The Singapore economy has weathered one of the worst global economic crisis and the 2010 Budget adopts key recommendations of the Economic Strategies Committee to develop long term sustained growth through raising productivity and growing globally competitive companies (in particular small and medium enterprises ["SMEs"])aswell as including all Singaporeans in growth. The main tax changes are summarized below.

RAISING PRODUCTIVITY :

SKILLS, INNOVATION AND ECONOMIC RESTRUCTURING

Productivity and Innovation Credit ("PIC") Incentive (from Year of Assessment ("YA") 2011 to YA2015)

PIC which is available to all businesses, will provide tax deductions for investments in 6 areas of

the innovation value chain.

(a) Research & Development ("R&D") done in Singapore;

(b) Investments in design done in Singapore;

(c) Acquisition of IP rights;

(d) Registration of IP rights;

(e) Spending on equipment or software (Investments in Automation);

(f) Costs of training employees to upgrade skills and capabilities.

Broadly, a 250% tax deduction is available for the first S$300,000 of qualifying expenditure and 100% for the balance expenditure. However, for R&D done in Singapore, a deduction for 150%

(instead of 100%) for the balance expenditure is allowed.

Two existing R&D tax incentives, ie R&D Tax Allowance ("RDA") and R&D Incentive for Startup Enterprises ("RISE") schemes will be phased out from YA2011.

Businesses may convert the tax deductions or allowances into a non-taxable cash grant capped at S$21,000 (7% of S$300,000) per YA, if they employ at least 3 local employees (Singapore citizens and permanent residents).

The Inland Revenue Authority of Singapore ("IRAS") will release details of PIC in June 2010 and the DesignSingapore Council, on (b) by May 2010.

Merger & Acquisition ("M&A") Allowance and Stamp Duty Remission  (for qualifying M&A deals executed from 1 April 2010 to 31 March 2015 [both dates inclusive])

The M&A allowance is 5% of the value of the acquisition, up to a cap of S$5 million of allowance granted for all qualifying deals executed per YA. The allowance is to be written down equally over 5 years.

A remission of stamp duty on the transfer of unlisted shares is given, capped at S$200,000 of stamp duty per year.

IRAS will release details by June 2010. Any stamp duty paid in full on a qualifying deal executed on and after 1 April 2010 but before the finalization of the rules will be refunded by IRAS, provided the finalized rules are satisfied.

Phase out of Industrial Building Allowance ("IBA") (with immediate effect)

IBA will not be allowed on capital expenditure incurred on the construction or purchase of industrial buildings or structures incurred after 22 February 2010.

Certain exceptions would continue to be eligible for IBA claim and include the purchase of

industrial buildings or structures where the option to purchase was signed on or before 22 February 2010 or the construction of new industrial buildings where the option was signed on or before 22 February 2010 and the development application is submitted to the Urban Redevelopment Authority by 31 December 2010.

IRAS will release details in April 2010.

Land Intensification Allowance ("LIA") Incentive (from 1 July 2010 to 30 June 2015)

LIA incentive is a more targeted scheme than IBA and is introduced to support enhanced land productivity among industrial users.

Businesses (belonging to any 1 of the 9 industry sectors) may claim LIA on qualifying capital

expenditure incurred for the construction of a qualifying industrial building or structure.

(a) Pharmaceuticals;

(b) Petrochemicals;

(c) Petroleum;

(d) Specialties;

(e) Other Chemicals;

(f) Semiconductor-Wafer fabrication;

(g) Aerospace;

(h) Marine and Offshore Engineering; and

(i) Solar Cell Manufacturing.

The business is granted an initial allowance of 25% and annual allowance of 5% of qualifying capital expenditure (to be written down fully over 15 years as opposed to 25 years for IBA).

Details will be released by the Jurong Town Corporation ("JTC") / Economic Development Board ("EDB") by June 2010.

Other changes - increase in foreign workers levies (from 1 July 2010)

To reduce reliance on foreign workers, the levies will be raised gradually over the next 3 years. For work permit holders, the first increase will be from S$10 to S$30 and for S-pass holders, a 2-tier levy of S$100 and S$120 will be introduced from 1 July 2010.

