Page 4 - Budget-2018-Highlights-en-flip

Budget 2018 not only addresses Singapore’s immediate needs and concerns but is also a strategic plan to
address challenges we will face for the next decade. The key thrust is still in the areas of innovation, rescaling and
upscaling.

The Government has already forewarned that to be able to keep up with the additional spending required of an
uncertain world economy and our ageing population, which gives rise to higher healthcare costs, it is inevitable
that taxes would have to be raised to fund our future higher spending needs. In his Budget Speech, the Finance
Minister explained the possible tax revenue sources. The Goods and Services Tax (“GST”) hike by 2%, coupled
with the implementation of reverse charge and the overseas vendor registration regime to collect GST on
imported services, seems to be a natural choice. What is perhaps surprising is that changes to the GST Act in
these areas will not take immediate effect. The 2% GST rate increase will come sometime in the period from 2021
to 2025, whilst the taxing of imported services will kick in from 1 January 2020. The other streams of additional
revenue are the extra 1% buyer’s stamp duty for residential property purchases costing more than $1 million,
which took immediate effect from 20 February 2018, and the Carbon Tax levy starting from 2019.

As most of the extra revenue streams are not immediate, for the nearer term needs, Government-owned
companies or statutory boards may borrow for critical national infrastructure projects and for the Government
to guarantee some of these loans. This sounds like a win-win situation for both the Government and the people.

To stay competitive, the Finance Minister did not make any change to the corporate and personal income tax
rates, except for slight adjustments to the Partial Tax Exemption and Start-up Tax Exemption schemes.

The following two measures were announced to assist businesses in coping with near-term cost pressures:

 Extending Wage Credit Scheme, the co-funding of wage increases, for three more years to 2020.

 Extending corporate income tax rebate by a further year to Year of Assessment 2019, though it is at a lower
percentage and cap. The Year of Assessment 2018 rebate is 40% of tax payable with an enhanced cap at
$15,000 whilst the Year of Assessment 2019 rebate is 20%, capped at $10,000.

In addition, the following key tax changes were announced:

 The deduction for qualifying R&D expenses incurred on qualifying R&D projects in Singapore is increased
from 150% to 250%. This is to further encourage and support businesses to build their own innovations.

 Enhance the deduction to 200% for the first $100,000 of qualifying IP registration and IP in-licensing costs
incurred for each Year of Assessment. The change will take effect from Year of Assessment 2019 to Year of
Assessment 2025.

 Increasing to $150,000, without the need for approval, qualifying expenditure for double tax deduction under
the Double Tax Deduction for Internationalisation scheme. This is to further encourage internationalisation.

 The 250% tax deduction for qualifying donations continues for a further three years to 31 December 2021 to
encourage Singaporeans to give back to the community.

 Introduction of a new tax framework for Singapore Variable Capital Companies, a more diverse fund vehicle
or structure.

Singapore citizens have not been forgotten. To share the fruits of Singapore’s development, an SG bonus in cash
of up to $300 will be given out to all adult Singapore citizens.

To summarise, Budget 2018 lays the foundation for our nation's development in the next decade. It is a targeted,
strategic and integrated financial plan to position Singapore for the future, requiring the people and the
Government to work together as one nation.

Tax Partner
19 February 2018

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