The new budget plan of Singapore for full-year 2016 features more tax incentives to SMEs, and a cap on the total amount of personal income tax relief that individual taxpayers can claim, announced the country’s Finance Minister Heng Swee Keat on March 24.
To promote economic transformation and help more SMEs seek opportunities both domestically and overseas, Heng announced multiple tax incentives in his first budget plan for FY2016.
Under the plan, the government will raise the existing corporate income tax rebate from 30% of tax payable to 50% of tax payable, with a cap of SGD20,000 (US$14,600) rebate each year for 2016 and 2017, according to a news report by Xinhua.
“The last time we had this 50 percent rebate was in 2001,” said Heng, who added that the increased support is expected to cost an additional SGD180 million over two years.
For firms, especially SMEs that are eager to seek new markets and new growth opportunities overseas, the government will extend the “double tax deduction for internationalization” scheme till March 31, 2020, which covers qualifying expenses incurred for activities such as participation in overseas business development and investment study trips.
“The extension of the double tax deduction scheme for internationalization by another four years will allow more SMEs expanding overseas to benefit from the scheme and gain a foothold on the global stage,” said Chai Wai Fook, a partner in tax services at Ernst & Young Solutions LLP.
For individuals, Heng said there will be a tax change to the current 15 personal income tax reliefs.
The government will introduce a cap of SGD80,000 per year on the total amount of personal income tax relief an individual can claim. At this threshold, 99% of tax-paying individuals will not be affected.
“We have enhanced many of these (tax reliefs) over the years… However, taken together, the tax reliefs may unduly reduce total taxable incomes, for a small proportion of individuals… This cap will make our personal income tax system more progressive. Nevertheless, our personal income tax burden remains low. Our personal income tax structure must allow us to continue to stay competitive,” Heng stressed.
The new personal income tax relief cap will take effect from 2018 and is expected to raise an additional SGD100 million a year.
Meanwhile, Heng said he expects an overall budget surplus of SGD3.45 billion in the first year of the new term of government.
The expenditure is to provide immediate relief to businesses and support longer term economic transformation as well as provide targeted support to those in need.
The finance minister said that total spending is expected to increase by SGD5 billion when compared with that in FY2015.
Heng reiterated that the government will tackle immediate economic pressures as well as prepare for the long term by transforming the economy in Budget 2016.
Photo: Formulax
