Breaking Down the Singapore Budget 2019

Singapore’s 2019 budget includes a range of tax measures which both employers and employees should welcome.

After a better-than-expected economic performance in 2018, Singapore’s Finance Minister, Heng Swee Keat, delivered the city-state’s 2019 budget buoyed by a S$2.1 billion surplus. Although the government had originally predicted a S$600 million deficit, the surplus is the result of increased statutory boards’ contributions, corporate income tax and stamp duty collections, and the pause of the Kuala Lumpur-Singapore High Speed Rail project, which effectively generated a boost equivalent to around 0.4% of Singapore’s GDP for 2019.

That surplus has allowed the Finance Minister to consolidate on his expansionary 2018 budget: although some restrictive measures have been introduced, in 2019, there are still plenty of concessions for both Singapore’s employers and employees. The major announcements of the 2019 Singapore Budget include:

Corporate Income Tax

Writing Down Allowance: In recognition of the importance of Intellectual Property Rights (IPR) to the Singapore economy, the 2019 Budget extends the Writing Down Allowance (WDA) for the acquisition of IPRs. The WDA will now cover capital expenditure for IPR acquisition until 2025.

Automation Support: The 100% Investment Allowance to support companies’ efforts to automate and scale-up has been extended for two years - from 1 April 2019, to 31 March 2021.

S-REIT Concessions: Tax concessions for Singapore-listed Real Estate Investment Trusts (S-REITs) have been extended to 31 December 2025. The measure is designed to boost Singapore’s status as an Asian REITs hub. The concessions apply to certain qualifying S-REITs distributions, and include:

  • Tax transparency treatment
  • Tax exemptions
  • 10% concessionary income tax rate

Additionally, an existing sunset clause on tax exemptions for S-REITs has been removed.

Qualifying Funds: Tax concessions for funds managed by Singapore-based fund managers have been extended until 31 December 2024. These concessions refer to sections 13A, 13R, and 13X fund schemes - refinements to these schemes have also been made in order to promote compliance performance:

  • The requirement that a basic tier fund must not have 100% of its securities owned by Singapore persons has been removed.
  • The enhanced tier fund has been adjusted to (a) include co-investments and non-company special purpose vehicles, (b) allow access to the committed capital concession by debit and credit funds, and (c) include managed accounts.
  • The Designated Investment (DI) list will be expanded - removing country-party and currency restrictions, and adding certain investments such as Islamic financial products and credit card facilities. Additionally, unit trusts will no longer need to wholly invest in DI.
  • The Specified Income (SI) list will be expanded to include payments falling under ITA section 12(6): interest, commission, and fees and payments connected to loans or indebtedness.
  • The 10% concessionary tax rate will be available to qualifying non-resident, non-individuals investing in S-REITs, REITs, and ETFs.

Unit Trust Schemes: The Designated Units Trust scheme will lapse on 31 March 2019, and the Approved Unit Trust scheme will lapse on 18 February 2019. Unit trust funds will be able to apply for other tax incentives.

Goods and Services Tax

GST Remission Extended: GST remission has been extended in the following contexts:

  • S-REITs and Registered Business Trusts will have their GST remission extended to 31 December 2025. The extension is intended to continue the facilitation of S-REITS and RBTs in ship and aircraft leasing, and in the infrastructure business.
  • GST remission will not be available until 31 December 2024 for qualifying funds managed by Singapore-based fund managers.

Import Relief: In order to keep Singapore’s tax system resilient, from 19 February 2019, GST relief for imported goods has been reduced for travellers arriving in the city:

Time travellers has spent outside Singapore

Previous value of GST relief on imported goods

New value of GST relief on imported goods

48 hours or more

S$600

S$500

Under 48 hours

S$150

S$100

 

Individual Income Tax

Personal Income Tax Rebate: As part of the government’s S$1.1 billion Bicentennial Bonus initiative, Singapore’s resident taxpayers will receive a one-off 50% personal tax rebate for YA 2019 (for income earned in 2018). The rebate is capped at S$200.

NOR scheme lapse: Introduced in 2002 to attract international talent to Singapore, the Not-Ordinarily-Resident (NOR) scheme grants tax relief for up to 5 years (up to a minimum effective tax of 10%) for qualifying taxpayers. Employers also receive tax relief under the scheme.

The NOR scheme will lapse after YA 2020, although individuals with NOR status will continue to receive tax relief until their status expires. The last NOR status will expire at the end of YA 2024.

Grandparent Caregiver Relief: Under the Grandparent Caregiver Relief (GCR) scheme, working mothers who need grandparents or in-laws to care for their children can claim up to S$3,000 for childcare purposes. From YA 2020, working mothers with handicapped and unmarried dependent children will be able to claim GCR regardless of the child’s age.

Diesel Tax

From 18 February 2019, diesel tax will be increased from S$0.10 per litre, to S$0.20 per litre. To mitigate the effect of the increase, a three year road tax rebate has been introduced for diesel vehicles (including commercial vehicles).

In its first year, the rebate will take effect from 1 August 2019 to 31 July 2020 at 100% (and supersede the existing 25% road tax rebate). The rebate will be adjusted to 75% from 1 August 2020, and to 50% from 1 August 2021 until 31 July 2022.

Other Individual Measures

Although it did not include the 2018 ‘hongbao’ bonus of S$300, gifted to all Singaporeans over 21 years old, the 2019 budget included its share of financial positives for individuals. Chief among those was the Merdeka Generation Package aimed at older Singaporeans and consisting of a range of health benefits. Similarly, younger Singaporeans will see their Edusave and Post-Secondary Education Accounts topped up, and lower-wage workers will receive more Workfare Income Supplements.

Learn more about Singapore’s budget and its current tax landscape by exploring activpayroll’s Singapore Global Insight Guide.