2014 B d t S i

www.pwc.com/sg

2014 Budget Seminar

K t t h Key corporate tax changes and others

Florence LohFlorence LohPwC Singapore

AgendaAgenda

1 Corporate tax rate1. Corporate tax rate

2. Productivity and Innovation Credit

3. Research and development

4. Intellectual property

5. Land intensification allowance

6 i hh ldi i d id 6. Withholding tax waiver on payments made to non-resident branches

7. Other changes

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Corporate tax rateCorporate tax rate

3

Corporate Tax RateCorporate Tax RateA tale of two cities

Singapore corporate tax rate remains at 17%

(Fl ) Si

Singapore corporate tax rate remains at 17%

(Flag) Singapore

• 3-year Transition Support Package continues

(Flag) Hong Kong

• Profits tax rate remains at 16.5%• 2013 14 Profits tax rebate 75% of tax g

• Corporate tax rebate 30% of tax payable, capped at S$30,000 per YA (until YA 2015)

• 2013-14 Profits tax rebate 75% of tax payable subject to a cap of HKD 10,000 (approx S$1,633)

S$500k of taxable income

S$500k of taxable income (approx HK$ 3m)

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ETR of 8.27%

( pp $ 3 )

ETR of 16.2%

Productivity and Innovation CreditProductivity and Innovation Credit

5

Productivity and Innovation Credit

Active companies benefiting from PIC – YA 2012*

Productivity and Innovation Credit

63%

37%

Yes

No?!?

* P IRAS / A l R

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* Per IRAS 2012/13 Annual Report

Productivity and Innovation CreditProductivity and Innovation Creditt YAs 2011 to 2015

d d A 8

rent 400% deduction

• $400k per YA per activity

Extended to YA 2018

urr Cash payout

• Capped at $60k per YA (for $100k of expenditure)

At least 3 consecutive months

prior to claim

Cu • 3 local employees

Qualifying activitiesA i iti l i f PIC i f ti

pprior to claim

• Acquisition or leasing of PIC information technology and automation equipment

• Training of employees• Acquisition or licensing of IP rights• Registration of IP rights

Includes centralised hiring arrangements

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• Registration of IP rights• R&D activities• Approved design projects

Productivity and Innovation CreditProductivity and Innovation CreditPIC+ scheme for SMEs

Key BenefitKey Benefit

• Expenditure cap for each qualifying activity raised from $400k to $600k from YA 2015

• Only for qualifying SMEs

Qualifying SMEs

D fi d tit ( it i t b li d t th l l) • Defined as an entity (criterion to be applied at the group level) which:

- Has an annual turnover of not more than $100 million or

- A workforce of not more than 200

Would increasing cap for cash payout

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Would increasing cap for cash payoutbe more beneficial for SMEs ?

PIC PIC+ PIC minus?PIC PIC PIC minus?

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PIC PIC+ PIC minus?PIC PIC PIC minus?

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Poll Question:

Who can be a SME?Who can be a SME?

A. HungryGoWhere B. A Singapore subsidiary of WhatsApp (if there is one)WhatsApp (if there is one)

C. I need to phone a friend D. Me…? I have more than 200 employees but I will ensure

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psomeone @ IRAS

200 employees but I will ensure some of them resign this year.

Research and developmentResearch and development

12

Research and developmentResearch and developmentEnhanced and further tax deductions

Additional 50% tax deductions – S14DA(1)

• Extended for 10 years to YA 2025

Further tax deductions – S14E

• Further tax deduction on up to 200% of qualifying expenditure on u e a deduc o o up o 00% o qua y g e pe d u e oR&D projects approved by the Economic Development Board (EDB)

• Extended for 5 years to 31 March 2020

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Intellectual propertyIntellectual property

14

Intellectual PropertyIntellectual PropertyIP registration costs

Extension

Tax deductions for IP registration costs (originally due to expire in YA 2015) – extended to YA 20182015) – extended to YA 2018

• Patents,

• Trademarks,

• Designs; and

• Plant varieties

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Intellectual PropertyIntellectual PropertyWriting down allowances

ExtensionsExtensions

• WDA for qualifying expenditure incurred to acquire intellectual property (IP) rights has been extended to YA 2020

• Accelerated WDA for media and digital entertainment companies on expenditure incurred to acquire IP rights approved by EDB has been extended to YA 2018

• Both schemes above originally due to expire in YA 2015

ModificationsModifications

• Legislate a Negative List – exclusions to focus on:(1) customer-based intangibles; and ( ) d i f k

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(2) documentation of work processes

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Intellectual PropertyIntellectual PropertyWriting down allowances – “Negative List”

Commercial value can be derived from customer-based Commercial value can be derived from customer based intangibles !

Allow companies to claim WDA on expenditure on IP that will generate value for Singapore companies and the Singapore economy? generate value for Singapore companies and the Singapore economy?

PwC 17WhatsApp active user base: 450 million

Intellectual PropertyIntellectual PropertyWriting down allowances – “Negative List”

Work processes manuals - What about Work processes manuals - What about the ‘bible’ that ‘shows youhow to do it’?

Proprietary operation systems and processes/ franchise arrangements

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processes/ franchise arrangements drive value in a company and its brand.

