Tax Changes Overview in Singapore Budget 2021
On February 19, 2021 the deputy prime minister and minister of finance, Mr. Heng Swee Keat unveiled Singapore budget 2021. Budget 2021 is quite broad based and structured in a way that helps embolden and restructure businesses as they seek new growth opportunities. In order to help businesses emerge stronger together; the government committed to building strong growth enablers that foster innovation spirit, and enterprise of the business communities with the aim of enhancing a range of capital to help transform and also scale businesses.
Some of the tax changes proposed in the budget are as below;
Extension of Budget 2020 Tax measures
Several tax measures and the non-tax ones were announced during budget 2020 to help mitigate the widespread financial impact of covid 19 on workers and businesses. Since there is still no visible end to the pandemic, specific sectors are still struggling from the effects of covid-19 and that has led to some of the relief measures being extended.
Enhanced carry-back relief scheme
Under the existing carry-back relief scheme, the unabsorbed capital allowances and trade losses for the current year could be carried back to the immediate year of assessment. In the budget for 2020, the carry-back relief scheme was expanded to create room for qualifying deductions for the year 2020 to be carried back up to the three immediate preceding years but it’s subject to conditions.
Option to accelerate tax write-off on plant and machinery acquiring costs
The option to accelerate write off of the plant and machinery acquiring costs will be extended to qualifying capital expenditure that’s incurred on the acquisition of plant and machinery in the financial period 2022. This move will help ease cash flow for businesses that have plans of purchasing new assets. Under the accelerated option, businesses are allowed to claim capital allowance of 75% of the cost incurred in the first year and 25% of qualifying cost in the second year. There is no deferment of capital allowance claim that’s allowed under these.
Option to accelerate the deduction for refurbishment and renovation expenses
The expenditure that’s incurred on refurbishment and renovation works that are related to business setting do not qualify for capital allowances. The taxpayers who incur renovation and refurbishment expenditure for the purpose of profession, business or trade should claim tax deduction on those costs for a period of three consecutive years. However, the claim is subject to an expenditure cap of S$300,000 for every relevant year. For the qualifying refurbishment and renovation costs that are incurred in the year 2021, taxpayers were given the option to claim the deduction within one year.
Goods and Services Tax
It was announced in the budget that the planned goods and services tax rate is to increase from 7% to 9% and this is to happen within the period 2022 – 2025. The timing for the increase of GST tax will be subject to the economic outlook. GST will be extended to the low-value goods which are imported either via post or air. And the non-digital imported B2C services.