The Ministry of Manpower and Ministry of National Development will announce details later this week.

GROWING GLOBALLY COMPETITIVE COMPANIES

Tax deduction for angel investors (new incentive valid from 1 March 2010 to 31 March 2015, both dates inclusive)

An approved angel investor needs to invest at least S$100,000 into a start-up in a YA in order to enjoy a tax deduction at 50% of his investment at the end of his second year of holding the

investment. The deduction is capped at S$500,000 of investment per YA and applies to qualifying iinvestments in qualifying start-ups made during the validity period.

More details of the scheme will be released by SPRING Singapore by June 2010.

Extension of Development and Expansion Incentive ("DEI") to International Legal Services (valid from 1 April 2010 to 31 March 2015, both dates inclusive)

The DEI scheme will be extended to cover income derived from the provision of international legal services by practices registered in Singapore as a company or as a branch of a foreign company. 10% concessionary tax rate will apply on incremental income from qualifying international legal services.

Details will be released by the Ministry of Law and EDB in March 2010.

Enhancements to Financial Sector Incentive ("FSI") (effective from 1 January 2011)

• The requirement to deduct a Qualifying Base (which is subject to normal corporate tax rate) will be removed;
• The concessionary tax rate will be changed from 10% to 12% as a revenue neutral change; and
• The list of qualifying activities will be updated.

The Monetary Authority of Singapore ("MAS") will release details of the changes by April 2010.

Review of existing tax incentives for futures members of Singapore Exchange ("SGX") and members of Singapore Commodity Exchange Limited ("SICOM")

The 2 existing tax incentives would be discontinued on 31 December 2010. New incentive

applicants will have to apply for the FSI scheme and meet the economic commitments under the FSI at the point of application.

Existing futures members of SGX and members of SICOM currently under the 2 incentives will be allowed to transit to the FSI - Standard Tier scheme automatically if they notify MAS by 31 July 2010.

MAS will release further details by April 2010.

Extension of and enhancement to listed real estate investment trusts ("REIT") concessions (from 18 February 2010 to 31 March 2015 [both dates inclusive])

The following income tax, stamp duty and GST concessions for listed REITs will be renewed:

• 10% concessionary income tax rate for non-resident non-individual investors;
• Stamp duty remission on the transfer of Singapore immovable property to a REIT;
• Stamp duty remission on the transfer of 100% of the issued share capital of a Singapore incorporated company that holds immovable properties situated outside Singapore to a REIT;
• GST remission to allow REITs to claim input tax on their business expenses regardless of whether they hold the underlying assets directly or indirectly through multi-tiered structures such as special purpose vehicles or sub-trusts.

A sunset clause will be introduced for the Foreign Sourced Income Exemption ("FSIE") income tax concession applicable to listed REITs or wholly owned Singapore subsidiary companies of listed REITs, such that the qualifying foreign-sourced income should be remitted on or before 31 March 2015.

The current requirement for unlisted REITs to be listed within one month from the date of completion of the agreements for sale in order to qualify for the stamp duty remissions will be extended to 6 months.

Removal of Approved Start-up Fund Manager Scheme (after expiry on 17 February 2010)

The Approved Start-up Fund Manager scheme will be allowed to lapse.

Review of tax concession for offshore insurance business (effective 1 April 2010)

• The incentive will be subject to a sunset clause of 5 years till 31 March 2015;
• The tax concessionary period will be for 10 years;
• There will be a new headcount requirement imposed (except for captive insurers).

Existing incentive recipients will be given a transition period of 3 years from 1 April 2010 to 31 March 2013 to meet the headcount requirement in order to continue to qualify for the incentive after 31 March 2013 for the remaining tenure of their awards.

MAS will release further details by April 2010.

Extension of Maritime Finance Incentive ("MFI") (extended from 28 February 2011 to 31 March 2016)

Applications submitted during the period from 1 March 2011 to 31 March 2016 (both dates inclusive) will be given approval for a period of not more than 5 years.

