Singapore Budget for 2010
Singapore Budget for 2010
On 22 February 2010, Mr. Tharman Shanmugaratnam, Singapore’s Minister for Finance, delivered the Budget Statement for the Financial Year 2010.1 We highlight below those measures affecting individuals that were announced in the budget. (All dollar figures expressed are Singapore dollars.)
For a complete budget analysis, as well as scheduled client roundtables and seminars on the budget, see the Web site for the KPMG International member firm in Singapore, at: http://www.kpmg.com.sg/ .
Reduction in Withholding Tax Rate for Nonresident Public Entertainers
Present Position: Nonresident public entertainers are subject to withholding tax at the rate of 15 percent on income derived from performances in Singapore. Public entertainers include stage, radio or television artistes, athletes, or individuals exercising a profession, vocation, or employment of a similar nature.
Proposed Change: The withholding tax rate would be reduced to 10 percent.
Effective: Payments made from 22 February 2010 to 31 March 2015.
Comments: The proposed change is in line with the government’s goal to develop Singapore as a leading sports and entertainment hub in Asia. The timing of this proposed change should be a welcome boost for business and tourism alike with the opening of Singapore’s Integrated Resorts and the inaugural Youth Olympic Games, both taking place this year.
Extension of Enhanced Tax Deduction on Donations
Present Position: Donations made to an Institution of Public Character and other approved beneficiaries (such as approved museums, prescribed educational and research institutions in Singapore) generally qualify for double tax deduction. For donations made between 1 January 2009 and 31 December 2009 (both dates inclusive), an enhanced 250-percent tax deduction is allowed.
Proposed Change: The enhanced tax deduction of 250 percent would be extended for another year for donations made from 1 January 2010 to 31 December 2010 (both dates inclusive).
Effective: Year of Assessment (YA) 2011 only.
Comments: The proposed extension of the enhanced deduction scheme would serve to promote greater charitable giving in the wake of the country’s economic recovery.
Tax Deduction for “Angel” Investors
Present Position: Currently, the cost of equity investments is not tax deductible as it is capital in nature.
Proposed Change: A new incentive would be introduced to encourage greater angel investment from private individuals with appropriate investment and business expertise to provide financing and to add value to start-ups. Details of the new incentive are as follows:
• The approved angel investor has to commit at least $100,000 of equity investments in a qualifying start-up in a YA.
• The approved angel investor would be eligible for a tax deduction of 50 percent of his/her investment at the end of a two-year holding period.
• The tax deduction is subject to a cap of $500,000 of equity investments in a qualifying start-up per YA.
• The incentive applies to qualifying investments in qualifying start-ups made during the effective period.
• The incentive would be administered by SPRING Singapore.
Effective: 1 March 2010 to 31 March 2015 (both dates inclusive).
Comments: The new incentive would assist start-ups to secure financing at the early stage of their growth and it aims to attract investors to nurture start-ups. An angel investor who qualifies for the incentive would enjoy a maximum tax saving of $50,000 per YA. To qualify, the angel investors would have to seek approval from SPRING Singapore. There would also be qualifying conditions for both the investments and the start-ups. SPRING Singapore would release more details of the incentive by June 2010.
Increase in Parent Relief
Present Position: A resident taxpayer may claim parent/handicapped parent relief if he/she is supporting his/her spouse’s parents, grandparents, or great-grandparents who must:
• be living in Singapore;
• be 55 years old or above or physically/mentally handicapped; and
• not have income of more than $2,000 per dependant in the year.
The relief for each dependant is summarized below:
Parent Relief Handicapped Parent Relief
Dependant is:
not staying with taxpayer $3,500 $6,500
staying with taxpayer $5,000 $8,000
Proposed Change: The increased relief for each dependant is summarized below:
Parent Relief Handicapped Parent Relief
Dependant is:
not staying with taxpayer $4,500 $8,000
staying with taxpayer $7,000 $11,000
All existing qualifying conditions (as mentioned above) for parent relief continue to apply, except for the current income threshold of $2,000 that would be increased to $4,000.
Effective: YA 2010.
