SUMMARY TABLE

BUDGET 2009 TAX CHANGES

s/n. / Tax Changes / Brief Description of Tax Changes / Amendment to Income Tax Act / Explanation for Amendments
1 / Corporate Income Tax (CIT) rate cut / The CIT rate will be cut from 18% to 17%. The rate cut will take effect from the Year of Assessment (YA) 2010. / Sections 43 and 45
[Clauses 34(b), (g) and 37] / Clause 34 amends section 43 (Rate of tax upon companies and others) to reduce the tax rate in subsection (1) from 18% to 17% for companies, bodies of persons, trustees (other than trustees of incapacitated persons), executors and non-resident persons who are not individuals or Hindu joint families.
Clause 37 makes a consequential amendment to section 45 (Withholding of tax in respect of interest paid to non-resident persons) arising from the reduction in tax rate to 17%.
2 / Tax framework for facilitating corporate amalgamations / A new tax framework for qualifying amalgamations will be introduced for amalgamations taking place on or after 22 January 2009.
It is aimed at minimising the tax consequences arising from amalgamation. This framework will apply to qualifying corporate amalgamations where, amongst other conditions, the amalgamated company takes over all assets and liabilities of the amalgamating companies and the amalgamating companies cease to exist. / Section 34C
[Clause 24] / Clause 24 inserts a new section 34C to provide for the tax treatment applicable, on election, to 2 or more amalgamating companies and an amalgamated company in a qualifying amalgamation.
3 / Enhancement of start-up exemption scheme / The start-up exemption scheme will be extended to companies limited by guarantee, subject to the similar conditions imposed on companies limited by shares, with effect from YA 2010.
This measure is intended to support the growth of companies limited by guarantee set up by social entrepreneurs. / Section 43
[Clause 34(j)] / Clause 34 amends section 43 (Rate of tax upon companies and others) to extend the tax exemption on the first $100,000 of the chargeable income of a qualifying company and the 50% tax exemption on the next $200,000 of the chargeable income of a qualifying company under subsection (6A) to companies limited by guarantee incorporated in Singapore which satisfy the enumerated conditions.
4 / Enhancement of existing Capital Allowances (CA) regime / Capital expenditure incurred on plant and machinery acquired, for the purposes of a trade, profession or business, in the basis periods for YAs 2010 and 2011 will be allowed an accelerated write-down.
With this change, businesses can elect to write down the cost of these newly acquired plant and machinery in two years with 75% of the write-down taking place in the first year of claim and 25% in any subsequent year. / Sections 19 and 19A
[Clauses 19 and 20] / Clause 19 makes a consequential amendment to section 19 (Initial and annual allowances for machinery or plant) arising from the insertion of section 19A(1B) by clause 20.
Clause 20 amends section 19A (Allowances of 3 years write off for machinery and plant, and 100% write off for computer, prescribed office automation equipment and robot, etc.) to allow a person to elect for the capital expenditure incurred by him during the basis period relating to the YAs 2010 and 2011 on the provision of machinery or plant for the purpose of his trade, profession or business to be written off over 2 years beginning with the YA relating to the basis period in which that expenditure is incurred or any subsequent YA, instead of over the working life of the machinery or plant under section 19 or over 3 years under section 19A(1) where applicable. The amount to be written off in the first and second year shall be 75% and 25% of the capital expenditure respectively.
5 / Enhancement of tax deduction for capital expenditure incurred on Renovation and Refurbishment (R&R) works / Businesses that incur qualifying R&R expenses in the basis periods for the YAs 2010 and 2011 can elect to deduct such expenses in one year instead of over 3 years currently.
The cap of $150,000 for every three years per business entity will remain unchanged. / Section 14Q
[Clause 17] / Clause 17 amends section 14Q (Deduction for renovation or refurbishment expenditure) to allow a person carrying on a trade, profession or business the option to elect for the full amount of qualifying renovation or refurbishment expenditure incurred during the basis period relating to the YA 2010 or 2011 to be deducted in the YA 2010 or 2011, respectively.
6 / Enhancement of loss carry-back relief scheme / The loss carry-back relief scheme will be temporarily enhanced for YAs 2009 and 2010. This measure is intended to help the cashflow of businesses which are making losses in this recession. The enhancements are as follows:
(a) Current year qualifying deductions will be allowed to be carried back for up to three YAs immediately preceding that YA relating to the year in which the capital allowances were granted or the trade losses were incurred (“YA of loss”);
(b) The order of carrying back the qualifying deductions to the three immediate preceding YAs will be so far as possible, first to the third YA, followed by the second YA, and then the YA immediately preceding the YA of loss; and
(c) The maximum amount of current year qualifying deductions that can be carried back will be increased from $100,000 to $200,000.
