Singapore’s 2014 Budget: Takeaways for Foreign Investors

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SINGAPORE – Last Friday, Singapore’s Minister for Finance and Deputy Prime Minister presented the 2014 Budget to Parliament for the financial year April 1, 2014 to March 31, 2015. Key tax initiatives from the 2014 Budget are as follows:

No Significant Corporate or Individual Income Tax Changes

There were no significant tax changes announced in Singapore’s 2014 Budget.

Extension of PIC Scheme to Year of Assessment 2018

The Productivity and Innovation Scheme (PIC), the Singapore Government’s Scheme to incentivize investments in research and development, innovation, automation and training has been extended for three years to Year of Assessment (YA) 2018. The PIC allows businesses to deduct up to 400 percent of qualifying expenditures, subject to an expenditure cap of S$400,000 of qualifying expenditure per activity combined across YA 2016 to YA 2018.

Introduction of PIC+ for Qualifying SMEs

With the extension of the PIC Scheme from YA 2015 to YA 2018, the expenditure cap for SMEs making substantial investments to transform their investment will be increased from S$400,000 to S$600,000 per qualifying activity per YA. Qualifying SMEs must have an annual turnover of less than S$100 million, or less than 200 workers.

Increase in Social Security (“CPF”)

Employer CPF contributions for employees of all ages will be increased from 16 percent to 17 percent subject to a S$5,000 monthly salary cap. CPF contributions only apply for employees who are Singaporean Citizens or Permanent Residents. Companies will receive a one year Special Employment Credit equal to 0.5 percent (subject to a S$5,000 monthly salary cap) to alleviate the additional cost burden. The change will take effect from 1 January 2015.

In addition, CPF contributions for older employees will be further increased. CPF contribution rates for employees aged 50 to 55 will increase by 1.5 percent (contributed 1 percent by the employer and 0.5 percent by the employee). CPF contribution rates for employees aged 55 to 65 will be increased by 0.5 percent (funded by the employer). Companies will receive a one year Special Employment Credit equal to 0.5 percent and subject to a S$5,000 salary cap. This change will also take effect from 1 January 2015.

Dezan Shira & Associates is a specialist foreign direct investment practice, providing corporate establishment, business advisory, tax advisory and compliance, accounting, payroll, due diligence and financial review services to multinationals investing in emerging Asia. Since its establishment in 1992, the firm has grown into one of Asia’s most versatile full-service consultancies with operational offices across China, Hong Kong, India, Singapore and Vietnam as well as liaison offices in Italy and the United States.

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