2009 BUDGET SYNOPSIS RESILIENCE

Robert Tan & Co 2009 BUDGET SYNOPSIS RESILIENCE CASH TO SAVE JOBS AND BUSINESSES Coined the Resilience Package, the Finance Minister, Mr Tharman Shanmugaratnam unveiled a $20.5 billion injection package aimed at saving jobs and helping companies stay afloat against the backdrop of the most severe financial turmoil since the Great Depression. We summarise below some of the salient points that this Resilience Package has to offer:Jobs for Singaporean : An ingenious initiative, as some may say, the Jobs Credit Scheme puts money into employers’ pockets based on the number of staff employed. This Scheme is believed to be better than a corporate tax rate cut as it benefits companies who are sustaining losses or who pay minimal taxes. Correspondingly, for many Singaporeans who use their CPF to pay for their homes or education, this is indeed good news as there is no erosion in employees’ CPF as compared to a CPF contribution rate cut. Stimulating bank lending : In a credit drought, if businesses are not given credit, even viable ones may suffer. The Government perceives that lenders are overly cautious in this current economic downturn. Thus, instead of focusing on the amount of exposure that some of our banks have in toxic-assets, the Government has now taken a bold move to increase its level of risk in the lending mechanism. Called Special Risk-Sharing Initiative (“SRI”), the Government will take a more significant part of the risk in trade financing. . 1 Robert Tan & Co Enhancing businesses : To provide liquidity, a 40% cut in property tax is given to landlords. When these savings are channeled down to the tenants, many businesses will enjoy the benefit. Enhancements to the loss carry-back scheme, capital allowance regime, and foreign-sourced income exemption will also provide much needed money for loss making companies. Lowering the corporate income tax rate from 18% to 17% and beefing up the current incentives aim to entice more companies to set up base in Singapore. With the above cost cutting measures for businesses and a helping hand to individual taxpayers by giving a 20% tax rebate for Year of Assessment (“YA”) 2009, additional Goods & Services Tax (“GST”) rebates as well as rebates to transport related taxes and fees, etc, the Government hopes to reduce the effects of the economic woes. The appetites of the world especially those of the US and the EU, have dwindled. Buyers are getting scarce and many factories in China are closing down. On these premises, you might say, “Is this resilience package good enough?” Whatever the answer, what is certain is that these present incentives may not be definitive. Should more be required, the Government has vowed to do more. ~o~o~o~o~o~o~ Budget date: 22 January 2009 2 Robert Tan & Co Page CORPORATE INCOME TAX • • • • • • • Corporate Income Tax Rate Enhancement of the Loss-Carry Back Relief Enhancement of tax deduction for donations Accelerated Capital Allowances Enhancement of Deduction on Renovation and Refurbishment (R&R) Expenditure Tax exemption for foreign-sourced income Enhancement of start-up tax exemption scheme to include Companies Limited by Guarantee • Simplifying our tax framework for amalgamation 5 6 7 7 8 8 9 10 INCENTIVISED COMPANIES • Enhancement of Fund Management Incentive • Extension of the tax deduction for General Provisions made by banks and finance • • • • • • 11 11 12 13 13 14 15 16 institution Enhancement of Financial Sector Incentive – Headquarter Services (FSI-HQ) Enhancement of the Commodity Derivatives Trader (CDT) Scheme Enhancement of the Global Trader Programme (GTP) Scheme Broadening the financial sector’s list of specified income and designated investments Extension and Enhancement and of the Withholding Tax (“WHT”) Exemption for Maritime Industry Accelerated Writing-Down Allowance (WDA) for acquisition of intellectual property rights (IPRs) for Media and Digital Entertainment (MDE) content PERSONAL INCOME TAX • Personal Income Tax and One-Off Income Tax Rebate • Flexible GIRO arrangements • Removal of Income Tax on Net Annual Value (“NAV”) 17 17 18 3 Robert Tan & Co GOODS & SERVICES TAX • Recovery of GST for qualifying funds • Zero-rating for the aerospace industry • Suspension of GST and duty on goods temporarily removed from Zero-GST or Licenced warehouse for auction and exhibitions exhibitions and conference events 19 20 21 22 • Exemption of GST and duty for a specified quantity of wine for approved wine MISCELLANEOUS • • • • Jobs Credit Scheme Property tax Transport related taxes and fees R&D grants and training schemes to develop new capabilities and spur innovation 23 25 25 26 4 Robert Tan & Co CUT IN