Singapore Budget 2008 Unveil "benefits for Business" says Singapore Company Setup Specialists
To make Innovation Pervasive in Singapore Economy, the budget 2008 unveils benefits for business.
o Increase the quantum of tax deduction for expenditure incurred on research and development (R&D) done in Singapore from 100% to 150%. This means that for every $100,000 of local R&D expenditure incurred, $150,000 may be claimed as a tax deduction. This higher deduction will be available from Year of Assessment (YA) 2009 to YA 2013.
o Allow a company’s locally-done R&D expenses that are not related to the company’s existing business to qualify for tax deduction. This will take effect from YA 2009 to YA 2013.
(A2) R&D Tax Allowance for All Companies (main benefits for SMEs)
o Introduce a new incentive to grant companies R&D Tax Allowance for YA 2009 to YA 2013, amounting to 50% of the first $300,000 of chargeable income for each YA. This allowance can be utilised against incremental expenditure on ongoing R&D that the company does in Singapore. This allowance has to be used within three YAs from the year in which the allowance is granted.
(A3) R&D Incentive for Start-Up Enterprises (RISE)
o Allow start-ups that have yet to make taxable profits within their first three YAs to convert up to $225,000 of the company’s losses that arise from tax deductions for R&D which the company does in Singapore into cash grants of up to $20,250 from the Government. To qualify for this new incentive, the start-up company needs to incur at least $150,000 of expenditure on ongoing R&D done in Singapore in the basis period for each YA of claim. The company will have to give up the losses that have been converted, viz. not be able to carry them forward to set-off future chargeable income of the company. This incentive, named the R&D Incentive for Start-Up Enterprises (RISE), will be available from YA 2009 to YA 2013.
- The three schemes above (A1-A3) will provide a significant incentive for all companies, small and big, to do R&D. Start-ups which do not yet have taxable profits will benefit from reduced costs when they do R&D. A small company that is around the 80th percentile of taxpaying companies, and which spends an additional $150,000 on R&D, would find its effective tax rate being reduced from around 9% currently to almost zero. For a medium-sized company, around the 90th percentile, its effective tax rate will come down from about 15% to 10%.
(B) Enhancing Business Competitiveness
For All Companies
(B1) Tax Incentive for Fixtures and Fittings (main benefits for SMEs)
o Grant an allowance to all companies for expenditure incurred on fixtures, fittings and installations, except those relating to structure or expansion of building space, up to a maximum expenditure of $150,000 every three years per business entity. This new five-year incentive will take effect on qualifying cost of fixtures, fittings and installations incurred after 15 February 2008.
(B2) Foreign Tax Credit for Foreign-Sourced Income
o Extend the unilateral tax credit claim for foreign income taxes incurred to all types of foreign-sourced income earned in countries with which Singapore has yet to conclude an Avoidance of Double Taxation Agreement (DTA). This is to encourage businesses to expand regionally and globally. This takes effect from YA 2009.
(B3) Overseas Talent Recruitment Scheme
o Extend the Further Tax Deduction for Overseas Talent Recruitment Scheme, which grants double tax deduction for recruitment and relocation costs of hiring top global talent, for another five years to 30 September 2013.
(B4) Equity Remuneration Incentive Scheme (ERIS)
o ERIS (All Corporations)
o ERIS (Small and Medium Enterprises)
o ERIS (Start-Ups). Introduce ERIS (Start-Ups), which allows employees of qualifying start-up companies to be exempted from personal income tax on 75% of the gains derived from equity-based remuneration granted by qualifying start-up companies. The equity-based remuneration must be granted within the first three calendar years of the company’s incorporation. Employees can claim tax exemption on 75% of up to $10 million of qualifying gains arising over a period of 10 years.
To qualify for ERIS (Start-Ups), the company needs to a) be incorporated and conducting a trade in Singapore; b) have gross assets with a market value of $100 million or less at the time of being granted the equity-based remuneration;
o ERIS will take effect from YA 2009 on stock options or share awards granted after 15 February 2008 by qualifying companies. Gains that employees of a qualifying company derive from qualifying stock options or share awards are to be incentivised only under one tier or ERIS, and the company has to meet the qualifying conditions applicable for the tier.
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