Singapore Budget 2020 affecting companies

Jobs Support Scheme ("JSS")

Current Treatment

Not applicable

New Treatment

Employers will receive an 8% cash grant on the gross monthly wages of each local employee (applicable to Singapore Citizens and Permanent Residents only) for the months of October 2019 to December 2019, subject to a monthly wage cap of $3,600 per employee.   

Employers do not need to apply for the JSS. The grant will be computed based on CPF contribution data.   

Employers can expect to receive the JSS payment from the Inland Revenue Authority of Singapore (IRAS) by 31 July 2020.

Wages paid to business owners will not be eligible for the grant. 

Enhancement to Wage Credit Scheme ("WCS")

Current Treatment

Under WCS, the Government will co-fund a part of wage increases given to Singaporean employees earning a gross monthly wage of up to $4,000.

  • 2013 to 2015: 40% cap at $4,000
  • 2016 to 2018: 20% cap at $4,000
  • 2019: 15% cap at $4,000
  • 2020: 10% cap at $4,000

Employers do not need to apply for the WCS. The grant will be computed based on CPF contribution data. 

Payouts will be given to employers by 31 Mar of the payout year.

New Treatment

The monthly wage ceiling will be raised from $4,000 to $5,000 for qualifying wage increases given in 2019 and 2020.

  • 2013 to 2015: 40% cap at $4,000
  • 2016 to 2018: 20% cap at $4,000
  • 2019: 20% cap at $5,000
  • 2020: 15% cap at $5,000

Government co-funding levels will also be raised for 2019 and 2020 qualifying wage increases by five percentage points, to 20% and 15% respectively. 

Corporate Income Tax ("CIT") Rebate 

Current treatment

YA2019: 20% of tax payable, capped at $10,000

New treatment

YA2020: 25% of tax payable, capped at $15,000

Automatic extension of interest-free instalments of 2 months for payment of CIT on Estimated Chargeable Income (“ECI”) filed within 3 months from the companies’ financial year-end (“FYE”)

Current Treatment

Tax payable on first ECI e-Filed within

  • 1 months from year end: 10 months
  • 2 months from year end: 8 months
  • 3 months from year end:  6 months
  • After 3 months from year end: No instalments allowed

New Treatment

Tax payable on first ECI e-Filed within

  • 1 months from year end: 12 months
  • 2 months from year end: 10 months
  • 3 months from year end:  8 months
  • After 3 months from year end: No instalments allowed

Increase the number of YAs for which the current year unabsorbed capital allowances (“CA”) and trade losses for a YA (collectively referred to as “qualifying deductions”) may be carried back 

Current Treatment

“Qualifying Deductions” (“QD”) can be carried back for one YA immediately preceding that YA in which the CAs are granted or the trade losses incurred capped at $100,000.

New Treatment

“Qualifying Deductions” (“QD”) for YA2020 can be carried back for three YA  (i.e YA2017) capped at $100,000.

Provide an option to accelerate the write-off of the cost of acquiring plant and machinery (“P&M”)

Current Treatment

A taxpayer who incurs capital expenditure on the acquisition of P&M in the basis period can claim Capital Allowances (CA) over

Section 19A

  • 100% Write-Off in One Year
  • Write-Off Over Three Years

Section 19

  • Write-Off Over the Prescribed Working Life of the Asset

New Treatment

A taxpayer who incurs capital expenditure on the acquisition of P&M in the basis period for YA2021 (i.e. financial year (“FY”) 2020) will have an option to accelerate the write-off of the cost of acquiring such P&M over 2 years.

The rates of accelerated CA allowed are as follows:

a) 75% of the cost incurred to be written off in the first year (i.e. YA2021); and,
b) 25% of the cost incurred to be written off in the second year (i.e. YA2022).

Provide an option to accelerate the deduction of expenses incurred on renovation and refurbishment (“R&R”)

Current Treatment

A taxpayer which incurs qualifying expenditure on R&R during the basis period for the purposes of its trade, profession or business can claim Section 14Q deduction  over three consecutive YAs starting from the year in which the R&R expenditure is incurred, i.e. 1/3 of the R&R expenditure can be claimed in each of the three YAs.

The amount of R&R costs that qualify for tax deduction as a business expense is capped at $300,000 for every relevant three-year period, starting from the year in which the R&R costs are incurred.

 

New Treatment

A taxpayer which incurs qualifying expenditure on R&R during the basis period for YA2021 (i.e. FY2020) for the purposes of its trade, profession or business will have an option to claim R&R deduction in 1 YA (i.e. accelerated R&R deduction).

The amount of R&R costs that qualify for tax deduction as a business expense is capped at $300,000 for every relevant three-year period, starting from the year in which the R&R costs are incurred.

Extend the Mergers & Acquisitions (“M&A”) scheme

Current Treatment

Under the M&A scheme, an M&A allowance will be granted to a company that acquires another company during the period 1 Apr 2010 to 31 Dec 2020 (both dates inclusive). The M&A allowance will be allowed on a straight line basis over five years and the allowance cannot be deferred. Companies must meet certain conditions to remain eligible for M&A allowance for each Year of Assessment (YA) during the five-year write-down period.

  • 1 Apr 2016 to 31 Dec 2020:  The M&A allowance is 25% of the value of acquisition, , subject to a maximum amount of $10 million for all qualifying share acquisitions in the basis period for each YA. Maximum M&A allowance for each YA will be reached with an acquisition of $20 million in that YA.
  • 1 Apr 2015 to 31 Mar 2016: The M&A allowance is 25% of the value of acquisition, , subject to a maximum amount of $5 million for all qualifying share acquisitions in the basis period for each YA. Maximum M&A allowance for each YA will be reached with an acquisition of $20 million in that YA.
  • 1 Apr 2010 to 31 Mar 2015: The M&A allowance is at 5% of the value of acquisition, subject to a maximum amount of $5 million for all qualifying share acquisitions in the basis period for each YA. Maximum M&A allowance for each YA will be reached with an acquisition of $100 million in that YA.

New Treatment

The M&A scheme will be extended to cover qualifying acquisitions made on or before 31 December 2025.

The scheme will remain unchanged for acquisitions made on or after 1 April 2020, except for the following:

  1. Stamp duty relief will lapse for instruments executed on or after 1 April 2020; and
  2. No waiver will be granted for the condition that the acquiring company must be held by an ultimate holding company that is incorporated in and is a tax resident of Singapore. This will apply for acquisitions made on or after 1 April 2020.