The 2009 Budget was presented by Dr Tharman Shanmugaratnam, Minister for Finance in Parliament on 22 January 2009.

 

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·                    Grave economic crisis

 

·                    Simultaneous recession in all major regions

 

·                    Economic activity took a sharp downturn

 

·                    Industrial production and exports fell dramatically

 

·                    Jobs at risk

 

·                    Global trade and cargo volumes had slumped

 

·          Global financial system - fragile

 

 

·                    Great uncertainty over how long recession will last

 

·                    Governments taking unprecedented steps to stimulate their economies

 

·                    Economy grew by 1.2%

 

·                    GDP (4^th quarter) declined by 3.7%

 

·                    Inflation averaged 6.5%

 

·                    Key risks - scale of recession and job loss

 

·                    Manufacturing exports and service industries affected by the world sharp contraction

 

 

·          GDP projected to contract by 2% to 5%

 

 

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(a)        Help Singaporeans to keep their jobs

(b)       Help businesses to meet their costs and enhance competitiveness

(c)        Focus on the future - accelerate investments, world-class education, broaden training opportunities,  build innovative capabilities

 

(a)          $5.1 billion to help preserve jobs

(b)         $5.8 billion Special Risk-Sharing Initiative ( to stimulate bank lending )

(c)          $2.6 billion to enhance business cash-flow and competitiveness

(d)         $2.6 billion to support Singaporean households

(e)          $4.4 billion for developing first class infrastructure and for expanding education and healthcare

 

 

*       12% on the first $2,500 of each month’s wages for each employee on the CPF payroll to be paid on a quarterly basis (i.e $300 a month) starting from March 2009

 

The wages paid to these employees in Oct to Dec 2008 will be the qualifying wages used to calculate the 12% cash credit.

 

*       All active employers (except local and foreign government organizations) are eligible. There is no need to apply. Payments will be received from the Inland Revenue Authority of Singapore.

 

 

*       help Singaporeans to upgrade skills by providing higher course fee for companies and individuals and absence payrolls during training

 

*       SPUR support extended for quality in-house training

 

*       step up training courses - PMET  Programme ( professionals, managers, executives, technicians)

 

*       Workfare Income Supplement (WIS) temporary top-up for low-income workers (an additional 50% of the WIS payments)

 

 

(i)            Singapore banks are well-capitalised – no need to bail out

 

(ii)          To help good and viable companies to get funding from banks to stay afloat

 

(iii)         Government to take on significant share of the risks of bank lending

 

(iv)        2008 - SME loan schemes to increase Government’s share of risk to 80%. Bridging Loan Programme for working capital with Government taking 50% of the risk

 

(v)          New Special Risk-Sharing Initiative (initially for 1 year )

 

*       a new Bridging Loan Programme ( BLP) initially for one year which will cater to loans of up to $ 5 million. Government’s share of risk to be increased from 50% to 80%. Banks will be allowed to set their own interest rates.

 

*       Government to take on significant part of risk in trade financing

 

*       The different schemes available are:

 

-        Loan Insurance Scheme - Plus

-        New Trade Credit Insurance Programme

-        Local Enterprise Finance Scheme

-        Micro Loan Programme

-        Internationalisation Finance Scheme

 

 

(i)      To prepare for opportunities

 

(ii)     To ease business cash-flow

 

*       a 40% property tax rebate for industrial and commercial properties

 

*       bringing forward property tax assessments in line with market conditions

 

*       defer property tax for land approved for development for up to 2 years or TOP, whichever the earlier

 

*       further flexibility to developers – extension of one year of project completion period

 

*       property tax for hotel rooms remains at 20%

 

*       to enhance loss carry-back for income tax purpose to preceding 3 Years of Assessment with cap increased to $200,000

 

*       tax exemption for tax resident Companies and Partners (of partnerships) in Singapore on all their foreign-sourced income

 

*       rebates and concessions on transport-related taxes and fees

-     30% road tax rebate for goods vehicles,buses and taxis for one year

 