These enhancements will be available to any person carrying on a trade, businesses, profession or vocation, including sole proprietors and partners of partnerships.
All other conditions in relation to the loss carry-back relief system, including the shareholding test (for companies) and business continuity test, remain unchanged for YAs 2009 and 2010. / Sections 23, 36A, 36C, 37, 37E and 37F
[Clauses 22, 27, 28, 29(b), 30 and 31] / Clauses 22, 27 and 28 make consequential amendments to sections 23 (Carry forward of allowances) arising from the amendment of section 37E by clause 30.
Clause 29 makes a consequential amendment to section 37 arising from the amendment of section 37E by clause 30.
Clause 30 amends section 37E (Carry-back of capital allowances and losses) —
(a)to allow qualifying deductions for the YAs 2009 and 2010 to be carried back and offset against any assessable income of the three YAs immediately preceding the YA 2009 or 2010, as the case may be, beginning with the earliest YA immediately preceding that YA, and any remaining balance of the qualifying deductions is to be allowed in the next earliest YA immediately preceding that YA, and so on, subject to conditions;
(b)to increase the maximum amount of qualifying deduction for each of the YAs 2009 and 2010 to be carried back, from $100,000 to $200,000;
(c)to clarify that where —
(i)a qualifying deduction for any year of assessment (referred to as year of loss) is carried back to offset against the assessable income for a preceding YA (referred to as year of offset);
(ii)there is nil or insufficient assessable income in one tax rate category but sufficient assessable income in another tax rate category in the year of offset; and
(iii)an adjustment under section 37B is to be made in the year of offset,
the rate of tax under section 43(1)(a) to be used, if applicable, for the purpose of applying the adjustment under section 37B in the year of offset shall be the normal tax rate applicable to that year of offset. The concessionary rate of tax to be used for the purposes of applying the adjustment under section 37B in the year of offset shall be the concessionary rate of tax applicable to the qualifying deduction for the year of loss or the concessionary rate of tax applicable to the assessable income that is deducted by any qualifying deduction, as the case may be; and
(d)to enable the Comptroller to raise an assessment within 6 years after the expiration of the YA 2008, where the Comptroller discovers that any qualifying deduction for the YA 2010 made against the assessable income of any person for the YA 2008 is excessive.
Clause 31 amends section 37F (Carry-back of capital allowances and losses between spouses) —
(a)to allow qualifying deductions for the YAs 2009 and 2010 transferred from a person to his or her spouse to be carried back and offset against the assessable income of the spouse for any of the three YAs immediately preceding the YA 2009 or 2010 as the case may be, beginning with the earliest YA immediately preceding that YA, and any remaining balance of the qualifying deductions is to be allowed in the next earliest YA immediately preceding that YA, and so on, subject to conditions;
(b)to increase the maximum amount of qualifying deduction for each of the YAs 2009 and 2010 that can be carried back to offset against the assessable income of a person and of his or her spouse, from $100,000 to $200,000, subject to conditions; and
(c)to enable the Comptroller to raise an assessment within 6 years after the expiration of the YA 2008, where the Comptroller discovers that any qualifying deduction for the YA 2010 made against the assessable income of the claimant spouse for the YA 2008 is excessive.
7 / Extension of Foreign-Sourced Income Exemption / With effect from 22 January 2009, resident non-individuals and resident individual partners of partnerships in Singapore will be exempted from tax on their remittance of all foreign-sourced income accrued outside Singapore on or before 21 January 2009, if they remit their foreign-sourced income to Singapore during 22 January 2009 to 21 January 2010 (both dates inclusive).
The Government will also temporarily lift the conditions that are currently required for foreign sourced income to be exempted from tax when remitted into Singapore. / Section 13
[Clause 8(c)] / Clause 8 amends section 13 to provide for the tax exemption on all types of foreign sourced income derived by resident taxpayers on or before 21 January 2009 and received in Singapore during the period from 22 January 2009 to 21 January 2010 (both dates inclusive), subject to conditions.
8 / Accelerated Writing-Down Allowances (WDA) for acquisition of Intellectual Property (IP) rights for Media and Digital Entertainment (MDE) content / Section 19B will be amended to allow capital expenditure incurred by an approved MDE company in respect of the acquisition of approved IP rights for MDE contentfrom 22 January 2009 to 31 October 2013 to be written down over a period of 2 years. / Section 19B
[Clause 21] / Clause 21 amends section 19B (Writing-down allowances for intellectual property rights) to allow capital expenditure incurred by an approved MDE company in respect of the acquisition of the approvedIP rights pertaining to film, television programmes, digital animations or games, or other media and digital entertainment contents, between the period from 22 January 2009 to 31 October 2013 to be written down over a period of 2 years beginning with the YA relating to the basis period in which that expenditure is incurred, instead of 5 years.
