News Archive

 

 

Highlights of the 2014 Budget

 

Budget 2014 sees no major changes introduced to our tax system. The corporate tax, the GST and the personal tax rates remain the same.

 

Business

 

 

Productivity and Innovation Credit (PIC) EXTENDED

 

The PIC scheme will be extended to YA 2018.

 

For enhanced tax deductions, the expenditure cap of S$400,000 of qualifying expenditure per activity will be combined across YA 2016 to YA 2018. Hence, up to S$1.2m will qualify for the enhanced tax deduction for each qualifying activity for each year between YA2016 and YA2018.

 

The expenditure cap of S$100,000 for PIC cash payout cannot be combined across the three YAs. Hence, the maximum PIC cash payout remains at S$60,000 for a YA (at the conversion rate of 60% of S$100,000).

 

 

Productivity and Innovation Credit (PIC) PLUS

 

Under the new PIC+ scheme, the expenditure cap for qualifying SMEs will be increased from S$400,000 to S$600,000 per qualifying activity per YA.

 

PIC+ will take effect for expenditure incurred in YA 2015 to YA 2018. The combined expenditure cap will be as follows: up to S$1.4m for YA 2015 and up toS$1.8m for YA 2016 to YA 2018.

 

An entity is a qualifying SME if:

A its annual turnover is not more than S$100m OR

B its employment size is not more than 200 workers.

This criterion will be applied at the group level if the entity is part of a group.

 

The expenditure cap for PIC cash payout will remain at S$100,000 of qualifying expenditure per YA. IRAS will release further details on the PIC+ scheme by the end of March 2014.

 

CA TRUST comment

 

Taxpayers will need to self-assess their eligibility as SME and be avail of thebenefits of PIC+. There will need for clarity if annual turnover includes non-core income, if 200 employees are measured at a specific date etc.

 

 

Redefining “3 local employees” for purpose of PIC Cash Payout

 

To qualify for PIC cash payout, businesses must have employed at least three local employees. A local employee refers to a Singapore citizen or Singapore permanent resident with CPF contributions but it excludes a sole-proprietor, a partner under contract for service and a shareholder who is a director of the company. A business is considered to have met the three-local-employees condition if it contributes CPF for at least three local employees in the relevant month.

 

To reinforce the condition that the payouts are made to businesses with active business operations, businesses will have to meet the three-local-employees condition for a consecutive period of at least three months prior to claiming the cash payout.This requirement will take effect for PIC cash payout applications from YA 2016.

 

CA TRUST comment

 

The refining of the three-local-employees condition gives a quantitative measure to the “active business” condition. Currently, a taxpayer can employ the minimum three local employees and makeCPF contributions for them only in the relevant month to meet the three-localemployeescondition to claim PIC cash payout. With the proposed change,taxpayers looking to profit and abuse the PIC cash payout option will need toincur more costs and may be dissuaded from doing so.

 

 

Extending PIC benefits to training of individuals under Centralised Hiring Arrangements

 

The PIC scheme will be enhanced to allow businesses to claim PIC benefits on training expenses incurred on training of individuals hired under centralised hiring arrangements.

 

The change will take effect from YA 2014. IRAS will release further details by theend of March 2014.

 

CA TRUST comment

 

For YA 2014 to YA 2018, individuals deployed under a centralized hiring arrangement will be regarded as employees of the business where they are deployed.

 

 

Waiving the withholding tax requirement for payments made to Singapore branches

 

To reduce compliance costs for businesses, payers will no longer need towithhold tax on s12(6) and s12(7) payments made to Singapore branches of non-resident companies.

 

These branches in Singapore will continue to be assessed for income tax on such payments that they receive and will be required to declare such payments in their annual tax returns.

 

This change will take effect for all payment obligations that arise on or after 21 February 2014.

 

CA TRUST comment

 

This waiver will ease the cash flow of Singapore branches as well as remove theadministrative burden of tracking the WHT suffered and making the claim intheir annual tax returns

 

 

Individuals

 

Enhancements to dependent reliefs

 

With effect from YA 2015, the quantum for dependents relief will be increased as follows:

 

Parent / handicapped parent relief

  • For dependent who is living in the same household as the taxpayer, the relief for parent will be at S$9,000 and the relief for handicapped parent will be at S$14,000.

  • For dependent who is not living in the same household as the taxpayer, the relief for parent will be at S$5,500 and the relief for handicapped parent will be at S$10,000.

 

The relief available foe handicapped dependents is as follows:

Type of relief                                   Quantum

  • Handicapped spouse relief            S$5,500

 

  • Handicapped sibling relief             S$5,500

 

  • Handicapped sibling relief             S$7,500

 

 

Removal of transfers of qualifying deductions and deficits between spouses

 

To simplify the personal income tax system, married couples will no longer beable to transfer qualifying deductions and deficits between each other (including under the loss carry-back scheme) with effect from YA 2016.

 

As a transitional concession, qualifying deductions and deficits incurred by a married couple in and before YA 2015 will still be allowed for inter-spousal transfers up until YA 2017, subject to existing rules.

 

Any unabsorbed trade losses or capital allowances may still be carried forward tofuture years to be setoff against the future income of the taxpayer, until the amount is fully utilised, subject to existing rules.

 

Similarly, any unutilised donations may be carried forward to set-off against the future income of the taxpayer, up to a maximum of five years.

 

IRAS will provide more details of the change by the end of May 2014.

 

CA TRUST comment

 

The removal of inter-spousal transfer of qualifying deductions may result inhigher overall tax liability for the couple.

 

A couple may still consider electing to file joint tax returns to utilise the losses ofone spouse against the income of the other. Alternatively, a spouse with surplus business losses may carry these forward to utilise against future income.