Singapore: Singapore Budget 2016: What Opportunities Does It Bring?

The Singapore Budget 2016 focused on driving growth within the economy, and much of this stems from supporting small-medium sized enterprises (SMEs). The budget introduced tax relief for SMEs to create an economy that drives innovation and productivity. It also enhanced tax incentives within certain industries to attract international businesses to Singapore.   

Access our Singapore Budget 2016: key highlights for a snapshot of the budget.

M&A tax incentive offers opportunities to expand in the slowdown

A slowing economy can provide great opportunities for business, including the option to expand through merger or acquisition.

This year's budget enhances Singapore's tax incentive scheme to encourage M&A transactions. The incentive allows a tax deduction on 25% of the cost of acquisition, with a cap on the deduction of SGD 10 million (approximately USD 7.43 million). Since 1 April 2016, the cap on the value of a qualifying share acquisition has increased from SGD 20 million to SGD 40 million.

For example, if a business spends SGD 40 million on a qualifying acquisition, it could claim a deduction of SGD 10 million against its taxable income. With Singapore's corporate tax rate currently at 17%, this would deliver a saving of up to SGD 1.7million.

Tax incentives for finance and treasury activities encourage relocation of key functions to Singapore

Against the backdrop of the OECD's Anti-Tax-Avoidance agenda, companies have to rethink their corporate structures and re-evaluate their tax risks. Many are relocating to a reputable jurisdiction with good infrastructure for business and reasonable taxes. Singapore remains a jurisdiction of choice for international businesses, with an abundance of incentives including favourable rates of tax for approved finance and treasury centres, approved operational headquarters and businesses operating under the Global Trader Programme.

This year's budget adds a significant boost for finance and treasury activities by lowering the tax rate on qualifying activities from 10% to 8%. This incentive, alongside others, is expected to encourage many global companies to move their key functions to Singapore.

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