CORPORATE TAX RATE Unexpectedly, the corporate income tax rate has been cut from 18% to 17% with effect from YA 2010. With this rate cut, the difference in corporate income tax rate between Singapore and Hong Kong is only 0.5%. However, taking into account of the partial tax exemption for normal chargeable income of up to $152,500, the Singapore effective corporate income tax rate for the first $300,000 chargeable income for YA 2010 is now 8.36% ($147,500/$300,000 X 17%). This effective tax rate would thus be one of the lowest and most competitive in the world. Note : Partial tax exemption will be given for the first $300,000 as follows:• • 75% exemption for first $10,000; and 50% exemption for the next $290,000. Aimed at encouraging more businesses to set up base in Singapore especially the small and medium sized corporations, the cut in corporate tax rate together with “Brand Singapore” which is reputed for top quality and reliable service, companies are likely to be more enticed to set up base in Singapore. Separately, a cut of 1% in the tax rate will also ease cash flow of larger corporations. In addition, the withholding tax rate of certain payment (for example technical service fee and management fee) which is pegged to the corporate income tax rate will also be reduced to 17%. For our foreign service providers who do not have a double tax agreement with Singapore, this reduction in withholding tax will translate to a reduction in their cost of doing business in Singapore. Effective date : YA 2010 onwards 5 Robert Tan & Co ENHANCEMENT OF THE LOSS CARRY-BACK RELIEF Current Under the current loss carry back relief system, any person carrying on a trade, business, profession or vocation may carry back his current year qualifying deductions (which comprise his unabsorbed capital allowances and trade losses) to offset his assessable income for the immediate preceding YA (that is, a single YA). This deduction is capped at $100,000 of the qualifying deduction or the assessable income to be offset. Proposed For YAs 2009 and 2010, the loss carry back relief system will be enhanced to allow businesses to carry back their current year qualifying deductions to offset assessable income for 3 immediate preceding YAs. The qualifying deductions claim will also be upped from $100,000 to $200,000. Existing conditions for the claim, namely, the substantial shareholding and the same business tests requirements will still apply. In addition to the above, IRAS will allow claims for the tax refunds based on declaration of estimated losses instead of having to wait for the finalisation of their YA 2009 and 2010 assessments by IRAS. IRAS has released an e-Guide on this on 23 January 2009. Comments Instead of a direct corporate income tax cut in YA 2009, the Government has decided to provide cash refunds to businesses via an enhancement in the loss carry back relief system. Businesses which are currently sustaining loss after paying tax in better times before 2008 will benefit from this enhancement. Applicable years : YA 2009 and YA 2010 6 Robert Tan & Co ENHANCEMENT OF TAX DEDUCTIONS FOR DONATIONS Current For tax purposes, approved donations made to any institution of public character (“IPC”) will be given a double deduction (2X). Proposed Without exception, IPCs are also hit by the economic downturn. To encourage greater charitable giving this year, the Government has proposed to increase the tax deduction from a double (2X) to a two and a half times (2.5X) deduction for donations made during 1 January 2009 to 31 December 2009. Comments The existing rules stipulate that any unutilised donations are available to be carried forward for 5 years. This condition will similarly apply to the current proposal. Applicable year : YA 2010 ACCELERATED CAPITAL ALLOWANCES (“CA”) Current Currently, businesses can, generally, write-down the costs incurred on plant and machinery over a 3-year period. Proposed To stimulate investments and in preparation for recovery, businesses can now accelerate the write-down of costs incurred on plant and machinery in the basis periods for YA 2010 and YA 2011. This temporary accelerated CA will allow businesses to write-down costs of these newly acquired plant and machinery within 2 years of purchase with 75% of the write-down taking place in the first YA of claim. Comments Coupled with the enhanced 3-year loss carry-back relief, a business may be able to recover the tax credit on 75% of the costs incurred on plant and equipment in the year of incurrence instead of just only 33% based on the existing rule. Although noble, it remains to be seen how businesses will be eager to invest at this time of diminished appetite