Intellectual PropertyIntellectual PropertyIP box regime?

IP LifecycleIP Lifecycle

Creation Ownership / Acquisition

Commercialisa-tion

R&D deductions(100%, 150%, 200%,

Enhanced deductions for registration & in-licensing costs A permanent

400%)

R&D grants

in-licensing costs

Writing-down allowance

A permanent IP box regime ?

Broad-based incentives (e.g. Development and Expansion Incentive)

R&D gestation period – up to 22 years !

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Up to 20 years (with option to extend for another 20 years – case-by-case)

Land intensification allowanceLand intensification allowance

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Land Intensification AllowanceLand Intensification Allowance

Overview

Land intensification allowance (LIA) expenditure incurred for the • Land intensification allowance (LIA) – expenditure incurred for the construction of a qualifying building or structure approved by EDB

ExtensionExtension

• Due to lapse after 30 June 2015 – now extended to 30 June 2020

Refinements

• Industry sectors expanded to include (1) the logistics sector and (2) businesses carrying out qualifying activities on airport and port landp

• Existing buildings that have already met or exceeded the GPR benchmark are required to meet an incremental GPR criterion of 10%

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10%

Withholding tax waiver on payments Withholding tax waiver on payments made to non-resident branches

22

Withholding tax waiver on payments made to Withholding tax waiver on payments made to non-resident branches

F i Foreign HQ

Foreign country

Singapore

Singapore partiesSingapore

Branch S12(6) and 12(7) payments payments

(e.g. interest, royalties, etc)

) Wi hh ldi

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1) Withholding tax; or

2) Branch waiver application

Withholding tax waiver on payments made to Withholding tax waiver on payments made to non-resident branches

F i WEF 21 Feb 2014, no requirement

Foreign HQ

to withhold tax on S12(6) & 12(7) payments

Foreign country

Singapore

Singapore partiesSingapore

Branch S12(6) and 12(7) payments payments

(e.g. interest, royalties, etc)

) Wi hh ldi

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1) Withholding tax; or

2) Branch waiver application

Other changesOther changes

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Other changesOther changesInformation and Communications Technology

• Subsidy of 70% of costs of adopting ICT solutions

Scaling up proven ICT solutions

• Subsidy of 80% of costs, up to $1 million of emerging technology Piloting of million, of emerging technology solutions piloted by “first movers”

gemerging solutions

• Subsidy of one-time costs and 50% (subject to caps) of monthly cost of fibre subscription plans

Enabling high-speed connectivity

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Other changesOther changesEnterprise financing schemes

• In 2010, the government set aside $250 million to co-invest in the private sector Another $150 million set aside

Co-investment Programme Phase II

• Loans of up to $100,000 are provided to local SMEs where government shares 50% of the loan default

Micro-loan programme for young where government shares 50% of the loan default

risks Government now shares 80%programme for young

SMEs

• Global Company Partnership• Market Readiness Assistance Grant

Financing for internationalisation

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Other changesOther changesVehicle tax

• Introduced to narrow the cost differential between green vehicles and conventional vehiclesvehicles extended to 30 June 2015 for commercial vehicles and buses

Green Vehicle Rebate

• Adopts a broader outcome-based approach to encourage shift to low emission models to encourage shift to low emission models extended to 30 June 2015 for commercial vehicles, buses and motorcycles

Carbon Emissions-based Vehicle Scheme

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Other changesOther changesThe tale of 3 “sins” – Betting, liquor and tobacco

… vices are sometimesonly virtues carried to excess !

Ch l Di k

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Charles Dickens

Other changesOther changesThe tale of 3 “sins” – Betting, liquor and tobacco

No budget is complete without complete without excise increases

on tobacco & alcohol…

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Other changesOther changesThe tale of 3 “sins” – Betting, liquor and tobacco

25% 10%5%

ting • 1 July 2014, duty

will be raised from 25% of uc

ts • 21 February 2014, excise duty to increase by 25% ac

co • 21 February 2014, excise duty on cigarettes and

Bet

t from 25% of gross bets to 30%

• Totalisator• Non horse or

pro

du increase by 25%.

• Beer• Wine• Spirits

Materials sed

Toba

cigarettes and other manufactured tobacco products will be increased by 10%• Non-horse

mutual betting • Any other

system or method of cash or credit betting

Liqu

o • Materials used to manufacture alcohol products

y

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or credit betting

Other changesOther changesThe tale of 3 “sins” – Betting, liquor and tobacco

25% 10%5%

ting • 1 July 2014, duty

will be raised from 25% of uc

ts • 21 February 2014, excise duty to increase by 25% ac

co • 21 February 2014, excise duty on cigarettes and

Bet

t from 25% of gross bets to 30%

• Totalisator• Non horse or

pro

du increase by 25%.

• Beer• Wine• Spirits

Materials sed

Toba

cigarettes and other manufactured tobacco products will be increased by 10%• Non-horse

mutual betting • Any other

system or method of cash or credit betting

Liqu

o • Materials used to manufacture alcohol products

y

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or credit betting

Concluding thoughts... Concluding thoughts... Painful to those who indulged

Grateful to those Helpful to those with

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Grateful to those who contributed

Helpful to those with “own money in the game”

Thank youThank you.

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