Singapore corporate tax exemptions caa 18 Feb 2018

Partial tax exemption for companies (from YA 2020)

Chargeable income% exempted from TaxAmount exempted from Tax
First $10,000@75%=$7,500
Next $190,000@50%=$95,000
Total $200,000 =$102,500

Tax exemption scheme for new start-up companies (where any of the first 3 YAs falls in or after YA 2020)

Chargeable income% exempted from TaxAmount exempted from Tax
First $100,000@75%=$75,000
Next $100,000@50%=$50,000
Total $200,000 =$125,000

Partial tax exemption for companies (YA 2010 to YA 2019)

Chargeable income% exempted from TaxAmount exempted from Tax
First $10,000@75%=$7,500
Next $290,000@50%=$145,000
Total $300,000 =$152,500

Tax exemption scheme for new start-up companies (where any of the first 3 YAs falls in YA 2010 to YA 2019)

Chargeable income% exempted from TaxAmount exempted from Tax
First $100,000@100%=$100,000
Next $200,000@50%=$100,000
Total $300,000 =$200,000

YA 2019
Companies will be granted a 20% Corporate Income Tax Rebate capped at $10,000.

YA 2018
Companies will be granted a 40% Corporate Income Tax Rebate capped at $15,000

Singapore Budget 2018 affecting companies tax

Corporate Income Tax

Current treatment

For YA2018, CIT rebate is 20% of tax payable, capped at $10,000

New treatment

For YA2018, the CIT rebate will be enhanced to 40% of tax payable, with enhanced cap at $15,000. 

For YA2019, CIT rebate at a rate of 20% of tax payable, capped at $10,000.

Tax Deduction For Qualifying Expenditure On Qualifying Research And Development (“R&D”) Projects Performed In Singapore​

Current treatment

Businesses that have incurred qualifying expenditure on qualifying R&D projects performed in Singapore can claim the following: 

a) 150% tax deduction for staff costs and consumables incurred, and 

b) 100% tax deduction for other qualifying expenditure. 

New treatment

Businesses that have incurred qualifying expenditure on qualifying R&D projects performed in Singapore can claim the following: 

a) 250% tax deduction for staff costs and consumables incurred, and 

b) 100% tax deduction for other qualifying expenditure. 

Period: YA2019 to YA2025.

Tax Deduction For Intellectual Property (IP) Registration Cost

Current treatment

Businesses that have incurred qualifying expenditure on qualifying R&D projects performed in Singapore can claim the following: 

a) 150% tax deduction for staff costs and consumables incurred, and 

b) 100% tax deduction for other qualifying expenditure. 

New treatment

Businesses that have incurred qualifying expenditure on qualifying R&D projects performed in Singapore can claim the following: 

a) 250% tax deduction for staff costs and consumables incurred, and 

b) 100% tax deduction for other qualifying expenditure. 

Period: YA2019 to YA2025.

Tax deduction for costs on IP in-licensing​

Current treatment

100% tax deduction on such costs. 

Period: Until YA2020. 

New treatment

Increase in tax deduction from 100% to 200% for the first $100,000 of qualifying IP registration costs incurred for each YA. This change will take effect from YA2019 to YA2025.

Period: From YA2019 to YA2025

Double Tax Deduction for Internationalisation (“DTDi”) scheme ​

Current treatment

200% tax deduction , on qualifying market expansion and investment development expenses, subject to approval from IE Singapore or STB. 

No prior approval is needed from IE Singapore or STB for tax deduction on the first $100,000 of qualifying expenses incurred on the following activities for each YA: 

a) Overseas business development trips/missions;

b) Overseas investment study trips/missions; 

c) Participation in overseas trade fairs; and 

d) Participation in approved local trade fairs.

New treatment

200% tax deduction , on qualifying market expansion and investment development expenses, subject to approval from IE Singapore or STB. 

No prior approval is needed from IE Singapore or STB for tax deduction on the first $150,000 of qualifying expenses incurred on the following activities for each YA: 

a) Overseas business development trips/missions;

b) Overseas investment study trips/missions; 

c) Participation in overseas trade fairs; and 

d) Participation in approved local trade fairs. 

This change will apply to qualifying expenses incurred on or after YA2019. 

IE and STB will release further details of the change by April 2018.

