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March 2, 2020
Singapore releases Budget 2020
On 18 February 2020, Singapore’s Minister for Finance delivered the Singapore Budget for the financial year 1 April 2020 to 31 March 2021 (Budget 2020).
Against the backdrop of near-term uncertainties and economic slowdown, Budget 2020 introduces a range of business-friendly tax changes and measures aimed at enhancing Singapore’s position as a Global-Asia hub of technology, innovation and enterprise.
This Alert summarizes the key tax initiatives relevant to businesses in Budget 2020.1
Strengthening Singapore’s tax competitiveness
To strengthen the resilience and competitiveness of Singapore’s tax system, various tax incentives have been extended, refined and/or enhanced. These include:
Budget 2020 also proposed enhancements to existing enterprise development schemes. In addition, it introduced a number of new schemes and pilot programs, aimed at supporting businesses, specifically start-ups and small and medium enterprises. The various schemes facilitate access to capital and cash flow and enhance digital and market connectivity.
Non-taxation of gains on disposal of ordinary shares
Singapore does not impose tax on capital gains. Nevertheless, it is necessary to first consider if a gain on disposal is revenue or capital in nature – this depends on the facts and circumstances of each case and may not always be straightforward. To provide upfront certainty to companies pursuing corporate restructuring, the exemption of gains or profits from the disposal of ordinary shares (subject to conditions) will be extended to 31 December 2027. To ensure consistency in the tax treatment for property-related business, the scheme will not apply to disposals of unlisted shares in an investee company that is in the business of trading, holding or developing immovable properties in Singapore and abroad.
Additional temporary boosts for businesses
Budget 2020 proposes several short-term measures to help businesses with their cash flow. These include:
1. The Singapore Budget 2020 Synopsis which can be found here provides an in-depth analysis of the Budget 2020 measures.
2. The term “year of assessment” (YA) refers to the year in which income tax is assessed on the company. The basis period for a particular YA for a company is the financial year ending in the year preceding that YA.
For additional information with respect to this Alert, please contact the following:
Ernst & Young Solutions LLP, Singapore
Ernst & Young LLP (United States), Singapore Tax Desk, Chicago
Ernst & Young LLP (United States), Asia Pacific Business Group, New York