Among the highlights of tax changes affecting businesses, as announced by Singapore’s Minister of Finance, Tharman Shanmugaratnam on 23 February 2015 are as follows:
1) Corporate Income Tax rebate (YA 2016 and 2017)
30% corporate income tax rebate will be provided for YA 2016 and YA 2017 at a reduced cap of $20,000 per company per YA. This is a reduction from the previous cap of $30,000 per company per YA. Therefore, companies will have to pay more taxes.
2) Expiry of Productivity and Innovation Credit (PIC) Bonus
The PIC Bonus will expire in YA 2015. This means that no more dollar to dollar claims for qualifying PIC expenditures from YA 2016 onwards. However, companies are still eligible to claim 60% PIC Cash Payout, limited to qualifying expenditure up to $100,000 per YA.
3) Extension of the Wage Credit Scheme (WCS)
The Wage Credit Scheme (WCS) will be extended for another two years. The Government will co-fund 20% instead of 40% of wage increases given to Singaporean employees earning a gross monthly wage of $4,000 and below. In addition, employers will continue to receive co-funding at 20% for wage increases given in 2015 which are sustained in 2016 and 2017. This means a reduction in the amount that businesses can claim for giving salary increment to their employees.
4) Tax deduction for donations
Tax deduction will be increased from 2.5 times to 3 times for qualifying donations made from 1 Jan to 31 Dec 2015 to Institutions of a Public Character (IPC) and other approved recipients. The 2.5 times tax deduction for qualifying donations will be extended for another 3 years from 1 Jan 2016 to 31 Dec 2018. If businesses have extra funds, please do your corporate social responsibility part and can lower your taxes at the same time.
5) Simplifying pre-registration GST claim rules for GST-registered businesses
GST incurred on purchases of goods and services prior to GST registration is referred to as pre-registration GST. To ease compliance, the claiming of pre-registration GST will be simplified to allow a newly GST-registered business to claim pre-registration GST in full on the following goods and services that are acquired within six months before the GST registration date of the business:
a) Goods held by the business at the point of GST registration; and
b) Property rental, utilities and services, which are not directly attributable to any supply made by the business before GST registration.
Thus, businesses no longer have to apportion the pre-registration GST on the above goods and services even if these goods and services have been used to make supplies straddling GST registration or these goods have been partially consumed before GST registration. This is provided the use of these goods and services after GST registration is for the making of taxable supplies and not exempt supplies. For other purchases of goods and services prior to GST registration, including those acquired more than six months before the GST registration date of the business, existing pre-registration GST claim rules will apply.
This change will take effect for businesses that are GST-registered from 1 Jul 2015. This changes will help to make it clearer as to what pre-registration GST incurred that can be claimed. It will also increase compliance level and reduce mistakes in claiming pre-registration GST by newly GST registered businesses.