Page 5 - Budget-2018-Highlights-en-flip
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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
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