The Budget for 2016 was presented to Parliament by the Finance Minister on 24 March 2016. A summary of the Budget with regard to corporate taxation is set out below:
Tax incentives:
-Under the Productivity and Innovation (PIC) Scheme the cash pay-out rate will be lowered from 60% to 40% for qualifying expenditure incurred from 1 August 2016.
– Qualifying projects may be eligible for an investment allowance (IA) of 100% on the amount of approved capital expenditure net grants under the Automation Support Package.
The Mergers and Acquisitions (M&A) Scheme will be enhanced as follows and will apply to qualifying M&A deals made from 1 April 2016 to 31 March 2020:
- A tax allowance of 25% will be granted for up to SGD 40 million of consideration paid for qualifying M&A deals per year of assessment; and
- Stamp duty relief will be granted for up to SGD 40 million of consideration paid for qualifying M&A deals per financial year.
-Non-taxation of companies’ gains on disposal of equity investments under section 13-z of the Income Tax Act (ITA) will be extended until 31 May 2022.
–The double tax deduction for the Internationalization Scheme will be extended for another 4 years from 1 April 2016 to 31 March 2020.
–Companies or partnerships may elect for their writing-down allowance to be claimed over a writing-down period of 5, 10 or 15 years under section 19B of the ITA.
–A pilot Business and IPC Partnership Scheme will be introduced from 1 July 2016 to 31 December 2018.
–The tax incentive scheme for trustee companies will be subsumed under the Financial Sector Incentive Scheme from 1 April 2016.
Tax rebate:
From the 2016 and 2017 years of assessment (YA) the corporate income tax rebate will be raised from 30% to 50%, with an annual cap of SGD 20,000.
Anti-avoidance:
From 25 March 2016 an anti-avoidance mechanism will be introduced for intellectual property rights (IPR) transfers. This will be included under section 19B of the ITA to empower the comptroller to make the following adjustments:
-if the acquisition price of the IPR is higher than the open market value of the IPR the comptroller may substitute the acquisition price for the open market value of the IPR and restrict the writing-down allowance based on the open market value of the IPR. If the disposal price of the IPR is lower than the open market value of the IPR the comptroller may substitute the disposal price for the open market value of the IPR for the purpose of computing a balancing charge.
E-filing:
Mandatory electronic filing (e-filing) will be introduced for the following companies:
- From YA 2018: companies with turnover of more than SGD 10 million in YA 2017;
- From YA 2019: companies with turnover of more than SGD 1 million in YA 2018; and
- From YA 2020: all companies.