-     waiver of special (diesel) tax for unhired taxis for one year

 

-     the Green Vehicle Rebate Scheme extended until 31 December 2011

 

-     to extend the special tax exemption for CNG vehicles for 2 years until 31 Dec 2011

 

-     a 20% concession in port dues to all harbour craft engaged in commercial activities

 

-     further freeze of government fee

 

 

*    to encourage more companies to anchor in Singapore

 

*    2009 – challenging year to attract foreign investments

 

*    corporate income tax reduced  from 18% to 17%

 

*    give accelerated capital allowance (for income tax) to encourage in equipment and business innovation –

 

-     equipment acquired in 2009 and 2010 to be written down within 2 years (75% in first year)

 

*    give accelerated write down for renovation and refurbishment expenses incurred in the basis periods for YAs 2010 and 2011:

 

-     such expenses incurred in 2009 and 2010 to be written down fully within one year ( Expenditure cap $150,000 for every 3 years remains )

 

*    Simplify tax framework for amalgamations

 

-     to make easier for companies to restructure and rationalize

 

-     to enhance tax incentives for fund management

 

-     to enhance the Headquarters Services and the Commodity Derivatives Traders Schemes

 

-         to expand the scope of GST zero-rating for the aerospace industry

 

-         to suspend duty and GST from 1 April 2009 on goods temporarily removed from licensed warehouses for auctions or exhibitions

 

 

*    to complement existing tax incentives for R & D with grants to develop new capabilities and spur innovation

 

*    $130 million to be spent to enhance grants and training schemes

 

*    $45 million to the Maritime Cluster Fund to support new projects

 

*    to expand support for the media and digital entertainment industry. Set up $230 million Singapore Media Fusion fund to build up a world-class media talent base

 

*    $200 million Test-Bedding Fund for companies and entrepreneurs to nurture new ideas

 

 

 

*       “Double” GST credits in 2009

 

*       additional one month S & CC rebates for one to three-room HDB flats

 

*       additional one month rental rebate for eligible households in public rental flats

 

*       income tax rebate of 20% ( capped at $2,000) for tax residents

 

*       individual tax residents who have lost their jobs can pay their personal income tax in 2009 by installments of up to 24 months

 

*       40% property tax rebate for owner-occupied residential properties

 

*       income tax on Net Annual Value of higher value houses and secondary residences removed

 

*       increase in Additional CPF Housing Grant for first-time home buyers (from $30,000 to $40,000)

 

*       enhance funding for the vulnerable - public assistance increased from $330 to $360

 

*       Government pensioners - Singapore Allowance increased to $240

 

*       public transport vouchers – top up for low-income households

 

*       $100 million added to ElderCare Fund and Medifund in 2009

 

*       students from families in need - MOE to enhance financial assistance

 

*       encourage greater charitable giving

 

*       income tax deduction for approved donations made in 2009 increased from 200% to 250%  ( Refer Part III – Tax Changes )

 

*       additional $15 million to support government-funded voluntary

 

*       funding for Self-Help Groups increased

 

*       extend tax exemption for start-ups to Companies Limited by Guarantee (Refer to Part III – Tax Changes)

 

 

*       public sector construction spending increased to $20 billion in 2009

 

*       bringing forward $1.3 billion government projects to 2009

 

 

*       to spend $1.6 billion in 2009 and in each of the next 3 years to support marriage and parenthood

 

*       upgrade both the hardware and software of education system

 

*       expanding healthcare capacity - invest $4 billion over next 5 years in healthcare infrastructure

 

*       $500 million over next 5 years on new community hospitals and boosting capabilities in treating chronic diseases

 

 

For FY 2009, the Government projects an Overall Budget deficit of $8.7 billion (3.5% of GDP) after dipping into the national reserves of $4.9 billion

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(a)                            Corporate income tax reduced from 18% to 17% as from YA 2010

 

(b)                           For YAs 2009 and 2010, “income tax relief for loss carry-back” can be carried back for up to preceding 3 YAs with cap increased to $200,000

