Singapore-Entrepreneurs

Singapore Budget 2010: Tax initiatives for businesses, a quick overview

Here is a brief look at the tax deductions for qualifying expenditure incurred in relation to investing in and upgrading of business operations.
At present, businesses benefit from up to 150% deduction on Research and Development conducted in Singapore and a 100% deduction for expenditure incurred on employee training, automation equipment, designs, IP acquisition and IP registration.
According to the 2010 Budget, under the newly introduced Productivity and Innovation Credit Scheme, all businesses will be allowed to deduct 250% of their expenditure incurred on qualifying activities, from their taxable income.
The tax deductions are capped at S$300,000 for each activity. The qualifying activities include Research & Development; Intellectual Property registration; Intellectual Property acquisition; Design activities, Automation through technology or software; and training of employees. Businesses with a low taxable income can choose to convert up to S$300,000 of the tax deductions and allowances credited to them into a cash grant, up to a maximum of S$21,000 each year. The Productivity and Innovation Credit will be available for all businesses from YA 2011 to YA 2015.
Enhancements to the Financial Sector Incentive (FSI) Scheme (proposed)
Certain amendments to the FSI Scheme have been proposed by the Monetary Authority of Singapore in order to help simplify the rules of the scheme and to lower compliance costs for financial institutions. Review of existing tax incentives for futures members of the Singapore Exchange (SGX) and members of the Singapore Commodity Exchange Limited (SICOM) At present, futures members of the Singapore Exchange (SGX) and members of the Singapore Commodity Exchange Limited (SICOM) receive a 10% concessionary tax rate on income derived from qualifying transactions.
With effect from January 2011, the members will no longer be entitled to the concessionary tax rate and will have to apply for tax incentives under the Financial Sector Incentive (FSI) scheme instead.
Review of tax concession for offshore insurance business
At present, licensed insurers in Singapore benefit from a 10% concessionary tax rate on qualifying income derived from offshore insurance business conducted from Singapore.
According to the 2010 Budget the incentive will be subject to a sunset clause of 5 years until 31 March 2015; the incentive will be awarded to an approved recipient for a period of 10 years; and a new headcount requirement will be imposed for incentive recipients. The budget will take effect from April 2010.

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