Comments: With the declining birth rate, more elderly dependants are supported by fewer children and by increasing the relief, the government is recognizing the contribution of those who look after their parents, grandparents, and great grandparents in their old age.
Expansion of Wife Relief to Spouse Relief
Present Position: Only a husband who is a resident taxpayer is entitled to claim wife relief of $2,000, if he is living with her or supporting her provided her income is not more than $2,000 in the year.
Proposed Change: The wife relief would now be known as spouse relief. It would be available to either husband or wife who supports his/her dependant spouse who has annual income not exceeding $4,000.
Effective: YA 2010.
Comments: With spouse relief, female resident taxpayers would be accorded the same benefit provided to male resident taxpayers.
Enhancement of Reliefs for Dependants
Present Position: The annual income of a dependant must not be more than $2,000 in the preceding year in order for a resident taxpayer to claim one of the following reliefs:
• Wife Relief
• Parent Relief
• Qualifying Child Relief
• Working Mother’s Child Relief
• CPF Cash Top-up Relief for top-up to CPF account of spouse or siblings
• Handicapped Child Relief
• Handicapped Spouse Relief
• Handicapped Parent Relief
• Handicapped Sibling Relief.
Proposed Change: The current annual income threshold of $2,000 would be increased to $4,000. In addition, for handicapped dependant-related reliefs, the annual income threshold condition would be removed.
Effective: YA 2010 (except for CPF Cash Top-up Relief for top-up to the CPF account of one’s spouse or siblings, where the changes to the annual income threshold would be effective from YA 2011).
Comments: The government recognizes the efforts of taxpayers in supporting family members who are genuinely dependent, in particular, the extra resources and attention needed in taking care of the disabled.
Increase in Course Fees Relief
Present Position: Resident individuals who are gainfully employed can claim relief for course fees of up to $3,500 incurred for attending qualified courses in the year preceding the YA. Allowable course fees include registration or enrolment fees, examination fees, tuition fees, and aptitude test fees (for computer courses). Living expenses, textbooks, and travelling expenses are not allowed.
Proposed Change: The relief for course fees would be increased to $5,500.
Effective: YA 2011.
Comments: The increase in course fees relief for individuals who upgrade themselves reaffirms the government’s commitment to and support for life-long learning.
Review of Existing Property Tax Rebate for Owner-Occupied Residential Properties
Present Position: Currently, the property tax rate for owner-occupied residential properties is at a concessionary 4-percent rate instead of the 10-percent rate for all other properties. Furthermore, owner-occupied residential properties with an annual value (AV) lower than $10,000, can enjoy the on-going 1994 property tax rebates ranging from $25 to $150, depending on the AV of the property.
Proposed Change: The 1994 property tax rebates would be replaced with the following progressive tax schedule:
• 1st $6,000 of AV: 0 percent
• Next $59,000 of AV: 4 percent
• AV balance in excess of $65,000: 6 percent.
Non-owner occupied residential properties and other properties would continue to be taxed at the 10-percent rate of their AV.
Effective: January 2011.
Comments: Due to the tax exemption on the first $6,000 of the AV and the progressive tax rates for the balance in excess of $6,000, the proposed property tax system for owner-occupied residential properties would benefit individual home owners of properties with an AV not exceeding $77,000. For owner-occupied residential properties with an AV of more than $77,000, there would be a small increase in property taxes.
Top-Up to CPF Medisave Accounts
The government would provide a one-off top-up to the CPF Medisave Accounts of older Singaporeans aged 50 and above in 2010. Depending on the assessable income (AI) and the AV of the home in 2009, the amount of top-up would be up to $500.
Top-Up to Post-Secondary Education Accounts (“PSEA”)
Present Position: The PSEA scheme was set up in 2007 under which the government would provide a cash top-up to encourage every Singaporean to complete post-secondary education. The amount of top-up in 2009 ranged from $100 to $400 depending on the age of the child and the AV of the child’s home.
Proposed Change: The amount of top-up for children between 13 and 20 years of age in 2010 would be up to $500 instead of $400. The amount of top-up for children between 7 and 12 years of age would remain unchanged.
Source: KPMG