Start-Up Tax Exemption ("SUTE") scheme​

Current treatment

A new company can, subject to conditions, qualify for, in each of the first three YAs: 

a) 100% exemption on the first $100,000 of normal chargeable income; and 

b) 50% exemption on the next $200,000 of normal chargeable income.

New treatment

A new company can, subject to conditions, qualify for, in each of the first three YAs: 

a) 75% exemption on the first $100,000 of normal chargeable income; and 

b) 50% exemption on the next $100,000 of normal chargeable income.

This change will take effect on or after YA2020 for all qualifying companies under the scheme. 

For example, if a qualifying company’s first YA is 2019, the current SUTE parameters will apply in YA2019 while the new parameters will apply in YAs 2020 and 2021.

Partial Tax Exemption (“PTE”) scheme​

Current treatment

All companies (excluding those that qualify for the SUTE scheme) and bodies of persons, can qualify for, in each YA: 

a) 75% exemption on the first $10,000 of normal chargeable income; and

b) 50% exemption on the next $290,000 of normal chargeable income.

New treatment

All companies (excluding those that qualify for the SUTE scheme) and bodies of persons, can qualify for, in each YA: 

a) 75% exemption on the first $10,000 of normal chargeable income; and

b) 50% exemption on the next $190,000 of normal chargeable income.

All other conditions of the scheme remain unchanged. 

This change will take effect on or after YA2020 for all companies (excluding those that qualify for the SUTE scheme) and bodies of persons. 

Tax Deduction for Qualifying Donations​

Current treatment

250% tax deduction for qualifying donations made to Institutions of a Public Character (“IPCs”) and other qualifying recipients 

Period: 1 January 2016 to 31 December 2018. 

New treatment

250% tax deduction for qualifying donations made to Institutions of a Public Character (“IPCs”) and other qualifying recipients 

Period: 1 January 2016 to 31 December 2021. 

Business and IPC Partnership Scheme (“BIPS”)​

Current treatment

A qualifying person can, subject to conditions, enjoy a total of 250% tax deduction on qualifying expenditure such as wages incurred by him in respect of 

a) The provision of services by his qualifying employee to an IPC during that period; or 

b) The secondment of his qualifying employee to an IPC during that period.

Period: 1 July 2016 to 31 December 2018 

New treatment

A qualifying person can, subject to conditions, enjoy a total of 250% tax deduction on qualifying expenditure such as wages incurred by him in respect of 

a) The provision of services by his qualifying employee to an IPC during that period; or 

b) The secondment of his qualifying employee to an IPC during that period.

Period: 1 July 2016 to 31 December 2021

GST on imported services​

Current treatment

GST is not applicable on imported services provided by an overseas supplier which does not have an establishment in Singapore.

New treatment

B2B imported services will be taxed via a reverse charge mechanism.

Only businesses that:

(i) make exempt supplies, or

(ii) do not make any taxable supplies need to apply reverse charge.

The reverse charge mechanism requires the local business customer to account for GST to IRAS on the services it imports. The local business customer can in turn claim the GST accounted for as its input tax, subject to the GST input tax recovery rules.

The taxation of B2C imported services will take effect through an Overseas Vendor Registration (OVR) mode.

This requires overseas suppliers and electronic marketplace operators which make significant supplies of digital services to local consumers to register with IRAS for GST.

FRS 115 – Specific Area: Warranties

Warranties

FRS 115 provides more guidance on accounting for warranties.

It defines warranties by:

  • Service-type warranties: Warranties that provide the customer with a service
  • Assurance-type warranties: Warranties that provide a customer with assurance that the related product will function as the parties intended because it complies with agreed-upon specifications

Continue reading “FRS 115 – Specific Area: Warranties”

FRS 115 – Specific Area: Franchise

Under a franchise, an entity promises to grant a license to use its intellectual property to a customer.

In addition to a promise to grant a licence to a customer, an entity may also promise to transfer other goods or services to the customer

If the promise to grant a licence is not distinct from other promised goods or services in the contract in accordance, an entity shall account for the promise to grant a licence and those other promised goods or services together as a single performance obligation.

If the promise to grant the licence is distinct from the other promised goods or services in the contract and, therefore, the promise to grant the licence is a separate performance obligation, an entity shall determine whether the licence transfers to a customer either at a point in time or over time. Continue reading “FRS 115 – Specific Area: Franchise”

FRS 115 – Specific area: Consignment Arrangements

Previously under FRS 18 illustrative example, when the buyer is acting, in substance, as an agent, the sale is treated as a consignment sale.

