Singapore's finance minister Mr Heng Swee Keat presented this year's budget against a backdrop of a slowing global economy and its consequences for Singapore. While a large part of the budget focused on addressing cyclical weaknesses in Singapore's economy, Mr Heng also set out the need to reform the local economy and to draw on the skills and resourcefulness of the Singaporean people.

Three key policies are designed to achieve this. The first is the adoption of an expansionary fiscal stance, including small and medium-sized enterprise (SME) tax relief. The second aims to strengthen enterprise and industry via an Industry Transformation Programme and to drive growth through innovation. Targeted government spending will help firms build deeper capabilities, scale up and internationalise. The final policy is to support Singaporeans in developing skills, particularly in new, fast-growing sectors, and in facilitating employment and job-matching.

These policies are supported by a range of tax measures, many of which came into force at the start of the financial year on 1 April 2016.

Key tax measures set out in the Singapore Budget 2016

Company tax changes

  • Enhancing the Corporate Income Tax Rebate from 30% to 50% for Year of Assessment (YA) 2016 and YA 2017, subject to a cap of SGD 20,000 per YA
  • Lowering the Productivity and Innovation Credit (PIC) cash pay-out rate from 60% to 40% for qualifying expenditures incurred from 1 August 2016 (the PIC scheme will expire after YA 2018)
  • Extending the Capability Development Grant to include support for automation projects up to 50% of qualifying costs, capped at SGD 1 million
  • Implementing an Investment Allowance of 100% on approved capital expenditure (net of grants), capped at SGD 10 million per project
  • Implementing an increase in risk-sharing with participating financial institutions for equipment loans to 70% for qualifying projects undertaken by SMEs (up from 50%) and to 50% for non-SMEs   
  • Enhancing the mergers and acquisitions scheme by increasing the cap on the value of a qualifying share acquisition after 1 April 2016 from SGD 20 million to SGD 40 million
  • Extending the relief under Section 13Z of the Income Tax Act until 31 May 2022, which provides certainty of non-taxation of companies' gains on the disposal of equity investments
  • Extending the Double Tax Deduction under the Internationalisation scheme from 1 April 2016 to 31 March 2020, covering overseas business development, investment study trips and missions as well as participation in overseas trade fairs and approved local trade fairs

Personal tax changes

  • Introducing a cap of SGD 80,000 on personal income tax reliefs from YA 2018
  • Removing the tax concession on home leave passages for expatriate employees from YA 2018

Industry-specific and other changes

Finance and treasury centre scheme

  • Extending the scheme to 31 March 2021 
  • Reducing the concessionary tax rate from 10% to 8% with effect from 1 April 2016 on income from qualifying activities and services

Tax incentive scheme for trustee companies

  • Bringing the tax incentive scheme for trustee companies under the Financial Sector Incentive (FSI) scheme to align with trustee activities covered under the FSI-Standard Tier scheme 
  • Introducing a 12% concessionary tax rate on qualifying income for new incentive recipients from 1 April 2016

Tax incentive scheme for marine hull and liability insurance, specialised insurance and captive insurance businesses

  • Bringing the scheme under the Insurance Business Development umbrella scheme
  • Introducing a 10% concessionary tax rate to new and renewal awards

Maritime Sector Incentive (MSI)

  • Enhancing the MSI to include income derived from the operation and leasing of ships used for exploration or exploitation of offshore energy or offshore minerals or ancillary activities relating to the exploration or exploitation of offshore energy or offshore minerals
  • Granting a tax exemption on income derived from the leasing of ships used for qualifying activities to any counterparties for use outside the port limits of Singapore

Global Trader Programme (Structured Commodity Finance)

  • Enhancing the programme to include activities such as consolidation, management and distribution of funds for designated investments, mergers and acquisitions advisory services and streaming financing

For access to the full Singapore Budget 2016 speech, visit www.singaporebudget.gov.sg/budget_2016/home. 

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