The Singapore Budget 2020 (also known as the Unity Budget) presented on 18 February 2020 was centered on ensuring sufficient targeted support measures for businesses that are negatively impacted by the COVID-19 outbreak. Given the uncertainties in the global economy and cognizant of the impact of COVID-19 to businesses in 2020, the Singapore Government had initiated various tax changes aimed at helping businesses cope with the immediate challenges in cash flows.
Some of the tax changes initiated in the Unity Budget to help businesses combat COVID-19 include:
1. 25% corporate income tax rebate (“CITR”) for Year of Assessment (“YA”) 2020, capped at S$15,000, for all companies.
2. Property tax rebate (“PTR”) for the period from 1 January 2020 to 31 December 2020:
(a) 30% PTR for accommodation and function room components of licensed hotels and serviced apartments and Meetings, Incentive, Conferences and Exhibitions (“MICE”) space components of prescribed MICE venues;
(b) 15% PTR for other qualifying commercial properties such as premises of an international airport, international cruise or regional ferry terminal, retail and F&B shops and premises of tourist attractions; and
(c) 10% PTR for Marina Bay Sands and Resorts World Sentosa.
3. Automatic extension of interest-free instalments of 2 months for tax payment on Estimated Chargeable Income filed for qualifying companies up to a maximum of 12 months instalment.
4. Carry-back of unutilized capital allowances (“CA”) and trade losses in YA 2020 up to 3 immediate preceding YAs, instead of only the immediate preceding YA, even before the actual filing of the tax returns for YA 2020.
5. Option to accelerate CA claim on the acquisition of qualifying plant and machinery in YA 2021 over 2 years as follows, instead of over the working life or over 3 years under Section 19 and 19A of the Singapore Income Tax Act:
(a) 75% of the costs incurred to be written-off in YA 2021; and
(b) 25% of the remaining costs incurred to be written-off in YA 2022.
6. Option to accelerate Section 14Q deduction on qualifying renovation and refurbishment (“R&R”) costs incurred in YA 2021 in one YA (i.e. 100% deduction in YA 2021), instead of over 3 years.
The corporate income tax changes such as the 25% CITR and additional 2 months of instalment payment for estimated taxes would no doubt benefit tax-paying companies as these changes would help ease their short-term cash flow issues to a certain extent with the reduction in tax payable and quantum payable in each month.
The PTR introduced would also provide some relief in year 2020 for companies in the relevant sectors affected by disruptions caused by the COVID-19 situation as the cash refunds from the rebate can be used by such businesses for their operating expenses.
Moreover, the option to accelerate CA claims from 33% to 75% and the Section 14Q deduction for R&R costs from 33% to 100% in YA 2021 will boost the confidence of taxpayers to proceed with their initial plans for additional investments and renovations instead of holding back on their spending in such trying times, which could create a further drag on the potentially sluggish economy.
Singapore Budget 2020 has also not forgotten companies that are suffering losses and hence, are not in a tax-paying position. The option to carry back their losses in YA 2020 up to 3 preceding YAs, resulting in a maximum potential cash tax refund of S$17,000, would definitely be welcomed by businesses with losses in year 2019.
Despite the various measures introduced in Singapore Budget 2020 to help businesses combat COVID-19, the worsening of the situation into a global pandemic and deterioration of the economy has resulted in the Singapore Government acting swiftly by announcing the Resilience Budget 2020 in less than six weeks after the Singapore Budget 2020 announcement.
Aware of the immediate cash flow challenges for businesses, Resilience Budget 2020 was less about tax changes but more of ensuring that cash can be put back into the hands of businesses. Therefore, measures such as the following were introduced by the Singapore Government on 26 March 2020:
1. Deferment of corporate income tax payments by 3 months.
2. Bringing forward of the wage credit scheme disbursement to end-June 2020.
3. Enhancement of the Jobs Support Scheme (“JSS”), whereby up to 75% cash grant of the first S$4,600 of monthly wages of each local employee in severely affected sectors are given for 9 months till end of 2020.
4. Enhanced PTR of up to 100% for qualifying commercial properties (e.g. those in the tourism sector).
5. Up to 2 months rental waivers for eligible commercial and other non-residential tenants of government-owned or managed non-residential facilities.
6. Enhancement of the maximum support level under the Enterprise Development Grant (“EDG”) to 80% or 90% (case-by-case basis).
7. Enhancement of the maximum support level to 80% for the Productivity Solutions Grant (“PSG”), with scope widened for PSG to cover technology solutions for safe distancing and business continuity measures.
8. Maximum support level for various grants in the tourism industry has also been increased by 10%.
However, as the COVID-19 situation continues to worsen since then, the Singapore Government decided to release the Solidarity Budget 2020 on 6 April 2020, in less than two weeks after the announcement of the Resilience Budget 2020. The measures enhanced in the Solidarity Budget 2020 were meant to help businesses and individuals cope with the ‘circuit breaker’ period, with the following enhancements made for businesses:
1. JSS payout of 75% on the first S$4,600 of gross monthly wages for every local employee in April 2020, with the first JSS payout brought forward to April 2020 instead of May 2020.
2. Waiver of monthly foreign worker levy (“FWL”) due in April 2020, with FWL rebate of S$750 (based on previous levies paid in 2020) for each work permit or S Pass holder.
3. Proposed new legislation which imposes obligation on property owners to pass to their tenants the full amount of PTR received attributable to the tenanted property.
4. Increased rental waivers for industrial, office and agricultural tenants of Government agencies to one month.
5. Government’s co-share of the risk on the loans with Participating Financial Institutions increased to 90% for the Enterprise Financing Scheme SME Working Capital Loan and Trade Loan and the Temporary Bridging Loan Programme.
In our view, the Resilience and Solidarity Budgets has complemented the Unity Budget by putting in bolder measures to help businesses deal with the immediate challenges of cash flows problems and ensure that they can sustain their current operations and workforce. Taking into consideration how the COVID-19 crisis unfolded since the start of 2020, the Ministry of Finance has to be commended for the various targeted support measures introduced in the Unity, Resilience and Solidarity Budgets to deal with the fast-evolving situation.
This article is contributed by Complete Corporate Services Pte Ltd, an associated firm of Moore Stephens LLP. To understand more about how we can support your business and help you to achieve your business objectives, contact us today.