, the annual special tax will be permanently reduced for diesel cars and taxis by $100 and $850 respectively. Also, 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, 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.
Extension of Writing Down Allowance (WDA)
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. This has now been extended from the existing basis period for YA 2020, to qualifying IPRs acquired on or before the last day of the basis period for YA 2025.
Extension of Automation Support Package
To maintain support to companies in their automation, productivity and scale-up efforts, the 100% Investment Allowance (IA) measure under the Automation Support Package (ASP) 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. The ASP was introduced in 2016, which included 100% IA support on the amount of approved capital expenditure, net of grants, on projects approved by Enterprise Singapore (IE).
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 incentives for funds managed by Singapore-based fund managers
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, which 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 from YA 2020.
- The enhanced tier fund scheme will be enhanced – on and after February 19, 2019 – 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). This will apply to income derived on and after February 19, 2019.
- 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. This will apply to SREITs and REITs ETFs distributions made during the period from July 1, 2019 to December 31, 2025.
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.
Tax changes for individuals in Singapore Budget 2019
Rebate in personal tax for YA 2019
As part of the Bicentennial Bonus announced by the minister, a Personal Income Tax rebate of 50% of tax payable – capped at $200 per taxpayer – will be granted to all tax resident individuals for YA 2019 (i.e. for income earned in 2018).
Discontinuation of Not Ordinarily Resident (NOR) scheme after YA 2020
In a bid to attract highly-skilled foreign talent to our shores and maintain Singapore’s competitiveness, the government had introduced the NOR scheme in 2002, under which, an eligible foreigner was granted the NOR status for a five-year period, and subsequently received several tax concessions, subject to conditions. This scheme will lapse after YA 2020, and the last NOR status granted will expire in YA 2024. But the minister promised that with measures such as a competitive tax regime, stable political, economic and social environment, strong regional connectivity, and high standards of healthcare, housing and education, the country will continue to build a conducive environment to attract and retain highly-skilled individuals.
GST import relief tightened for tourists
The quantum of GST import relief for overseas travellers has been revised 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,” the minister informed.
No cap on a child’s age to apply for Grandparent Caregiver Relief
With effect from YA 2020, working mothers with handicapped and unmarried dependent children, will be able to claim the Grandparent Caregiver Relief in respect of a handicapped and unmarried dependent child, regardless of the child’s age (from the existing 12-year-old cap), if they have met all other conditions.
As the minister noted in his concluding remarks, Singapore is well-placed as a Global-Asia node of technology, innovation and enterprise, by welcoming the best MNCs and SMEs from around the world, and help start-ups and Singapore established companies to grow, scale, and internationalise.
Singapore Budget 2019 is a further step in that direction, and a proof of the government’s strong desire to partner with foreign entrepreneurs and companies, which are willing to use the country as a launch-pad to harness the huge economic potential of the Asian giants including China, India and Indonesia.
Need help understanding Singapore Personal Tax?
Our experts will help you through every step, so you’ll get your taxations right.