The worldwide tax scene is intricate and multi-faceted. Because of the economic effect of COVID-19 that was further exacerbated by quarantines, self-isolation, and lockdowns, governments around the world have had to come up with smart ways to support businesses.
This help has come in the form of unprecedented fiscal support and stimulus packages that have helped keep businesses and jobs afloat.
In addition to the curation of new laws to boost businesses, multiple national tax agencies loosened tax compliance obligations – despite it being temporary – to alleviate the impact of the novel pandemic on businesses.
Singapore’s taxation framework was no exception to such action.
Business tax landscape in Singapore
The residence of a company is dependent on where the control and the management of its business is exercised, and where the organization’s Board meetings are held, for the preceding Year of Assessment (YA).
Principally, the standard business tax rate in Singapore has been 17% since 2010. It is essentially determined based on the organization’s chargeable pay, for example, taxable incomes less allowable costs and expenses.
Relaxed business tax measures in Singapore post COVID-19
In light of the COVID-19 global pandemic, the Singaporean government chose to institute loosened compliance prerequisites and deductions for companies, and a series of support measures to assist businesses and individuals in easing their cash flow.
The idea was to guarantee that Singapore maintains a tax framework that urges organizations to be competitive. Here is an informational overview of some of the changes that affect corporate tax in Singapore post-COVID-19.
Loss carryback relief scheme
The loss carryback relief scheme was upgraded for organizations for YA2020. Under the extended scheme, unabsorbed capital allowances (CA) and trade losses (collectively called qualifying deductions) can be brought back up to 3 immediate preceding YAs. This relief is capped at SGD100,000, subject to conditions.
The Mergers and Acquisitions scheme
This scheme is intended to help organizations (especially small and medium enterprises) grow via strategic acquisitions.
For qualifying share acquisitions made from 1 April 2016, the cap on value of acquisition has been increased from $20 million to $40 million. With the M&A allowance at 25% of the value of acquisition, the maximum allowance is capped at $10 million for all qualifying share acquisitions in the basis period for each YA.
Land Intensification Allowance Scheme
LIA on approved applications is computed as follows:
Initial allowance (IA)
IA comprising 25% of qualifying capital expenditure will be granted in the Year of Assessment (YA) relating to the basis period in which the capital expenditure is incurred.
Annual allowance (AA)
AA comprising 5% of qualifying capital expenditure will be granted upon the completion of the construction or renovation/ extension works, as long as all the qualifying conditions are met. If the “minimum floor area” requirement is not met at the end of any basis period, AA will not be granted for that YA.
Double Tax Deduction for Internationalization Scheme.
The double tax deduction for internationalization scheme was extended to 31 December 2025 in light of COVID-19. This scheme allows a tax deduction of 200% on qualifying market expansion and investment development expenses. This deduction is subject to regulation from Enterprise Singapore or Singapore Tourism Board (STB).
Maritime Sector Tax Incentives
Generally, the maritime sector revolves around sea and shipping businesses. Essentially, the maritime sector incentive scheme is targeted to ship operators, naval transporters, and suppliers of shipping-related support services.
Venture Capital Fund Incentives
This incentive scheme was extended post-COVID-19. Targeting venture capital funds and capital fund management companies, the venture capital scheme institutes a concessionary tax rate of up to 5% on income derived from the management of an approved venture capital fund.
Share Disposals Exemptions
This exemption was extended and revolves around gains derived from ordinary share disposals. In practice, it means that profits from the disposal of ordinary shares by an organization are not taxable where the divesting company is.
However, the caveat is that the organization has to be, at minimum, a 20% shareholder in the entity whose shares are to be disposed of, and has to have satisfied the 20%-shareholding prerequisite for a time of at least 24 months before the disposal.
Property Tax Rebates
Similarly, qualifying business properties such as hotels, shops, serviced apartments, tourist attractions, shops, and restaurants qualified for a 100% property tax rebate post-COVID-19.
Furthermore, integrated resorts and other non-residential properties like industrial properties, offices received property tax rebates of 60% and 30%, respectively.
Other Supportive Business Tax Measures
Post COVID-19, the Singaporean government implemented other supporting measures to facilitate businesses, such as corporate income tax rebates, enhanced SME Working Capital Loans, upgraded rental waivers, and extension of the Temporary Bridging Loan Programme.
All things considered, COVID-19 cast a gloomy shadow on societies and economies globally, affecting multiple businesses. Consequently, these small changes to the Singapore business tax framework will help incentivize small and medium enterprises (SMEs) as they navigate this unprecedented season.
This should come as no shock as the SME sector is responsible for approximately 70% of the country’s employment, and as such, is justifiably the Singaporean economy’s lifeblood.