Incentive for ship brokers and Forward Freight Agreement ("FFA") traders (from 1 April 2010 to 31 March 2015 [both dates inclusive])

A company carrying out solely ship broking and/or FFA trading in Singapore can qualify to be taxed at a concessionary tax rate of 10% for a period of 5 years, subject to conditions.

The Maritime Port Authority ("MPA") will release the implementation details by end March 2010.

Inclusion of ship management fees under Section 13A of Income Tax Act ("ITA") and Approved International Shipping Enterprise ("AIS") Scheme (effective from 22 February 2010)

Ship management fees derived from the rendering of ship management services to qualifying Special Purpose Vehicles will be treated as qualifying income to be exempted from tax under Section 13A of the ITA and the AIS scheme, subject to conditions.

The MPA will release the implementation details by end March 2010.

Renewal and enhancement of Investment Allowance ("IA") scheme for aircraft rotables (extended from 1 April 2010 to 31 March 2015)

The IA scheme for aircraft rotables will be renewed for another 5 years. The "non-swapping condition" under the existing IA scheme will be removed.

EDB will release the details by March 2010.

Reduction in withholding tax rate for non-resident public entertainers (valid for the period from 22 February 2010 to 31 March 2015)

The withholding tax rate on gross income derived by non-resident public entertainers in respect of services performed in Singapore will be reduced from 15% to 10%.

GOODS & SERVICES TAX ("GST") CHANGES

Expanding GST zero-rating for marine industry (effective from 1 July 2010)

• The definition of "qualifying ship" for zero-rating of GST will be expanded to include pleasure and recreational ships that are wholly used for international travel regardless of whether they call on a port outside Singapore;
• All goods (including stores and merchandises) supplied for use on board and the transport of goods or passengers on a qualifying ship will qualify for zero-rating, regardless of whether the ship calls on a port outside Singapore;
• Stores supplied to and merchandises for sale on board a qualifying aircraft will qualify for zero-rating.

Details will be released by the IRAS by June 2010.

Extension of GST remission granted to qualifying listed Registered Business Trusts ("RBTs") (from 18 February 2010 to 31 March 2015 [both dates inclusive])

The above concession will be renewed for listed RBTs in the sectors of infrastructure, ship leasing and aircraft leasing.

Deferring import GST (effective from 1 October 2010)

Approval will be granted to GST-registered businesses that meet all qualifying conditions

(including good compliance records and subscription to monthly GST filing) to defer the payment of their import GST for at least 1 month.

Details will be released by the IRAS by March 2010.

Simplifying GST accounting rules (effective from 1 January 2011)

Generally, the time of supply rules will be simplified to the earlier of:

• when a tax invoice is issued;
• when payment is received.

Businesses will no longer need to track when the goods are delivered / made available or services are performed.

Details will be released by the IRAS by May 2010.

INCLUDING ALL SINGAPOREANS IN GROWTH

Introduction of progressive property tax schedule for owner-occupied residential properties (for property tax payable from January 2011)

The existing 4% concessionary rate on owner occupied property will be replaced with progressive property tax rates as set out below:

Increase in parent relief

(effective from YA2010)

Parent Relief and Handicapped Parent Relief have been increased as follows:

Expansion of wife relief to spouse relief (effective from YA2010)

The relief has been expanded to include female resident taxpayers who support their husbands and is henceforth known as Spouse Relief. The income threshold is S$4,000.

Waiver of income threshold condition for handicapped-dependant-related reliefs (effective from YA2010)

The income threshold of S$2,000 has been removed for handicapped-dependant-related reliefs (including handicapped parent relief).

Increase in income threshold for all other dependant-related reliefs (effective from YA2010)

The income threshold for all other dependant-related reliefs (including parent relief) has been

increased from S$2,000 to S$4,000. The only exception is the CPF Cash Top-Up Relief for spouse or siblings, for which the revised income threshold is effective from YA2011.

Increase in course fees relief (effective from YA2011)

The maximum allowable course fees relief will be increased from S$3,500 to S$5,500.

Enhancement of tax deduction on donations (from 1 January to 31 December 2010)

The tax deduction of 250% on donations will be extended by another year.