for spending and when the world demand, especially that of the US, has shrunk. Applicable years : YA 2010 and YA 2011 7 Robert Tan & Co ENHANCEMENT OF DEDUCTION ON RENNOVATION & REFURNISHMENT (R&R) EXPENDITURE Current Announced in the last Budget and under Section 14Q of the Income Tax Act, a tax deduction is given over a period of 3 consecutive years to businesses incurring during the period from 16 February 2008 to 15 February 2013 (both dates inclusive), expenditure on R&R for their trade. The amount of R&R expenditure is subject to a cap of $150,000 for three consecutive years within the aforesaid 5-year period. Proposed To prepare small businesses in the services sector for the upturn, such businesses are encouraged to refit their business premises this year and the next. With this in view, the Government has temporarily allowed a full tax deduction (that is, a claim over 1 year instead of 3 years) on qualifying R&R expenditure incurred during YAs 2010 and 2011. Comments Apart from structural works, designer and professional fees, antiques and fine arts, most of the expenditure incurred on R&R will qualify for the above claim. Therefore, if businesses are already planning to renovate or refurbish their premises, now is the time. Applicable years : YA 2010 and YA 2011 TAX EXEMPTION FOR FOREIGN-SOURCED INCOME Current Only foreign sourced dividends, branch profits and specified service income which are received or deemed received in Singapore by a tax resident company qualifies for tax exemption. In addition, certain conditions need to be met before the income is exempted. They are :• • In the year of remittance, the headline tax of that foreign jurisdiction is at least 15%; That income has been subject to income tax in the jurisdiction from which it is received. 8 Robert Tan & Co Proposed To enable resident companies to tide through the credit crunch and make optimal use of all their sources of funds generated prior to 22 January 2009, the Government:i) ii) has temporarily expanded the scope to cover all types of foreign source income; and will also temporarily lift the conditions that are currently required (as mentioned above) before such foreign income is exempted. Comments Such a move would be most welcomed by companies who have generated significant foreign interest, rental and royalties income. Since our neighbour, Malaysia has long adopted a tax-free stance on remittance of foreign-sourced income without any attached conditions, we hope that this temporary move will be enhanced in that the limited period of remittance will be completely lifted the near future. Applicable date : 22 January 2009 to 21 January 2010 (both dates inclusive) ENHANCEMENT OF START-UP TAX EXEMPTION SCHEME TO INCLUDE COMPANIES LIMITED BY GUARANTEE Current A newly incorporated qualifying Singapore company (not limited by guarantee) can enjoy the following for its first 3 consecutive Years of Assessment:• • Full tax exemption on the first $100,000 of its normal chargeable income; and A further 50% tax exemption on the next $200,000 of its normal chargeable income. Proposed However, companies limited by guarantee (“CLGs”) which mainly consists of non-profit organizations, charities, societies and clubs do not qualify under this scheme. To support social entrepreneur to set up CLGs in Singapore, the above start up exemption scheme has been extended to them. Comments It makes absolute sense to include such companies thus making Singapore a place where one can work, play and contribute back to society. Effective from : YA 2010 9 Robert Tan & Co SIMPLIFYING OUR TAX FRAMEWORK FOR AMALGAMATION Current Under the existing tax rules, amalgamating companies will have a transferor and a transferee. As the transferor is treated as having ceased its business and disposed of its assets and liabilities, negative tax consequences are often triggered. For instance, plant and machinery will be subject to balancing adjustments (tax gain/loss on disposal) in the transferor’s books and bad and doubtful debtors taken over are neither tax deductible nor taxable in the hands of the amalgamated company since the income of such debts were not reported in its books previously. Proposed A new tax framework for qualifying amalgamations will be introduced to make it easier for companies to restructure and rationalise with minimal tax consequences. Amongst other conditions, the amalgamated company will have to take over all the assets of the transferor companies. More details will be released by IRAS in February 2009. Comments Sections 215A to 215H of the Companies Act in year 2006 have already paved the way for companies to amalgamate easily. The above new tax