New Tax Cuts - Details

Singapore Tax Benefits for all Companies

• Reduce the corporate tax rate by two percentage points to 18% from Year of Assessment (YA) 2008. 
• Increase the corporate tax exemption threshold from $100,000 to $300,000 from YA2008, with the following exemption rates:

  -	75% exemption for the first $10,000 of chargeable income; and
  -	50% exemption for the next $290,000 of chargeable income.

• With the above changes, the Singapore corporate tax structure will be as follows:

  Amount of chargeable income Effective Singapore tax rate First $10,000 4.5% Next $290,000 9.0% In excess of $300,000 18.0%

• Allow tax deduction for other specified borrowing costs that are paid as a substitute for interest expense, from 2008.
• Extend the concession permitting writing down allowances for acquired intellectual property from 31 October 2008 to 31 October 2013.
• Increase the qualifying period for the investment allowance incentive from five to eight years, for assets acquired on hire-purchase basis. This will be effective for assets purchased on hire-purchase terms from 15 February 2007.

Singapore Tax Benefits for Start-ups and SMEs

• Remove the YA2009 expiry date for the Singapore corporate tax exemption scheme for start-ups, which exempts the first $100,000 of chargeable income.
• Grant Singapore small-to-mid-size companies cash rebates on the first $80,000 of total employer and employee CPF contributions over two years:

  -	In the first year (1 July 2007 – 30 June 2008), the rebate is 2% of the first $40,000 of total CPF contribution and 1% of the next $40,000 of total CPF contribution.
  -	In the second year (1 July 2008 – 30 June 2009), the rebate is 1% of the first $40,000 of total CPF contribution and 0.5 % of the next $40,000 of total CPF contribution.

• Provide a grant for small to mid-size companies voluntarily registering for GST (limit at $5,000 per SME) to support up to 50% of GST registration-related costs, such as hardware, software, Internet connection and IT implementation consultancy and training.
• To qualify for the tax exemption for a relevant year under the new scheme, a company must –
  a) be a company incorporated in Singapore
  b) be a tax resident in Singapore for that year
  c) have no more than 20 shareholders throughout the basis period relating to that year; and
  d) have all shareholders who are individuals throughout the basis period relating to that year.
  
  Any Singapore company that does not meet the qualifying conditions is still eligible for partial tax exemption.

Singapore has implemented a one-tier corporate tax system. Under this system, the income tax payable on the normal chargeable income of a company is a final tax and shareholders will not be taxed on such dividend income. There is no capital gains tax imposed in Singapore. Singapore does not levy a withholding tax on dividends.