Learn about the latest tax developments and changes with Budget 2020.
GST
The change: No GST hike in 2021
It was announced in Budget 2018 that the GST rate would be increased to 9% in the period between 2021 and 2025. Considering the impact of COVID-19 on the economy, Budget 2020 has announced that this GST rate increase will not take place in 2021. Nonetheless, to cushion the rate increase which will still take place by 2025, an Assurance Package worth S$6 billion including a cash payout and enhanced GST Vouchers will be extended to eligible Singaporeans.
The way forward: More assurance for all
The certainty that the GST rate will not increase in 2021 is assuring, considering that Singaporeans are deeply concerned with the multiplier effect of COVID-19 on the overall economy and personal resources. This Assurance Package will help eligible Singaporeans to cushion the 2% rate hike when the GST rate is eventually raised by 2025.
The change: Extension and refinements to the Global Trader Programme (GTP)
To further strengthen Singapore's position as a global trading hub and to encourage more structured commodity financing (SCF) activities to be done in Singapore, the following changes will be made to the GTP:
- Qualifying activities of the GTP (SCF) to be subsumed under the GTP with effect from 19 February 2020
- GTP (SCF) to lapse after 31 March 2021
- Concessionary tax rate of 5% on income from qualifying transactions in liquefied natural gas (LNG) to lapse after 31 March 2021
Existing recipients of 2. and 3. can continue to enjoy the respective tax concessions up until the expiry of their awards, if the conditions for approval of their awards continue to be met. ESG will provide further details by May 2020.
The GTP scheme, which is scheduled to lapse after 31 March 2021, will be extended to 31 December 2026.
The way forward: Opportunities for trade financing and LNG trading
Trading companies planning to undertake SCF activities, such as factoring, forfeiting, export receivable financing, and Islamic trade financing will no longer need to apply for both the GTP and the GTP (SCF) in order to cover both trading and SCF activities.
The GTP companies would welcome the subsuming of the GTP (SCF) under the GTP as they would likely not be expected to fulfil another set of conditions, such as an additional set of headcount and business spending, as required previously under the GTP (SCF).
For LNG traders, there remains a window of opportunity to apply and obtain the GTP award by 31 March 2021 in order to enjoy the concessionary tax rate of 5% on income from LNG trading. Thereafter, LNG will be treated no differently from other qualifying commodities under the GTP.
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GENERAL TAX CHANGES
Refinement
Scheme
Recipients of capital grants from the Government or statutory boards no longer allowed to claim tax deduction or allowance on the portion of the expenditure funded by such grants
Effective Date
Applicable for capital grants approved on or after 1 January 2021
Enhancement
Scheme
Streamlining of the number of years of working life of Plant and Machinery (P&M) for capital allowance claims under Section 19 and Sixth Schedule of ITA
Effective Date
Applicable for P&M acquired:
- in or after FY 2022; and
- prior to FY 2022, if the capital allowance claim on the entire cost of the P&M was deferred
Extensions
Scheme
Finance and Treasury Centre scheme
Effective Date
Extended till 31 December 2026
Scheme
Withholding tax exemption for non-resident mediators
Effective Date
Extended till 31 March 2022
Scheme
Concessionary withholding tax rate for non-resident public entertainers
Effective Date
Extended till 31 March 2022 and will lapse thereafter
Scheme
Land Intensification Allowance scheme
Effective Date
Extended till 31 December 2025
Scheme
Withholding tax exemption for non-resident arbitrators
Effective Date
Extended till 31 March 2022
Extension/ Streamlining/ Withdrawal
Scheme
Insurance Business Development (IBD) and IBD-captive Insurance schemes
Effective Date
Extended till 31 December 2025 to realign the tenure of all awards under the IBD umbrella scheme and to include the insurers engaged in Marine Hull Liability (MHL) business under the IBD scheme
Scheme
IBD-MHL scheme
Effective Date
To lapse after 31 March 2020
Withdrawal
Scheme
Further tax deduction for R&D expenditure under Section 14E of the ITA
Effective Date
- To lapse after 31 March 2020
- Existing Section 14E incentive recipients continue to receive the incentive until expiry of their awards