framework will thus complement the rules in the Companies Act. Applicable year : To be announced by IRAS in February 2009 10 Robert Tan & Co ENHANCEMENT OF FUND MANAGEMENT INCENTIVE Current The current fund management incentives generally grant tax exemption on specified income derived from designated investments by qualifying funds. These qualifying funds are namely, non-resident qualifying funds and Singapore resident qualifying funds who each have their sets of conditions to be fulfilled before they are approved. In addition to the conditions set on the fund vehicle, the investors in the qualifying funds must also pass the test as qualifying investors. Proposed To further position Singapore as a fund management hub, a new enhanced tier will be introduced to the existing fund management incentives. Under this enhanced tier, there will be no restrictions imposed on the residency status of the fund vehicle as well as that of the investors. Requirements for entry include conditions that the funds must have a minimum fund size of S$50 million at the point of application. More details will be released by MAS by April 2009. Applicable period : 1 April 2009 to 31 March 2014 (both dates inclusive). EXTENSION OF THE TAX DEDUCTION FOR GENERAL PROVISIONS MADE BY BANKS AND FINANCIAL INSTITUTIONS Current Currently, banks and financial institutions are allowed to claim general provisions for loan losses based on MAS Notices and subject to caps stipulated under Section 14I of the Income Tax Act. This concession was introduced in the year 2005 and for a period of 5 years. Proposed Encouraging the Singapore banking system to make adequate provision, the concession will be extended with the same terms and conditions for another 3 years. 11 Robert Tan & Co ENHANCEMENT OF THE FINANCIAL SECTOR HEADQUARTER SERVICES (FSI-HQ) SCHEME Current INCENTIVE – Under the FSI-HQ scheme, a concessionary tax rate of 10% will apply to qualifying income derived from providing qualifying services to qualifying foreign network companies. Companies that can apply for the above scheme must:• • Be licensed or approved by MAS or is exempted from such licensing requirements under any Act; and Provide treasury, investment or financial services in Singapore to any of its offices or its associated companies. Separately, under the Qualifying Processing Centre scheme (“QPC scheme”), a 5% concessionary tax rate is granted for income earned on prescribed high value-added processing services. Proposed Enhancements are made to further encourage financial institutions to manage and control their regional / global operations in Singapore by allowing the following to be eligible for the FSI-HQ Scheme:• Companies that are wholly-owned, directly or indirectly by, or wholly own directly or indirectly, a company that is licensed or approved by MAS or by the financial supervisory authority in its home country; and Which provide treasury, investment or financial services in Singapore to any of its offices or associated companies. • Besides foreign network companies, local network companies can also be approved as qualifying network companies, subject to conditions. In addition, withholding tax exemption will be granted on interest payments made by a FSI-HQ company to qualifying persons on qualifying loans to perform qualifying activities. The QPC scheme will be subsumed under the FSI-HQ scheme. In addition, income from providing prescribed normal processing services in Singapore to any financial institution or another QPC will be taxed at a concessionary rate of 10%. Effective date : 22 January 2009 to 31 December 2013 (both dates inclusive) 12 Robert Tan & Co ENHANCEMENT OF THE COMMODITY DERIVATIVES TRADERS (“CDT”) SCHEME Current The current CDT scheme grants a concessionary tax rate of 5% on income derived by an approved company from qualifying trades in commodity derivatives carried out Over-theCounter, services as an intermediary for transactions relating to commodity derivatives as well as forward freight agreements. Proposed The following enhancements are to be made:• The CDT scheme will be subsumed under the Financial Sector Incentive-Derivatives Market (FSI-DM) scheme for the period from 27 February 2009 to 31 December 2013 (both dates inclusive). A new FSI-DM (CDT) award will be created; The definition of commodity derivatives will be expanded to include emission derivatives under the above FSI-DM (CDT) award; and The counter-party restrictions under the FSI-DM (CDT) award will be removed for qualifying trades carried out on exchanges. • • MAS will release details by April 2009. Effective date : 27 February 2009 to 31 December 2013 (both dates inclusive) ENHANCEMENT OF