 

(c)              Tax exemption for tax resident companies and Partners (of Partnerships) in Singapore on all their foreign-sourced income remitted during 22 Jan 2009 to 21 Jan 2010

 

(d)              Capital Allowance for plant & machinery incurred in the basis periods for YAs 2010 and 2011 to be allowed within 2 years (with 75% in the first year)

 

(e)              Subject to approval, accelerated writing-down allowance for Intellectual Property rights for Media and Digital Entertainment acquired by a company or partnership (during 22 Jan 2009 to 31 Oct 2013) reduced from 5 to 2 years

 

(f)               Tax deduction within one year for expenditure incurred (up to 15 Feb 2013) on “Renovation and Refurbishment” (cap of $150,000 for every 3 years remains)

 

(g)              New tax framework to facilitate corporate amalgamations introduced (to be announced)

 

(h)              Fund Management incentives enhanced - no restrictions on “residency status” of fund vehicles and investors. Also no investment limit for the Enhanced Tier

 

(i)               Headquarter Services Incentive Scheme enhanced from 22 Jan 2009 to 31 Dec 2013. Withholding tax exemption on interest payments on qualifying loans made to qualifying persons. MAS will release details

 

(j)               Commodity Derivatives Traders Incentive Scheme enhanced MAS will release details

 

(k)              Withholding tax exemption extended for 5 years to 31 Dec 2013 for interest payable on loans taken by a shipping enterprise from a lender outside Singapore for acquiring a Singapore-flagged ship, and also on loans taken from a lender outside Singapore to acquire 100% of the shares in a Special Purpose Company owning 100% of a Singapore flagged ship

 

(l)               The start-up exemption scheme (100% on first $100,000 and 50% on the next $200,000 of chargeable income) for the first 3 YAs extended to companies limited by guarantee subject to the same conditions

 

 

(a)              No change in tax rates

 

(b)              20% tax rebate for YA 2009 capped at $2,000

 

(c)              Removal of income tax on Net Annual Value for YA 2010

 

(d)              Tax deduction on approved donations made during 2009 enhanced from 200% to 250%

 

(a)              No change in GST rate

 

(b)              GST zero-rating for the aerospace industry expanded to include all aircraft used for international transportation of goods and passengers also extended to cover the sale, maintenance or repair services of aircraft components or systems of qualifying aircraft

 

(c)              Suspension of GST and duty on goods temporarily removed from licensed warehouse for auctions and exhibitions as from 1 April 2009 provided they are returned to the warehouse subsequently

 

(d)              Exemption of duty and GST for specified quantity of wine for use at approved wine exhibitions and conferences as from 1 April 2009. Singapore Customs will release details

 

 

(a)              40% Property tax rebate for commercial and industrial properties for 2009

 

(b)              Property tax deferral of up to 2 years or TOP, whichever the earlier, for land approved for development as from 22 Jan 2009

 

(c)              40% Property tax rebate for owner-occupied residential properties for 2009

 

(d)              Property tax rate of 20% to remain for 2009 for hotel rooms

 

 

(a)              30% Road tax rebate for goods vehicles, buses and taxis for one year from 1 July 2009

 

(b)              Special (Diesel) Tax waiver for un-hired taxis for one year effective 1 March 2009

 

(c)              Green Vehicle Rebate extended for 2 years to 31 Dec 2011

 

(d)              Tax exemption for CNG vehicles extended for 2 years to 31 Dec 2011

 

 

Note:    These Notes are designed to update our Clients of the tax changes proposed. They are of a general nature and are not intended to be comprehensive. Our Clients are advised that before acting on any specific issue, they should discuss their particular factual situation with our Firm. No liability can be accepted for any action thereon without our prior consultation or not taken on the basis of the information in this bulletin.

 

If you have any specific enquiry, please contact our Mr Yee Fook Hong (Tax Partner) or Ms Cheang Wai Mang (Tax Manager)

 

24 Jan 2009