Page 5 - Budget-2018-Highlights-en-flip
P. 5
CORPORATIONS
AND BUSINESSES
Corporate Income Tax Rebate Partial Tax Exemption Scheme
Current Current
Companies can qualify for a Corporate Income Tax All companies (excluding those that qualify for the
(“CIT”) rebate of 20% of tax payable, capped at Start-up Tax Exemption (“SUTE”) scheme) and
$10,000, for Year of Assessment (“YA”) 2018. bodies of persons can qualify for in each YA:
Proposed changes 75% exemption on the first $10,000 of normal
chargeable income; and
To ease business costs and support restructuring
by companies, the CIT rebate will be enhanced and 50% exemption on the next $290,000 of normal
extended as follows: chargeable income.
The CIT rebate will be extended for another year Proposed changes
to YA 2019, at a rate of 20% of tax payable,
capped at $10,000; and To strengthen support for firms to build capabilities,
the tax exemption under the Partial Tax Exemption
For YA 2018, the CIT rebate will be enhanced to (“PTE”) scheme will be adjusted to:
40% of tax payable, with an enhanced cap at
$15,000. 75% exemption on the first $10,000 of normal
chargeable income; and
Effective date
50% exemption on the next $190,000 of normal
YA 2018 and YA 2019. chargeable income.
Comments All other conditions of the scheme remain
unchanged.
With the increase in the CIT rebate from 20% to
40% for YA 2018, the effective tax rate for the Effective date
first $300,000 of normal chargeable income is
reduced to 5.02% from 6.69%. The change will take effect on or after YA 2020 for
all companies (excluding those that qualify for the
The Government is mindful that the chargeable SUTE scheme) and bodies of persons.
income for many SMEs may not be as high as
$300,000 in a year. Increasing the rebate Comments
percentage from 20% to 40% and enhancing the
overall cap to $15,000 allows as many of the The proposed adjustment will only affect
smaller SMEs as possible to maximise their tax companies with chargeable income in excess of
rebate claims. $200,000. For chargeable income of $200,000,
the effective tax rate remains at 8.29%.
Companies paying little or no tax should
consider deferring the capital allowances claim The effective corporate income tax rate for
and/or not surrendering losses to group ordinary chargeable income of $300,000 for YA
companies in order to maximise the CIT rebate 2018 is 8.36% (before corporate income tax
claims for YA 2018 and YA 2019. rebate). This same level of chargeable income
from YA 2020 will be taxed at an effective tax
rate of 11.19%, which is still well below the
headline tax rate of 17%.
BUDGET 2018 HIGHLIGHTS | 3