THE GLOBAL TRADER PROGRAMME (“GTP”) SCHEME Current Under the current GTP scheme, an approved company may enjoy concessionary tax rate of either 5% or 10% on qualifying income carried out with specified counterparties. Specified counterparties for commodity futures trading include a person who is neither a resident nor a permanent establishment in Singapore, an ACU of a financial institution, a member of the Singapore Commodity Exchange, etc. Proposed The counterparty restrictions will be removed for qualifying trades carried out on exchanges. Effective date : 27 February 2009 to 31 December 2013 (both dates inclusive) 13 Robert Tan & Co BROADING THE FINANCIAL SECTOR’S LISTS OF SPECIFIED INCOME AND DESIGNATED INVESTMENTS Current A list of specified income and a list of designated investments are available currently under the financial sector tax incentive scheme. Proposed To enable our incentives to keep up with industry development and changes, the lists will be enhanced with the following additions:1. Under the specified income list:• Income realised (other than through sale) on or after 22 January 2009 from designated investments in other forms (held to maturity, redemption, or where the realisation leads to a transfer of both economic and legal ownership); and Income derived from debt securities under the Qualifying Debt Securities (QDS) scheme. Or more specifically, prescribed income directly attributable to QDS issued on prescribed dates as well as amount payable on any Islamic debt securities which are QDS and issued on or after 22 January 2009. • 2. Under the designated investment list:• • • • • • Investments in structured products; Units in business trusts; Qualifying Islamic investments involving the Murabaha, Mudaraba, Ijara wa Igtina, Musharaka, Istisna and Salam concepts; Emission derivatives; Stocks and shares of unlisted companies (whether resident or non-resident in Singapore) denominated in any currency; and Adjudicated and non-adjudicated liquidation claims. MAS will release details by April 2009. Effective date : 22 January 2009 14 Robert Tan & Co EXTENSION AND ENHANCEMENT OF WITHHOLDING TAX (“WHT”) EXEMPTION FOR MARITIME INDUSTRY Current Under the Block Transfer Scheme (“BTS”), interest payable on a loan taken by a shipping enterprise from an overseas lender to purchase a Singapore-flagged ship registered with the Singapore Registry of Ships (“SRS”) on any date from 1 November 2003 to 31 December 2008, can be granted exemption from WHT. Proposed The WHT exemption under the BTS will be extended for another 5 years until 31 December 2013. The WHT exemption, subject to terms and conditions, can be granted on interest payable by a shipping enterprise on loan borrowed from an overseas lender to acquire a ship that is a new entrant to the SRS and registered with the SRS on any date from 1 January 2009 to 31 December 2013 (both dates inclusive). With effect from 1 January 2009, the WHT exemption has been extended to interest payable on a loan taken by a shipping enterprise from an overseas lender to acquire 100% of the shares in a Special Purpose Company (“SPC”) owning 100% of a ship that is a new entrant to the SRS and registered with the SRS on any date from 1 January 2009 to 31 December 2013 (both dates inclusive). Comments The Government’s effort in promoting Singapore as an international maritime centre has yielded results as seen from the significant increase in the number of ships registered with the SRS. The expansion of the WHT exemption to include interest payment on loans taken to acquire the shares in a SPC has offered an alternative to businessmen who may prefer investing through SPCs. Applicable dates : 1 January 2009 to 31 December 2013 15 Robert Tan & Co ACCELERATED WRITING-DOWN ALLOWANCE (“WDA”) FOR ACQUISITION OF INTELLECTUAL PROPERTY RIGHTS (“IPRs”) FOR MEDIA AND DIGITAL ENTERTAINMENT (“MDE”) CONTENT Current A company carrying on a trade or business which has incurred capital expenditure on acquiring any intellectual property rights (“IPRs”) for use in that business will be given writing down allowances (“WDA”) over a 5-year period. Proposed To encourage MDE companies to create and exploit their intellectual property from Singapore, the Government will enhance the current WDA incentive to allow MDE businesses to write down the costs of their qualifying IPR for MDE content over 2 years instead of 5 years. The accelerated WDA will be granted on approval by the EDB for qualifying IP rights. Comments In support of the MDE industry where opportunities are growing and where Singapore is an emerging hub, the above incentive is indeed a great boost. Applicable date : 22 January 2009 till 31 