Under FRS 115, this determination is based on whether control of the inventory has passed to the consignee upon delivery.

Indicators that an arrangement is a consignment arrangement include, but are not limited to, the following:

(a) the product is controlled by the entity until a specified event occurs, such as the sale of the product to a customer of the dealer or until a specified period expires;

(b) the entity is able to require the return of the product or transfer the product to a third party (such as another dealer); and

(c) the dealer does not have an unconditional obligation to pay for the product (although it might be required to pay a deposit). Continue reading “FRS 115 – Specific area: Consignment Arrangements”

FRS 115 – Specific Area: Price Concessions

A company may give discount to a customer whether explicitly stated in the contract or implicitly where the customer a valid expectation arising from past business practices.

Depending on the jurisdiction, industry or customer this offer may be referred to as a discount, rebate, refund or credit.

FRS 115 deems this to be an variable consideration and the company shall estimate an amount of variable consideration by using either of the following methods, depending on which method the entity expects to better predict the amount of consideration to which it will be entitled:

(a) The expected value—the expected value is the sum of probability-weighted amounts in a range of possible consideration amounts. An expected value may be an appropriate estimate of the amount of variable consideration if an entity has a large number of contracts with similar characteristics.

(b) The most likely amount—the most likely amount is the single most likely amount in a range of possible consideration amounts (ie the single most likely outcome of the contract). The most likely amount may be an appropriate estimate of the amount of variable consideration if the contract has only two possible outcomes (for example, an entity either achieves a performance bonus or does not. Continue reading “FRS 115 – Specific Area: Price Concessions”

FRS 115 – Specific Area: Sales With Rights To Returns And Refund liabilities

An entity shall recognise a refund liability if the entity receives consideration from a customer and expects to refund some or all of that consideration to the customer. A refund liability is measured at the amount of consideration received (or receivable) for which the entity does not expect to be entitled (ie amounts not included in the transaction price). The refund liability (and corresponding change in the transaction price and, therefore, the contract liability) shall be updated at the end of each reporting period for changes in circumstances. Continue reading “FRS 115 – Specific Area: Sales With Rights To Returns And Refund liabilities”

FRS 115 – Specific Area: Customer Loyalty Program

FRS 115 supersedes INT FRS 113 Customer loyalty programs.

Similar to INT FRS 113, an entity should determine that whether the loyalty program is a performance obligation.

If the program is a performance obligation, the entity should allocate the transaction price to the program based on a relative stand-alone selling price basis. If the stand-alone selling price for a customer’s option to acquire additional goods or services is not directly observable, an entity shall estimate it. Continue reading “FRS 115 – Specific Area: Customer Loyalty Program”

FRS 115 – Specific Area: Differences between “Output method” per FRS 115 vs “surveys of work performed”/ “Surveyor method” per FRS 11

Under FRS 11 Construction Contracts , both contract revenue and contract costs that are accounted for using the POC method are recognised with reference to the stage of completion.

Under FRS 115 Revenue from Contracts with Customers, revenue is recognised using a measure depicting performance using an input or an output measure. A contractor applying the input measure excludes the effect of inputs that do not depict its performance in transferring control of goods or services to customer (e.g. unexpected amounts of wasted materials, labour and any uninstalled materials).

Costs on the other hand, are expensed as incurred unless they qualify to be capitalised as an asset under another standard (e.g. inventory, property, plant and equipment) or they relate to incremental cost to obtain the contract or future performance. Continue reading “FRS 115 – Specific Area: Differences between “Output method” per FRS 115 vs “surveys of work performed”/ “Surveyor method” per FRS 11”

FRS 115 Revenue from Contracts with Customers

FRS 115 Revenue from Contracts with Customers was issued on 19 Nov 2014 but the effective date was delayed until 1 Jan 2018. It supersede FRS 11 Construction Contracts and FRS 18 Revenue.

FRS 115: Five-Step Model

FRS 115 applies a five-step model to determine whether a contract falls within its scope, and also the timing and quantum of revenue recognition.

  1. Identifies whether there is a contract with a customer.
  2. Identifies the separate performance obligations.
  3. Determines the transaction price.
  4. Allocates the transaction price to the separate performance obligations.
  5. Recognise revenue when (or as) the entity satisfies a performance obligation.

Continue reading “FRS 115 Revenue from Contracts with Customers”