ISCA Budget 2014 Update and its Tax Implications: Impact ...download.isca.org.sg/event/TAX2014.pdf1...

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ISCA Budget 2014 Update and its

Tax Implications:

Impact on Corporate Firms and Individuals

5 March 2014, Wednesday

8.30 a.m. – 12.30 p.m.

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Prof. Sum Yee Loong Honorary Tax Advisor, ISCA

Professor of Accounting (Practice), SMU

ISCA 2014 Budget

Analysis and Recent

Tax Developments

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GROWTH & HARMONY GROWTH & HARMONY

4

Corporate Tax

5

Corporate Tax Rate

- Remains @ 17%

6

Corporate Tax Comparisons

0

10

20

30

40

50

12.516.5 17

2023 25

3035

Ireland

Ireland Hong Kong S’pore Thailand UK China India US

Taiwan Malaysia Australia

Indonesia Philippines

7

30% Tax Rebate

- YA 2013 – YA 2015

- Max $30,000 per YA

8

C.I. $

Rate* %

300,000 5.8

500,000 8.3

740,735 9.5

1,000,000 11.4

* After partial exemption of $152,500 & rebate

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PIC

Introduced in 2010 Budget and enhanced in 2011, 2012, 2013 & 2014 - 400% of up to $400k of qualifying expenditures on:- - R&D - Acquisition & Licensing of IP - Registration of IP - Investments in design - Investments in automation - Training for employees

10

Cash Conversion

- Up to $60,000

(on first $100,000 expenditure)

- Effective conversion rate of 15%

- From YA 2013

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NO

$

Profit 700,000

PIC (400,000)

C.I. 300,000

PTE (152,500)

147,500

Tax @ 17% 25,075

Cash conversion -

25,075

Cash Conversion

YES

$

700,000

-

700,000

(152,500)

547,500

93,075

(60,000)

33,075

$8,000

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Reconciliation

$400,000 @ 17% 68,000

Cash payout (60,000)

8,000 .

13

NO

$

Profit 500,000

PIC (400,000)

C.I. 100,000

PTE (52,500)

47,500

Tax @ 17% 8,075

Cash conversion -

8,075

Cash Conversion

YES

$

500,000

-

500,000

(152,500)

347,500

59,075

(60,000)

(925)

($9,000)

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Reconciliation

$200,000 @ 17% 34,000

$200,000 @ 8.5% 17,000

51,000


(9,000)

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NO

$

Profit 700,000

PIC (400,000)

C.I. 300,000

PTE (152,500)

147,500

Tax @ 17% Rebate

25,075 (7522)

Cash conversion -

17,553

Cash Conversion YES

$

700,000

-

700,000

(152,500)

547,500

93,075 (27,922)

(60,000)

5,153

($12,400)

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Reconciliation

$400,000 @ 11.9% 47,600


(12,400)

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NO

$

Profit 500,000

PIC (400,000)

C.I. 100,000

PTE (52,500)

47,500

Tax @ 17% Rebate

8,075 (2,422)

Cash conversion -

5,653

Cash Conversion YES

$

500,000

-

500,000

(152,500)

347,500

59,075 (17,722)

(60,000)

(18,647)

$24,300

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Reconciliation

$200,000 @ 11.9% 23,800

$200,000 @ 5.95% 11,900

35,700


(24,300)

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PIC

Introduced in 2010 budget for 2011 - 2015

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PIC

Extended 3 years to YA 2018

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PIC

PIC for training extended to centralised

hiring arrangements

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PIC

- Tax deferral not extended

- Ends in YA 2015

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PIC + for SMEs

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SME

- T/O ≯ $100mil, or

- Employees ≯ 200

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PIC + Scheme

From YA 2015 - 2018

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PIC + Scheme

$600k per qualifying activity per year

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PIC + Scheme

Combined cap (YA 2013 – 2015)

- $1.4 mil ($400k + $400k + $600k)

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PIC + Scheme

Combined cap (YA 2016 – 2018)

- $1.8 mil

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R&D

Additional 50% deduction (S14DA)

- Extended 10 years to YA 2025

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R&D

Double deduction (S14E)


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Intellectual Property Rights

Writing Down Allowance (WDA) for IPR


32


Accelerated WDA for Media and Digital

Entertainment


33


Registration of IP (S14A)


34

Land Intensification Allowance

LIA

- Extended 5 years to 30 June 2020

35

Withholding Tax

Currently withholding tax applies to

payments to non-residents of:

- interest;

- royalties;

- technical fees;

- management fees; and

- rental of movable assets.

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Withholding Tax

With immediate effect

- No withholding required if paid to

Singapore branches.

37

Listed Infrastructure

Registered Business Trust

Exemptions under S13(12) to be

expanded to cover dividends and

interests from qualifying offshore

infrastructure projects

38

Financial Institutions

Distributions paid on Tier 1 capital (other

than shares) deductible

39

Fund Management

Tax exemption for funds

- Extended 5 years to 31 March 2019

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Personal Tax

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Personal Tax

YA 2014

- No change in tax rates

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Comparative personal effective tax rates

Year of Assessment 2014

Employee married with 2 children

Gross annual remuneration of $200,000

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43

Tax Rate

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Dependent Relief

YA 2014 YA2015 onwards

Parent/grandparent

- Not staying in same 4,500 / 8,000 5,500 / 10,000

household

- Staying in same 7,000 / 11,000 9,000 / 14,000

household

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Handicapped Spouse, Sibling, Child

Reliefs

YA 2014 YA2015 onwards

Handicapped spouse 3,500 5,500

Handicapped sibling 3,500 5,500

Handicapped child 5,500 7,500

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Transfers of Qualifying Deductions and

Rental Deficits between Spouses

Transfers of :-

• C.A.