October 2013 (both dates inclusive) 16 Robert Tan & Co PERSONAL INCOME TAX AND ONE-OFF INCOME TAX REBATE YA 2009 To ease the financial burden of households paying income tax, tax resident individuals will be given a personal income tax rebate of 20% (capped at $2,000) for YA 2009 as in YA 2008. The top personal income tax rate stays at 20%. Since the corporate tax rate is at 18% for YA 2009, the top personal income tax rate is still 2% higher. YA 2010 The top personal income tax rate remains unchanged at 20%. However, as the corporate tax rate is reduced to 17% with effect from YA 2010, the percentage difference will widen to 3%. With the broadening of the tax rates and also to take advantage of the tax exemption granted to newly incorporated companies (subject to the fulfillment of certain conditions), sole-proprietors with high income may wish to consider incorporating their businesses as private limited companies. FLEXIBLE GIRO ARRANGEMENTS Tax residents who have lost their jobs in year 2008 or 2009 can approach IRAS to allow them to pay their personal income taxes for YA 2009 in 24 monthly instalments, up from the current 12 months allowed. In addition, all tax residents who are currently on the monthly GIRO instalment scheme, can apply to IRAS from 9 February to 15 March 2009, to defer their income tax instalment payments from May to July 2009 in respect of their income earned in year 2008. Upon approval, their instalment deductions will commence in August 2009 and end in April 2010. 17 Robert Tan & Co REMOVAL OF INCOME TAX ON NET ANNUAL VALUE (“NAV”) Current Property owners are required to pay income tax on the NAV of their dwelling or secondary residences. However, an exemption of up to $150,000 of NAV for one owneroccupied residential property is granted. Proposed With effect from YA 2010, the income tax on NAV will be removed. Comments The removal will effectively benefit large property owners who are paying income tax on their NAV (after expenses and exemption) while not collecting any profit from the occupation of their residential property. The aim of this removal is to simplify our tax regime. Effective date : YA 2010 18 Robert Tan & Co RECOVERY OF GST FOR QUALIFYING FUNDS Current When a fund manager provides services to a fund in Singapore, such services require standard-rating. However, funds that derive only dividend and interest income from financial institutions in Singapore or perform only financial service transactions, such as the trading of shares and bonds with Singapore counterparties or through the SGX, are not eligible for GST registration, since these are treated as exempt supplies. Accordingly, they are not entitled to claim any GST incurred on their expenses such as fund management fees incurred in Singapore. Proposed Qualifying funds that are managed by a prescribed fund manager in Singapore will be allowed to recover a substantial portion of the GST incurred on prescribed expenses. This change will be effective for the period from 22 January 2009 to 31 March 2014 (both dates inclusive). MAS will release the details by April 2009. Comments The proposed change will allow qualifying funds that are currently not eligible for GST registration to recover the GST incurred on prescribed expenses. It will therefore reduce the business costs of establishing funds in Singapore. This creates an incentive for funds to be established in Singapore which in turn, will promote the fund administration and management service industry in Singapore. Applicable dates : 22 January 2009 to 31 March 2014 19 Robert Tan & Co ZERO-RATING FOR THE AEROSPACE INDUSTRY Current Zero-rating of GST is allowed for the following :• • • Sale and lease of qualifying aircraft; Sale of aircraft components exported; and Maintenance, repair and overhaul (“MRO”) works that are performed directly on aircraft; provided that the aircraft is not used for recreational or pleasure purposes. Proposed To support the growth of the aerospace industry in Singapore, the scope of zero-rating has been expanded to include :• Sale and lease of all aircraft which are wholly used or intended to be wholly used for international transportation of goods and passengers. This includes private aircraft, provided that it is wholly used or intended to be wholly used for travel outside Singapore; Sale, maintenance or repair services of aircraft components or systems exported so long as they form part of a qualifying aircraft; and A new scheme will be introduced to facilitate the import of aircraft components or systems for qualifying aircraft without GST. • • These changes will be effective from 1 April 2009. IRAS will release the details by March 2009. Comments