Page 6 - Budget-2018-Highlights-en-flip
P. 6


Start-up Tax Exemption Scheme                           Comments

Current                                                  The SUTE scheme was introduced to promote
                                                            entrepreneurship and help the growth of local
A new company can, subject to conditions, qualify           businesses. Whilst the SUTE scheme lowers
for, in each of the first three Years of Assessment:        costs for smaller firms and start-ups, it does not
                                                            directly help firms to develop capabilities.
 100% exemption on the first $100,000 of normal            Moreover, in practice, start-ups may not have
    chargeable income; and                                  generated sufficient profits in their early years
                                                            to realise the full benefit of the scheme. The
 50% exemption on the next $200,000 of normal              intent of the announced changes is to move
    chargeable income.                                      away from a broad-based tax scheme.

Proposed changes                                         With the announced adjustments, start-ups will
                                                            have an effective corporate tax rate of 4.25%
To strengthen support for firms to build capabilities,      for the first $100,000 of their normal chargeable
the tax exemption under the SUTE scheme will be             income from YA 2020 versus zero currently. As
adjusted to:                                                for those with normal chargeable income of
                                                            $200,000, the effective tax rate will be 6.38%
 75% exemption on the first $100,000 of normal             from YA 2020 versus 4.25% currently (before
    chargeable income; and                                  corporate income tax rebate).

 50% exemption on the next $100,000 of normal           Notwithstanding the announced changes, the
    chargeable income.                                      effective corporate income tax rate for start-
                                                            ups and smaller firms remains low compared to
All other conditions of the scheme remain                   the headline tax rate of 17% and in comparison to
unchanged.                                                  corporate income tax rates in selected countries
                                                            (see Chart on next page).
Effective date
                                                         The Government expects profitable companies
The change will take effect on or after YA 2020 for         to pay some level of tax, albeit at lower rates.
all qualifying companies under the scheme.

If a qualifying company’s first YA is say 2019, the
current SUTE parameters will apply in YA 2019 while
the new parameters will apply in YA 2020 and YA

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