Singapore unveiled an expansionary Budget 2021 that balances providing additional support to help businesses and people manage through COVID-19 together with reforms to deal with long-term challenges.
By Geeta Balakrishnan
While the S$11 billion COVID-19 Resilience Package, additional support for businesses and workers, and sustainability initiatives such as Green Plan 2030 took prominence in CPA Australia’s original budget coverage, there’s a raft of other interesting and impactful measures you may have missed.
Here are 11 additional measures from the budget you may not be aware of.
1. GST on imported non-digital services
A goods and services tax (GST) will be imposed on imported non-digital services to bring them into line with the GST treatment of imported digital services. Effective 1 January 2023, overseas businesses that supply non-digital services to consumers based in Singapore will be required to register via the overseas vendor registration (OVR) regime and charge GST.
Imported business-to-consumer (B2C) digital services have been subject to GST since 1 January 2020. Imported low-value goods will also be subject to GST from the same date, although implementation details have yet to be finalised by the Inland Revenue Authority of Singapore (IRAS).
2. Changing tax principles for the digital economy
The basis for applying GST to media sales (e.g. advertisements) will be changed to “the place where the contractual customer and direct beneficiary of the service belong”, effective 1 January 2022. In short, if a customer of the service belongs outside Singapore media sales will be zero-rated, while if a customer belongs in Singapore they will be standard-rated. However, the development of digital technologies has changed how media sales are supplied and currently makes it challenging for suppliers of digital media sales to determine where they are circulated.
3. Encouraging capital expenditure
To encourage investment and to help stimulate the economy, the government announced extensions to several tax incentives:
- Loss carry-back relief. The ability of businesses to elect to carry back unabsorbed capital allowances and trade losses will be extended until the year of assessment (YA) 2021. The scheme is capped at S$100,000 and subject to other conditions, including that the taxpayer can only carry it back for up to three YAs immediately preceding YA 2021.
- Accelerated write-off of plant and machinery. The option for businesses to accelerate the cost write-off of capital expenditure incurred on the acquisition of plant and machinery has been extended until YA 2022 (or fiscal year 2021).
- Accelerated renovation and refurbishment deductions. The option for taxpayers to claim qualifying renovation and refurbishment expenditure as deductions in one YA will be extended until YA 2022.
- The 100 per cent investment allowance scheme to support automation. Automation projects approved by Enterprise Singapore will continue to be eligible for the 100 per cent allowance on the amount of approved capital expenditure, capped at S$10 million per project. The scheme now expires on 31 March 2023.
4. Managing the cost of hiring foreign workers
Foreign worker levy (FWL) rates will not change for all sectors. The increase previously announced for the maritime shipyard and process sectors will be deferred for a year. Rate changes anticipated for S Pass holders and services and manufacturing sector work permit holders (WPH) will now be announced in 2022.
5. Spurring digital innovation
Launched in 2018, the Open Innovation Platform (OIP) presents problem statements identified by “problem owners”; e.g. lead sector agencies and trade associations and chambers to “problem solvers” such as entrepreneurs, start-ups, companies, and technology innovators to create innovative digital solutions. It will be enhanced with two new features:
- “Discovery engine” – automated searching and matching of technology solutions to challenges; and
- “Digital bench” – a virtual sandbox and testing environment for quicker proof of concept testing.
The improvements should allow more companies to participate in co-innovation and digital transformation, fast-track prototype development and potentially reduce the time to commercialisation.
6. Co-funding digital transformation
To encourage and accelerate the growth of new digital capabilities, the government will co-fund the chief technology officer-as-a-service initiative, which will allow small-to-medium enterprises (SMEs) access to professional IT consultants for end-to-end digital advice and downstream implementation support.
It will also further facilitate the digital leaders program, which provides the capability and financial support for promising, high potential local companies to build technology leadership and expertise in-house, and develop and implement digital transformation roadmaps.
7. Supporting internationalisation through a special tax deduction
The Double Tax Deduction for Internationalisation (DTDi) scheme allows businesses a 200 per cent tax deduction on qualifying market expansion and investment development expenses. The scheme is being enhanced to cover new categories of expenses incurred and new activities on or after 17 February 2021. The updated list of qualifying activities and expenses available for DTDi will be available on the Enterprise Singapore website shortly.
8. Enhancing the financial sector’s competitiveness
Withholding tax (WHT) exemptions for the financial sector will be extended and rationalised. These include:
- WHT exemption on payments for structured products offered by Singapore financial institutions, which will be extended for five years from 31 March 2021.
- WHT exemption for payments on over-the-counter financial derivatives by a Singapore financial institution will also be extended.
9. Supporting children’s education-related expenses
Each Singaporean child up to the age of 20 in 2021 will receive a one-off top-up of S$200 to their child development, Edusave, or post-secondary education accounts based on their age and education level. The top-up to the Edusave account is in addition to the annual Edusave contribution the government makes.
Children studying in government-funded special education schools will also receive an Edusave top-up, regardless of their age. Others with special needs will also receive a top-up to their relevant accounts based on the child’s age.
10. Encouraging corporate volunteerism
The special tax deduction for qualifying expenditure under the Business and IPC Partnership Scheme (BIPs) will be extended until 31 December 2023. Businesses currently receive a 250 per cent tax deduction on wages and other qualifying expenses related to staff that volunteer or provide services to institutions of a public character (IPC).
11. Businesses as ‘donation collection agents’
To incorporate “giving opportunities” into customer transactions, the government will provide a one-off enabler grant to businesses to cover a portion of one-off development costs needed to integrate or enhance the donation functions in their customer payment platforms. This comes under the ComChest (Community Chest) “Change for Charity Grant” that will run from the financial year 2021 to 2025.
A summary of Budget 2021 initiatives and relevant links is available here. An overview of all the tax changes in Budget 2021 is available here.