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January 23, 2009

Singapore govt to help ease tax burden for businesses
The tax burden facing businesses in Singapore will be eased in the coming year following a slew of measures announced in the budget on Thursday.

Channel News Asia quoted Finance Minister Tharman Shanmugaratnam as saying the corporate income tax rate will be cut by one percentage point to 17 per cent from the Year of Assessment 2010. This is expected to cost the government some S$400 million to S$500 million a year in the medium term.

Tharman said that this, along with the previous changes to the Partial Tax Exemption scheme, means that Singapore will have the lowest effective corporate tax rates for SMEs among any competing destination.

This puts the country in a competitive position to attract new investments when up against regional rivals like Hong Kong which has a 16.5 per cent corporate tax rate.

Owi Kek Hean, executive director, Head-Tax, KPMG Tax Services, said: "With the partial exemption scheme that we have, the effective tax rate is way below most of the countries if not all the countries in the region. With a further reduction in the one percentage, it will enhance Singapore's attractiveness to attract investment dollars.

“If you look at a company that earns taxable income of S$1 million, the effective tax rate is less than 15 per cent."

Businesses also stand to gain from a 40 per cent property tax rebate for industrial and commercial properties in 2009. Mr Tharman said the move will cost the government S$800 million and urged landlords to pass on the benefits of the rebate to their tenants.

Landlords like JTC, HDB and SLA will offer a 15 per cent rental rebate to their tenants and land lessees. The rebate will also apply to stallholders in markets and food centres managed by the National Environment Agency.

In view of the changing market conditions, Tharman said the Inland Revenue Authority of Singapore will also bring forward its property tax assessments for 2009 as the annual value of properties will have fallen.

There is also plenty of good news for developers. Property tax for land which has been approved for development will be deferred for up to two years from January 22 or to the date set for occupation, whichever is earlier. This deferment will cost the government S$290 million a year for 2009 and 2010.

The government will also allow a one-year extension of the project completion period for private residential projects.

Another change is the extension of the time frame which developers have to dispose of all residential units in their projects from two to four years. Developers can also rent out unsold residential units during this period.

In addition, Tharman said foreign developers will be able to reassign government sales sites.

The current loss carry-back relief for Year of Assessment 2009 and 2010 will be enhanced to help improve the cashflow of companies, especially those that are not making profits.

This includes a relaxing on the cap on losses which can be claimed, which has been increased from S$100,000 to S$200,000. Companies will also be able to claim losses against the past three years of taxable income instead of just the preceding year.

Chong Lee Siang, partner, International and Corporate Tax Services, Ernst & Young, said: “For people who have made money in the past and now have losses, it is cash in hand that they can get back immediately.”

Those with operations overseas will further benefit from temporary changes to the Foreign-Sourced Income Exemption scheme. Mr Tharman said all foreign income earned before 22 January 2009 will be exempted from tax when they are remitted, with immediate effect, for one year.

Another short-term measure to help businesses is a freeze in government fees and charges to the end of 2009.

Other measures cover transport-related taxes and fees. It is estimated that companies can save some S$40 million from the 30 per cent road tax rebate for goods vehicles, buses and taxis for a year, starting from 1 July 2009.

The government will also waive the special diesel tax for un-hired taxis for a year, yielding savings of about S$6 million. These savings are expected to be passed on to taxi drivers.

Tharman added that the special tax exemption for Compressed Natural Gas vehicles will be extended for two years until 21 Dec 2011.

In addition, port service providers can look forward to a 20 per cent concession in port dues to be granted to all harbour craft engaged in commercial activities.

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