Singapore Budget 2021: To Emerge Stronger from Covid-19
Singapore Budget 2021 primarily focuses on continued economic restructuring with support for Singaporeans, workers, and businesses, especially those in the hardest-hit sectors. The recovery in global economic activity is expected to be long-drawn, highly uncertain, and uneven across sectors and geographies.
The Singapore government unveiled a S$11 billion for a COVID-19 Resilience Package to support the continued fight against the pandemic as well as towards the gradual opening of the economy.
The following are main areas of tax changes which were announced by our Deputy Prime Minister and Minister for Finance, Mr Heng Swee Keat, in his Budget Statement for the Financial Year 2021.
Support for Workers and Businesses
Job Support Scheme(JSS)
JSS will be extended for firms in Tier 1 and 2 sectors by up to 6 months, covering wages paid from April 2021 to September 2021. The support levels will be tiered based on recovery of the various sectors as follows:
- Tier 1 sectors (Aviation, Aerospace and Tourism) will receive 30% JSS support for wages paid from April to June 2021 and 10% JSS support for wages paid from July to September 2021.
- Tier 2 sectors (example: Food services, Retail, Marine & Offshore and Arts and Entertainment) will receive 10% JSS support for wages paid from April to June 2021.
For most sectors not covered above, the tranche of JSS announced last year will continue to cover wages up to March 2021.
Wage Credit Scheme(WCS)
Wage Credit Scheme will be extended for a year with a co-funding ratio of 15% and the qualifying gross wage ceiling at $5,000.
Job Growth Incentive(JGI)
The JGI qualifying window will be extended by seven months. JGI supports employers to expand the hiring of local employees between March 2021 and end-September 2021 to receive wage support as follows:
- Subsidies to eligible employers of 25% on first $5,000 of gross monthly wages paid to non-mature local hires (below 40 years old) up to 12 months form the month of hire, if the employers continue to meet the eligibility criteria.
- For mature workers aged 40 and above, persons with disabilities and ex-offenders, up to 18 months based on 50% of the first $6,000 of gross monthly income.
Tax Changes for Businesses
Corporate Income Tax(CIT) Rebate
There is no CIT rebate proposed for the Year of Assessment 2021.
Enhanced Carry-back Relief Scheme
The enhancements to the Carry-back Relief Scheme for YA2020 will be extended to apply to qualifying deductions in YA2021 with the same parameters.
Accelerated write-off of the cost of acquiring Plant and Machinery (P&M)
The option to accelerate the write-off of the cost of acquiring P&M in YA2021 will be extended to cover capital expenditure incurred on the acquisition of P&M in the basis period for YA2022 with the same parameters.
Accelerated deduction of expenses incurred on Renovation and Refurbishment works (R&R)
The option to claim accelerated R&R deduction in one YA will be extended to qualifying expenditure incurred on R&R in YA2022, with the same parameters.
Double Tax Deduction for Internationalisation (DTDi) Scheme
The scope of the existing DTDi scheme will be enhanced to cover to cover the following specified expenses incurred in approved virtual trade fairs:
- Package fees charged by event organisers for virtual exhibition hall and booth access,
- Third party costs for design and production of digital collaterals and promotion materials for virtual fairs; and
- Logistics costs incurred to send materials/samples overseas to potential client at the virtual trade fairs
In addition, the scope of qualifying activities which do not require prior approval from Enterprise Singapore (“ESG”) or Singapore Tourism Board will be enhanced to cover the following additional activities up to the current annual expense cap of S$150,000:
- Product/service certification approved by ESG;
- Overseas advertising and promotional campaign;
- Design of packaging for overseas markets;
- Advertising in approved local trade publication; and
- Participation in virtual trade fairs approved by ESG
Withholding Tax(WHT) exemptions for the financial sector
All section 12(6) payments made by banks in Singapore to their branches/ head offices outside Singapore or another bank outside Singapore will be exempt from tax. Hence, banks in Singapore do not need to withhold tax when making section 12(6) payments to their branches/ head offices outside Singapore or another bank outside Singapore. The exemption will apply to:
- Section 12(6) payments that are made on contracts that take effect from 1 Apr 2021 to 31 Dec 2031 (both dates inclusive); and
- Section 12(6) payments that are made from 1 Apr 2021 to 31 Dec 2031 for contracts that take effect before 1 Apr 2021 (both dates inclusive).
Goods and Services Tax(GST)
GST rate increase will not take effect in 2021. However, the GST rate increase is needed sometime between 2022 and 2025.
Extension of GST Coverage
GST is extended to the following with effect from 1 January 2023:
- Low-value goods imported via air or post, regardless of value, affected via the Overseas Vendor Registration and reverse charge regimes.
- Business-to-consumer imported non-digital services, effected via the Overseas Vendor Registration regime.
Other Tax Changes
250% tax deduction for qualifying donations
- The 250% tax deduction for qualifying donations made to Institutions of a Public Character(IPCs) will be extended to qualifying donations made between 1 January 2022 and 31 December 2023.
- All other conditions of the scheme remain unchanged.
Household Support Package(HSP)
The HSP includes the following:
GST Voucher(GSTV) – Cash Special Payment
- Lower-income Singaporeans who qualify for the GSTV will receive an additional GSTV Cash special Payment of S$200 each in June 2021.
- In total, lower-income Singaporeans can receive up to S$500 in GSTV – Cash and Cash Special Payment, this year.
GSTV – U-Save Special Payment
- All eligible Housing Development Board (“HDB”) households will receive an additional 50% of their regular GSTV – U-Save in April and July 2021 to offset their utilities expenses.
Service and Conservancy Charges Rebate(S&CC)
- Eligible Singaporeans Household living in HDB flats will receive rebates to offset between 1.5 and 3.5 months of S&CC over four quarters, disbursed in April, July and October 2021 and January 2022.
Top-ups to Child Development Account, Edusave Account and Post-Secondary Education Account
- Singaporeans child below 21 in 2021 will receive an additional one-off top-up pf S$200.
- Top-ups to Edusave Account and Post-Secondary Education Account will be credited in May 2021.
- Top-ups to Child Development Account will be credited in September 2021.
Community Development Council (“CDC”) Vouchers scheme
- S$100 worth of CDC Vouchers will be given to each Singaporean household to be used at participating heartland shops and hawker centres
Tax Changes for Vehicles
- Encouraging early adoption of electric vehicles.
- Increase in petrol duty rates.
- Transitional offset measures for vehicles using petrol.
To read more about Singapore Budget 2021, visit www.gov.sg/features/budget2021