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THE FINANCIAL YEAR 2017 BUDGET

The Minister for Finance, Mr. Heng Swee Keat, announced the 2017 Budget in Parliament on 20 February 2017. Highlights of the tax and other changes are as follows:

1Individual Tax Changes

1.1A Personal Income Tax Rebate of 20% of tax payable will be granted to all individual tax residents for YA 2017 (i.e. for income earned in 2016). The rebate will be capped at $500 per taxpayer.

1.2The GST Tourist Refund Scheme ("TRS") for tourists departing by international cruise will be withdrawn for purchases made on or after 1 Jul 2017. Tourists who are departing by international cruise from the cruise terminals will have until 31 Aug 2017 to claim refunds on purchases made before 1 Jul 2017.

2Corporate / Business Tax Changes

2.1The CIT Rebate cap will be raised from $20,000 to $25,000 for YA (with the rebate rate unchanged at 50% of corporate tax payable) and extended to the YA 2018, at a reduced rate of 20% of tax payable and capped at $10,000.

2.2To encourage the use of IPs arising from taxpayer's R&D activities, income will be incentivised under a new IP Regime named the IP Development Incentive (IDI). The IDI incorporates the BEPS-compliant modified nexus approach.

Such income will be removed from the scope of Services/Headquarters Incentive and the Development and Expansion Incentive-Services/Headquarters for new incentive awards approved on or after 1 Jul 2017. Existing incentive recipients will continue to have such income covered under their existing incentives awards till 30 Jun 2021.

2.3The Tax Deduction for Computer Donation Scheme will be after 20 Feb 2017.

2.4The Accelerated Depreciation Allowance for Energy Efficient Equipment and Technology ("ADA-EEET") scheme will be withdrawn after 31 Dec 2017. No ADA-EEET will be granted for equipment installed on or after 1 Jan 2018.

2.5The Approved Building Project ("ABP") scheme will be allowed to lapse after 31 Mar 2017.

2.6To ease compliance, taxpayers may opt to claim tax deduction under Section 14D for 75% of the payments made under a Cost Sharing Agreements ("CSAs") incurred for qualifying R&D projects. The change will apply to CSA payments made on or after 21 Feb 2017.

2.7In line with the Government's thrust to grow the digital continue to be a key hub for data flow, the WHT exemption on payments for international telecommunications submarine cable capacity under an IRU agreement will be extended till 31

2.8The qualifying period for exemption from Withholding Tax on made to non-resident non-individuals for structured products offered by Financial Institutions will be extended till 31 Mar 2021.

2.9To help ease the compliance burden of approved Finance and Centre ("FTC"), the qualifying counterparties for certain transactions of approved FTCs will be streamlined. The change will apply to new or renewal incentive awards approved on or after 21 Feb 2017.

2.10The remission of stamp duty payable on the instrument of transfer to qualifying infrastructure projects/assets to qualifying entities listed, or to be listed, on the SGX, will be allowed to lapse after 31 Mar 2017. Apart from the remission of stamp duty above, the existing package of tax incentive schemes for Project and Infrastructure Finance will be extended till 31 Dec 2022.

2.11To facilitate and encourage more trading activities in Singapore and to simplify the Global Trader Programme ("GTP"), the GTP will be enhanced as follows:

a.The requirement for qualifying transactions to be carried qualifying counterparties will be removed. Consequently, concessionary tax rate will be granted to approved global trading companies on income derived from qualifying transactions with any counterparty;

b.Concessionary tax rate will be granted to approved global trading companies on physical trading income derived from transactions in which the commodity is purchased for the purposes of consumption in Singapore or for the supply of fuel to aircraft or vessels within Singapore;

c.Concessionary tax rate will be granted to approved global trading companies on physical trading income attributable to storage in Singapore or any activity carried out in Singapore which adds value to commodity by any physical alteration, addition or improvement (including refining, blending, processing or bulk-breaking);

d.The substantive requirement to qualify for the GTP will be

The enhancements in (a) to (c) will apply to qualifying or after 21 Feb 2017 by approved global trading companies from qualifying transactions. The enhancement in (d) will apply to new or renewal incentive awards approved on or after 21 Feb

2.12The Aircraft Leasing Scheme ("ALS") will be extended till 31 Dec The scope of qualifying ancillary activities for approved aircraft lessors will be updated to cover incidental income derived from the provision of finance in the acquisition of aircraft or aircraft engines by any lessee will apply to income derived on or after 21 Feb 2017 for all incentive recipients and the concessionary tax rate on income derived from leasing of aircraft or aircraft engines and qualifying ancillary activities will be streamlined from 5% and 10% to a single rate of 8% will apply to new or renewal incentive awards approved on or after 1 Apr 2017.