9 / Enhancement of fund management incentives / An Enhanced Tier to the existing fund management incentives will be introduced for funds with a minimum fund size of S$50 million at the point of application amongst other conditions, with effect from 1 April 2009 to 31 March 2014 (both dates inclusive).
Under the Enhanced Tier, there will be no restrictions imposed on the residency status of the fund vehicles as well as that of investors. The Enhanced Tier will also apply to funds that are constituted in the form of Limited Partnerships i.e. there will no longer be a need to look through to the partners’ level to apply the incentive conditions. The 30% or 50% investment limit imposed on resident non-individual investors will also be lifted for funds that come under the Enhanced Tier.
Fund managers interested in the Enhanced Tier for their funds may apply to MAS for approval.
A sunset clause will also be introduced for the Enhanced Tier as well as the existing fund management incentives at the incentive scheme level.
Both incentives will expire on 31 March 2014. All funds that are on the scheme on or before 31 March 2014 will continue to enjoy the tax exemption after 31 March 2014, subject to them continuing to meet the conditions under the scheme. / Sections 13C, 13CA, 13R and 13X
[Clauses 9, 10(f), 14(a) and 15] / Clause 9 amends section 13C (Exemption of income of trustee of trust fund arising from funds managed by fund manager in Singapore) to provide the type of trustee of a prescribed trust fund to which the tax exemption under section 13C may apply.
Clause 10 amends section 13CA (Exemption of income of non-resident arising from funds managed by fund manager in Singapore) to provide the type of prescribed person to which the tax exemption under section 13CA may apply. Only a prescribed person which is incorporated or constituted on or before 31 March 2014 and which has qualified for tax exemption under section 13CA on its qualifying income between the date of the incorporation or constitution (as the case may be) and 31 March 2014, may qualify for tax exemption after 31 March 2014 under this section if it continues to meet the qualifying conditions for the tax exemption.
Clause 14 amends section 13R (Exemption of income of company incorporated and resident in Singapore arising from funds managed by fund manager in Singapore) to extend the end of the period by which approval may be granted under the section to 31 March 2014.
Clause 15 inserts a new section 13X. The new section 13X provides for tax exemption on prescribed income derived by an approved company, a partner of an approved limited partnership or a trustee of an approved trust fund from funds managed in Singapore by a prescribed fund manager, subject to conditions.
10 / Removal of income tax on Net Annual Value (NAV) / The income tax on NAV will be removed with effect from YA 2010. / Section 10 (11)
[Clause 3(b)] / Clause 3 amends section 10 to remove the income tax payable on the net annual value of any property used by or on behalf of its owner for residential purposes and not for the purposes of gain or profit.
11 / Personal Income Tax (PIT) rebate / A PIT rebate of 20% capped at $2,000 will be granted to tax resident individuals for the YA 2009. / [Clause 42] / Clause 42 provides for the remission of 20% on tax payable, or an amount not exceeding $2,000, whichever is the lower, for the YA 2009 by a resident individual or a Hindu joint family.
12 / Enhancement of Tax Deduction on Donations / Tax deduction on any qualifying donation made during the period from 1 January 2009 to 31 December 2009 will be enhanced from the current 200% to 250% of the amount or value of the donation.
All existing rules to qualify for the enhanced tax deduction remain the same. / Section 37
[Clause 29 (a)] / Clause 29 amends section 37 (Assessable income) to increase the amount of deduction given to a person for donations of the types in subsections (3)(b) to (f) made during the period from 1 January 2009 to 31 December 2009 (both dates inclusive) from twice the amount of money or the value of the item donated to 2.5 times of such amount or value.
13 / Tax exemption on Jobs Credit Grant / The Jobs Credit scheme is part of the one-off substantial fiscal stimulus of Budget 2009 to encourage businesses to preserve jobs in the downturn. Given that this is a period of exceptional difficulty, granting tax exemption on the grant given under the Jobs Credit scheme will maximize the impact of the fiscal stimulus. / Section 13
[Clause 8(b)] / Clause 8 amends section 13 (Exempt income) to provide for the tax exemption on any Government cash grant payable to an employer in 2009 under the Jobs Credit Scheme announced in the Government’s 2009 Budget Statement.

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