MRO businesses are usually under the Major Exporter Scheme (“MES”) which already allows for the suspension of GST payable on the importation of non-dutiable goods into Singapore. We will hence have to wait for further details to see how different this proposed import GST-relief scheme is from the current MES scheme. Effective date : 1 April 2009 20 Robert Tan & Co SUSPENSION OF GST AND DUTY ON GOODS TEMPORARILY REMOVED FROM ZERO-GST OR LICENSED WAREHOUSE FOR AUCTIONS AND EXHIBITIONS Current GST is not levied in respect of goods exported from the approved warehouses to overseas markets or when they are supplied within the approved warehouses. GST is also suspended when the goods are removed from the approved warehouses by a MES trader or approved Third Party Logistics company. However, GST is payable when goods are removed from a zero-GST or Licensed warehouse for auctions, exhibitions, etc. Proposed To encourage the growth of the auction and exhibition industry as well as specialized storage facilities, GST and duty will be suspended on goods (including wine) temporarily removed from a zero-GST or Licensed warehouse for auctions or exhibitions with effect from 1 April 2009. The suspension also applies to goods sold during the auction or exhibition, provided that they are returned to the warehouse subsequently. The details will be released by the Singapore Customs by March 2009. Comments The proposed change will reduce business costs and contribute to the development of Singapore as a leading auction and exhibition centre. Effective date : 1 April 2009 21 Robert Tan & Co EXEMPTION OF GST AND DUTY FOR A SPECIFIED QUANTITY OF WINE FOR APPROVED WINE EXHIBITIONS AND CONFERENCE EVENTS Current GST and duty are payable for wine used at wine exhibitions and conference events. Proposed To promote wine trading activities and develop the wine industry in Singapore, GST relief and duty exemption will be granted on up to three bottles of wine per label per day for each exhibitor and the main conference organizer at approved wine exhibitions and conference events. The proposed change takes effect on 1 April 2009. The details will be released by the Singapore Customs by March 2009. Comments The proposed change will reduce the costs associated with the importation of wine for use at approved wine exhibitions and conference events. Effective date : 1 April 2009 22 Robert Tan & Co JOBS CREDIT SCHEME A Jobs Credit Scheme is introduced in year 2009 to encourage businesses to preserve jobs in the current economic downturn and where their business warrants, to employ additional staff. This is a temporary one-year scheme and the details are as follows :• Employers in the private sectors will receive a 12% cash grant on the first $2,500 of each month’s wages for each employee on their CPF payroll. An illustration of the amount of cash grant given to a company with three employees with monthly wages of $1,000, $2,500 and $5,000 is shown below :Qualifying wage for Oct – Dec 08 Employee 1 $1,000 $3,000 Employee 2 $2,500 $7,500 Employee 3 $5,000 $7,500 Total Jobs Credit to Employer (March 2009 Payment) Employee Monthly wage Jobs Credit (12%) $360 $900 $900 $2,160 • This scheme is only applicable to employees who are Singapore citizens or permanent residents. Foreign employees who are not required to contribute to CPF will not qualify. • The Jobs Credit will be paid to eligible employers in year 2009 in four quarterly payments, that is, March, June, September and December 2009. • The amount of Jobs Credit an employer can receive for each quarterly payment will depend firstly, on the number of employees on the employer’s CPF payroll for the months of January, April, July and October in year 2009 and secondly, the wage cost of these employees derived from the CPF contributions made for them in the preceding quarter (known as the Qualifying Period as mentioned in the table below). 23 Robert Tan & Co An illustration of the qualifying periods for each payment and the corresponding payment dates is shown below :Qualifying period of wages to compute Jobs Credit Oct to Dec 08 Jan to Mar 09 Apr to Jun 09 Jul to Sep 09 Deadline by which employers need to make CPF contributions 14 Feb 09, on employees’ Jan 09 salary 14 May 09, on employees’ Apr 09 salary 14 Aug 09, on employees’ Jul 09 salary 14 Nov 09, on employees’ Oct 09 salary Jobs Credit Payment date 31 Mar 09 30 Jun 09 30 Sep 09 31 Dec 09 • Eligible employers need not apply to join the Jobs Credit Scheme. Jobs Credit will be automatically granted to them and computed based on CPF contribution data provided by the CPF Board to IRAS. IRAS has issued a media release on 22 January 2009 providing details