Tax rebates and incentives announced in the Singapore Budget for aiding business growth

With Singapore still tackling COVID-19, the Budget Statement was delivered in the Parliament by Finance Minister and Deputy Prime Minister, Mr. Heng Swee Keat, on February 18, 2020.

The changes in the tax structure seen this year are nothing groundbreaking, but it still reflects the values held by Singapore during these times of global structural shift and economic uncertainties. Because of the headwinds being faced by the country, several tax measures introduced this year aim at stabilizing the economy and supporting the businesses. In the international front, the country is well-poised to benefit from the geopolitical changes. There have been several refinements, enhancements, and extensions of tax schemes to make Singapore one of the prime financial hubs all over the world. However, the basic tax structure remains the same as the government believes it to be competitive enough and well-suited for Doing Business in Singapore.

Some of the notable highlights, regarding taxes, in the current budget are given below.

1. Corporate Tax benefits offered to the companies for stabilizing the economy

• Twenty-five percent income tax rebate per company, within the limit of S$15,000, for the year of assessment 2020
• Improvements in the carry back relief schemes for the year of assessment 2020
• Greater relief for renovation and refurbishments, plants & machinery for the year of assessment 2021

2. GST remains unchanged for now, but there might be some changes in GST for the cross-border activities of a company.

• No GST hikes from seven percent to nine percent for the year 2021, but it might be implemented before 2025
• GST levied on digital payments and imported services

3. The Mergers & Acquisitions scheme to be extended till 31 December 2025, with conditions applied

• No stamp duty reliefs for the tools executed after or on April 1, 2020
• No waiver application allowed for the foreign holdings of Singaporean subsidiaries for the acquisition they made after or on April 1, 2020

4. Promoting venture capitalism and maintaining a competitive market by refining, enhancing, and extending tax incentive schemes

• Extending the ‘safe harbor’ clause for disposing of ordinary shares till December 31, 2027
• Tax benefits for fun management businesses and venture capital businesses enhanced and extended
• Refining, enhancing and extending tax incentives for different industries, which include particular financial markets, maritime businesses, and insurance firms.

Twenty-five percent income tax rebates will be given to the corporate ventures, within the limit of S$15,000, for the year of assessment 2020. The small and medium enterprises will benefit considerably from it, and so will the companies facing minor cash crunches.

Mergers & Acquisitions Schemes Extended, but with certain limitations

The Mergers & Acquisitions scheme, introduced in the year 2010, was meant to foster growth and restructuring of the companies through the scheme. This scheme states that a Singaporean company legally acquiring the shares of another company might be entitled to certain tax rebates.

To qualify for this scheme, the main holding company of the acquiring company needs to be a legal tax resident in the country. This condition was waivered in 2012 for particular companies, including foreign MNCs that have headquarters in the country under the Headquarters Tax Incentive Program.

There will be an extension of the Mergers & Acquisitions scheme for qualifying acquisitions made before or on December 31, 2025. But, there will be certain limitations on the scheme, such as:

• The stamp duty reliefs under the scheme will end up lapsing for Singapore company incorporation after or on April 1, 2020
• Lapse of waiver for share acquisitions made after April 1, 2020. The MNCs that incorporate Singaporean subsidiaries might not be able to fulfill the conditions of the scheme under this clause.

The present tax benefits under the Mergers & Acquisitions scheme incorporate, an allowance based on purchase considerations that are limited at S$10 million for all the qualifying acquisitions in the year of assessment, and a double-tax reduction on the transaction costs spent for acquiring the qualified shares that are limited at S$100,000. The limits on double-tax reduction and Mergers & Acquisitions rebates are aimed to benefit the growth and development of small and medium enterprises. The other conditions and limitations of the Mergers & Acquisitions scheme continue to remain the same.