Making Singapore the Best Place to Start and Grow A Business

For All Companies

• Reduce the corporate tax rate by two percentage points to 18% from Year of Assessment (YA) 2008. This will cost the Government $800 million a year.
• Increase the corporate tax exemption threshold from $100,000 to $300,000 from YA2008, with the following exemption rates:

  -	75% exemption for the first $10,000 of chargeable income; and
  -	50% exemption for the next $290,000 of chargeable income.

  This will cost the Government $150 million a year.
• With the above changes, the corporate tax structure will be as follows:

  Amount of chargeable income Effective tax rate First $10,000 4.5% Next $290,000 9.0% In excess of $300,000 18.0%

• Allow tax deduction for other specified borrowing costs that are paid as a substitute for interest expense, from YA2008. IRAS will release details by May 2007. This will cost the Government $110 million a year.
• Extend the concession permitting writing down allowances for acquired intellectual property from 31 October 2008 to 31 October 2013.
• Increase the qualifying period for the investment allowance incentive from five to eight years, for assets acquired on hire-purchase basis. This will be effective for assets purchased on hire-purchase terms from 15 February 2007.

For Start-ups and SMEs

• Remove the YA2009 expiry date for the corporate tax exemption scheme for start-ups, which exempts the first $100,000 of chargeable income.
• Grant SMEs cash rebates on the first $80,000 of total employer and employee CPF contributions over two years:

  -	In the first year (1 July 2007 - 30 June 2008), the rebate is 2% of the first $40,000 of total CPF contribution and 1% of the next $40,000 of total CPF contribution.
  -	In the second year (1 July 2008 - 30 June 2009), the rebate is 1% of the first $40,000 of total CPF contribution and 0.5 % of the next $40,000 of total CPF contribution.

  This will cost the Government $100 million. Further details of the application process for rebates and the eligibility criteria will be released by 1 May 2007.
• Provide a grant for SMEs voluntarily registering for GST (capped at $5,000 per SME) to support up to 50% of GST registration-related costs, such as hardware, software, Internet connection and IT implementation consultancy and training.

Growing "High-Trust" Services

Promoting Legal Services

• Allow 50% tax exemption for law firms' incremental income from international arbitration activities. The incentive will be available from 1 July 2007 to 30 June 2012. The Ministry of Law will release more details by May 2007.

Promoting Financial Services

• Remove the 80/20 rule under our tax exemption scheme for non-resident funds under Section 13C of the Income Tax Act, subject to conditions.
• Enhance tax exemption schemes for income of funds managed by local fund managers with effect from 15 February 2007:

  -	Expand the list of designated investments to cover qualifying loans, physical commodities, and commodity derivatives; and
  -	Extend the schemes to Collaterised Debt/Loan Obligations.

• Enhance the Financial Sector Incentive (FSI) scheme, with effect from 15 February 2007, to include income earned from providing investment advisory services under fund management delegation arrangements with foreign fund managers.
• Expand scope of activities qualifying for the Finance and Treasury Centre (FTC) incentive scheme by allowing investments in qualifying unit trusts, with effect from 15 February 2007.
• Extend the existing tax exemption on over-the-counter (OTC) financial derivative payments by five years to 19 May 2012.
• Enhance the Qualifying Debt Securities (QDS) scheme to include prepayment fees, redemption premium and break cost which are paid to holders of qualifying debt securities issued on or after 15 February 2007. MAS will release details of the above tax changes by May 2007.

Promoting Philanthropy Services and NPOs

• Grant income tax exemption to all registered charities without requiring them to spend at least 80% of their annual receipts in Singapore within two years.
• Relax the 80/20 spending rule under the fund raising permit for foreign charitable causes for donations raised from private donors and not from the general public.
• Allow double tax deductions for donations to foundations and grantmakers as long as the donations are channelled to charities with Institution of a Public Character (IPC) status within a specified time frame. Details will be released by September 2007.
• Grant income tax exemption to attract not-for-profit organisations (NPOs) with regional or international charters that can bring economic value to Singapore. This scheme takes effect from 15 February 2007.

Promoting Logistics, Maritime, Aviation Services

• Extend the incentive period for Approved Shipping Logistics Enterprise (ASL) scheme from five to 10 years with effect from 15 February 2007. MPA will release the details by May 2007.
• Enhance the Aircraft Leasing Scheme (ALS) for the period of 1 March 2007 to 29 February 2012 by:

  -	Offer an additional 5% concessionary tax rate category on qualifying leasing incomes;
  -	Extend the scheme to aircraft financing structures; and
  -	Expand the list of qualifying lease incomes to cover incomes from onshore leasing and leasing of aircraft engines.

  EDB will release details by May 2007.
• Zero-rate GST for expenses incurred to service, buy, or lease containers in the international transport of goods with effect from 1 April 2007. Details will be released by IRAS in March 2007.

Other Tax Changes

• Extend stamp duty relief for intra-group transfer of assets to unlimited companies, Limited Liability Partnerships where partners are companies, and Statutory Boards. This will take effect from 15 February 2007. IRAS will release details in February 2007.