• Losses

• Donations

• Rental deficits

- Phased out from YA 2016

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Section 40 Relief

S40 Relief

- Phased out from YA 2016

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CPF

Employers – 1% increase

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CPF

Contributions by

Employees’ Age Employers Employees

50 – 55 years old 1% 0.5%

55 – 65 years old 0.5% 0%

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Excise Duties

Cigarettes - 10% increase

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Excise Duties

Alcohol - 25% increase

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Streamlining of Stamp Duty

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Leases of Immoveable Properties

Period Stamp Duty Rate

Up to 4 years

0.4% of total rent for period

> 4 years 0.4% of 4 times of average

annual rent for period

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Land Premiums and Purchase of Property

Purchase Price or

Market Value

Buyer’s Stamp Duty Rate

First $180,000

1%

Next $180,000

2%

Excess over $360,000

3%

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Stocks and Shares

Transaction Stamp Duty Rate

Transfer of

Shares

0.2% of higher of purchase

price or market price

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Recent Tax Developments

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Rights-based Approach

S12(7) deems, inter alia, payment for:

- use of technical, industrial or

commercial knowledge

- to be sourced in Singapore

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W/H tax waiver applied to payment for:

- Shrink-wrap s/w;

- downloadable s/w;

- site-licence; and

- digitised information.

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Is payment for:

- transfer of copyright rights; or

- copyrighted article; or

- digitised goods?

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Transfer of copyright right:

- able to exploit copyright

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Full Tax Exemption

FTE does not apply to:

- Property Developers; and

- Investment Holding Companies.

(w.e.f. 26.02.2013)

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Bonuses and Directors’ Fees

Contractual bonus:

- if contractual;

- with conditions?

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Sign-on bonus:

- with conditions?

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Directors’ Fees

- approved in arrears;

- approved in advance.

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Accommodation Benefit-in-kind

Assessable Lower of:

- 10% emolument; or

- A.V.

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wef YA 2015:

- Full A.V. assessable

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F & F:

- fully furnished:

- 50% of A.V. assessable;

- partially furnished:

- 40% of A.V. assessable.

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$

Salary 240,000

Bonus 60,000

Total Rental p.m.

12,000

Property Rental p.m.

9,000

F&F Rental p.m. 3,000

F&F (scale rate) 300 p.m.

A.V. 108,000

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$

Salary 240,000

Bonus 60,000

300,000

F&F 3,600

Emolument 303,600

Acc BIK (10%) 30,360

Total emolument 333,960

YA 2014

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$

Salary 240,000

Bonus 60,000

300,000

F&F 54,000

Emolument 354,000

Acc BIK (10%) 108,000


YA 2015

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$

Salary 240,000

Bonus 60,000

300,000

F&F 3,600

Emolument 303,600

Acc BIK (10%) 30,360


YA 2014

$

240,000

60,000

300,000

54,000

354,000

108,000

462,000

YA 2015

$128,040

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Hotel Benefit-in-kind

Assessable:

- $250 pm; plus

- 2% of basic pay for the period

74

Hotel Benefit-in-kind

wef YA 2015:

- Full cost assessable

75

Financial Action Task Force (FATF)

-Recommended that Tax Crimes

be designated as money laundering

“PREDICATE OFFENCES”

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Corruption, Drug Trafficking and Other

Serious Crimes (Confiscation of

Benefits) Act (CDSA) :

- Now criminalises laundering of

proceeds from serious tax offences

(wef 1.7.13)

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Implications of Amendments

- Confiscation of Criminal Proceeds;

- Mandatory Reporting of Suspicious

Transactions.

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Tax Offences regarded as Money

Laundering Predicate Offences:

- Tax Evasion (S96);

- Serious Fraudulent Tax Evasion (S96A)

- Tax Evasion (S62 GSTA);

- Overclaiming Refunds (S63 GSTA)

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Predicate offence

- Any offence whose proceeds may

become the subject of any money

laundering offence.

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Predicate Offences for Money Laundering:

- Drug Trafficking;

- People smuggling;

- Sexual servitude;

- Illegal Logging and fishing;

- Fraud and Organised Crime;

- Corruption;

- Corporate Crimes;

- Tax Evasion

SYL_SMU-Oct13

81

“Indications” of Evasion of Income Tax:

- Declared Income does not correlate to:

- Assets owned and living standards;

- Other companies within same industry.

- Unusually high expenses;

- High turnover with low margins or loss;

- High creditor balances;

- Qualified accounts;

- Bank balances higher than turnover;

- Use of personal bank accounts for business.

SYL_SMU-Oct13

82

“Indications” of Evasion of GST:

- Perpetual refunds;

- Inconsistencies between GST returns and

Income Tax Return;

- Unusual high volume or unusually high

value of transactions;

- Discrepancies with third party confirmations.

SYL_SMU-Oct13

83

Thank You

ISCA Budget 2014 Update and its Tax Implications: Impact ...download.isca.org.sg/event/TAX2014.pdf1...

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