on the Jobs Credit Scheme. Comments The Government has for the first time, made an unprecedented move by dipping into Singapore’s reserves to fund the Jobs Credit Scheme in order to sustain jobs in this severe global economic crisis. Instead of proposing a reduction in the employer’s CPF rate which will affect those employees who are using their CPF contributions to pay their housing loans, the Government has introduced the Jobs Credit Scheme which will help to reduce the financial burden of the employers and at the same time, avoid employees suffering a reduction in real wages. Jobs Credit payment is made to eligible employers quarterly instead of monthly so as to encourage employers to retain the staff for at least a period of three months instead of one month. As the cash grant is capped at 12% on the first $2,500 of the employees’ wages, the scheme may be less effective in minimizing the loss of jobs of high-wage earners. 24 Robert Tan & Co PROPERTY TAX • Owner-occupied residential properties and owners of commercial and industrial properties will be granted a rebate of 40% on the property tax payable for year 2009. Business owners may apply to IRAS for property tax deferral for a maximum period of two years from 22 January 2009 or the date of the Written Permission (“WP”), whichever is later, to 21 January 2011 for land approved for development. Land approved for development is defined as land with a valid WP or Provisional Permission from the Urban Redevelopment Authority and land sites which are owned by companies. • The property tax assessment rate for hotel rooms, which was due to increase from 20% to 25% with effect from 1 January 2009, will be deferred for 1 year. Hence, the rate stays at 20% for year 2009. • TRANSPORT RELATED TAXES AND FEES • A 30% road tax rebate will be granted for goods vehicles (including goods-cumpassenger vehicles), buses and taxis for a period of one year from 1 July 2009 to 30 June 2010 (both dates inclusive). A diesel taxi that is not hired for a continuous period of at least two months from 1 March 2009 to 28 February 2010 will be given a pro-rated waiver on the special (diesel) tax. The Green Vehicle Rebate Scheme which was introduced to encourage the use of hybrid, electric and Compressed Natural Gas (“CNG”) vehicles will be extended for another two years until 31 December 2011. The special tax exemption for CNG vehicles will also be extended for another 2 years until 31 December 2011. Thereafter, the said tax will be permanently removed and replaced with a CNG unit duty of $0.20 per kg. Industrial usage of CNG will be granted duty exemption. At the same time, CNG cars will cease to be included under the Green Vehicle Rebate Scheme. MPA will grant a 20% concession in port dues to all harbour craft (except pleasure craft for personal use) engaged in commercial activities within Singapore’s port waters for a 1 year period from 1 April 2009. • • • • 25 Robert Tan & Co R&D (“RESEARCH & DEVELOPMENT”) GRANTS AND TRAINING SCHEMES TO DEVELOP NEW CAPABILITIES AND SPUR INNOVATION Tax incentives for innovation and R&D which were introduced in the 2008 Budget will be complemented with a range of grants and training schemes to develop new capabilities and spur innovation among enterprises. Encouraging innovation A $200 million Test-Bedding Fund will be set up to make Singapore a “living lab” and support companies and entrepreneurs in nurturing new ideas, test innovative solutions and develop future global business. The fund will be administered by the Economic Development Board. $180 million will be set aside in the Core Innovation Fund (set up in year 2008) over the next two years to assist companies to collaborate directly with government agencies to develop innovative solutions for public services. R&D funding will also be expanded for both universities and research institutes. Capability development To encourage enterprises to develop new capabilities, an enhanced support fund amounting to $130 million will be set aside towards the capability development grant and internationalisation schemes, which are managed by SPRING and IE Enterprise respectively. A Singapore Media Fusion Fund of $230 million will be set up to provide grants to help local enterprises to export content, applications and services to other parts of the world and also, build up a world-class media talent base in Singapore. This will complement Singapore’s plans to develop Mediapolis at One-North and help position Singapore as a leading Asian media hub. Additional funds of $45 million will be contributed towards the Maritime Cluster Fund to build business and manpower capabilities in the maritime sector. - End - 26