The automatic withholding tax exemption regime will be extended to qualifying payments made on qualifying loans entered into on or before 31 Dec 2022.

2.13The Integrated Investment Allowance ("IIA") scheme will be extended till 31 Dec 2022. In addition, one of the requirements is liberalised in that the qualifying productive equipment may be used by the overseas company primarily (instead of solely) to manufacture products for the qualifying company under an approved project.

The above liberalisation in the qualifying requirement will apply to expenditure incurred on a qualifying productive equipment for a project approved on or after 21 Feb

2.14The International Arbitration Tax Incentive ("IArb") will be allowed to lapse after 30 Jun 2017.

2.15The accelerated Writing-Down Allowances ("WDA") for acquisition of Intellectual Property Rights ("IPRs") for Media and Digital Entertainment ("MDE") content scheme will be allowed to lapse, in respect of IPRs acquired for MDE content after the last day of the basis period for YA 2018.

MDE companies or partnerships may elect to claim WDA over a writing-down period of 5, 10 or 15 years on the capital expenditure incurred to acquire the qualifying IPRs under Section 19B or the ITA.

3Other Changes

With effect on or after 20 February 2017, the diesel duty on automotive diesel, industrial diesel and diesel component of biodiesel is $0.10/litre. The annual Special Tax will be permanently reduced for diesel cars and taxis by $100 and $850 respectively.

With effect on or after 20 February 2017, diesel will be removed from the IEFS. Industrial diesel will be subject to volumetric diesel duty of $0.10/litre.

To ease the transition to the re-introduction of diesel duty, three years of road tax rebates will be provided for commercial diesel vehicles:

1 August 2017 – 31 July 2018: 100% Road Tax Rebate

1 August 2017 – 31 July 2019: 75% Road Tax Rebate

1 August 2017 – 31 July July 2020: 25% Road Tax Rebate

The Special Employment Credit (SEC) will continue to provide employers with support for the wages of older workers till 2019. Wage offsets will be provided to employers hiring Singaporean workers aged 55 and above, and earning up to $4,000 a month. With effect from 1 July 2017, the re-employment age will be raised from 65 years to 67 years.

Tiered ARF for motorcycles will be introduced to improve the progressivity of the vehicle tax system.

The SME Working Capital Loan will continue to provide loans of up to $300,000 for local registered SMEs, having 30% shareholding, if the Company’s group annual sales is not more than $100 million or company’s group employment size is not more than 200 for another 2 years as announced earlier.

The SME Go Digital Programme will be introduced to help SMEs build digital capabilities. The Info-communications Media Development Authority (IMDA) will work with SPRING and other sector lead agencies in this effort.

Foreign Worker Levies will be deferred for the Marine and Process sectors by one more year.

The Ministry of Manpower (“MOM”) will increase wage and training support provided under the Career Support Programme, the Professional Conversion Programme, and the Work Trial Programme and commit an additional $26 million a year for the Lifelong Learning Endowment Fund and Skills Development Fund.

With immediate effect, the CPF Housing Grant will be increased from $30,000 to $50,000 for couples who purchase 4-room or smaller resale flats, and from $30,000 to $40,000 for couples who purchase 5-room or bigger resale flats. A couple can now receive a total of up to $110,000 in housing grants when buying a resale flat, depending on the flat location, flat type and their income.

More support for families with infants will be provided, that is, children under 18 months of age. At present, about 4,000, or 8% of all infants are enrolled in centre-based infant care. To meet growing demand, the capacity of centre-based will be increased infant care to over 8,000 places by 2020.

Annual bursary amounts for those attending Post-Secondary Education Institutions, or PSEIs will be increased up to $400 for undergraduate students, up to $350 for diploma students, and up to $200 for ITE students.

A one-off GST Voucher (GSTV) – Cash Special Payment of up to $200, on top of the regular GSTV will be given to eligible household. This means that eligible recipients will receive up to $500 in total in 2017.

GST Voucher – U-Save Rebate for eligible HDB households, will be increased by an amount ranging from $40 to $120, depending on flat type. This increase will be permanent.

The Service and Conservancy Charges (S&CC) rebate, and raise it by 0.5 months for FY2017 depending on HDB flat type.

The VWOs-Charities Capability Fund has helped VWOs and charities train their staff, expand their reach, and serve people better. An additional funding, up to $100 million in total, will be provided to further develop the capabilities of the VWOs and charities.

An additional $6 million grant will be provided to the Self-Help Groups over the next two years.

To sustain this momentum the Cultural Matching Fund which was implemented in 2014, an amount of S$150 million will be added to the Cultural Matching Fund.



The above summary was prepared for your quick reference and should you require more details on the above, please contact us.

20 February 2017





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