Overview of Tax Change in Budget 2021
Introduction
This article will discuss about the key changes in Budget 2021.
Jobs Support Scheme (JSS), Wage Credit Scheme (WCS) and Jobs Growth Incentive (JGI) have been extended. These three parts will be the main support for workers and business.
- JOBS SUPPORT SCHEME
JSS will be extended for firms under Tier 1 and Tier 2 sectors by up to six months until September 2021. Under the extended JSS, support levels will be tapered based on the projected recovery of the various sectors. Firms that are under Tier 1 who are currently receiving 50% JSS support, will receive 30% JSS support for wages paid from April to June 2021 and 10% for wages paid from July to September 2021. For Tier 2 sectors, businesses who are currently receiving 30% JSS support will receive 10% of support from April to June 2021. For Tier 3A sectors who are currently receiving 10% JSS support for wages paid from September 2020 to March 2021 will cease thereafter. Lastly, firms that are not allowed to resume on-site operations currently receive Tier 1 JSS support for wages paid up to March 2021. For wages paid from April 2021 onwards, JSS support will revert to the firms’ base JSS tier.
- WAGE CREDIT SCHEME
WCS scheme is extended for one year to 2021 with the government co-funding ratio at 15% and the qualifying gross wage ceiling at $5,000. In 2019 and 2020 gross monthly wage increase of at least $50 by the same employer will continue to be co-funded if they are sustained in 2020 and 2021.
- JOBS GROWTH INCENTIVE (JGI)
The JGI scheme will be extended for seven months from March 2021 to September 2021, eligible companies that hire locals between this period will receive wage support. For the non-mature locals (aged below 40) from the month of hire and up to 12 months, eligible companies will receive based on 25% of the first $5,000 of gross monthly income. Next, for the mature workers (aged at 40 and above), person with disabilities and ex-offenders, eligible companies will receive up to 18 months based on 50% of the first $6,000 of gross monthly income from March 2021.
Our comment
The Government has set aside $5.2 billion on JGI. This is to encourage companies to hire new local employees and retain its existing local employees.
Donations
Singapore Government encourages Singaporean and businesses to give back more to community by either donating or doing voluntary work (for businesses only) to Institutions of a Public Character (IPCs). The 250% Tax Deduction will be extended from 31 December 2021 to 31 December 2023.
Corporate tax changes
Some tax changes that were introduced in Budget 2020 has been extended in Budget 2021. For example, enhanced carry-back relief and accelerated write-off of Plant and Machinery (P&M) and renovation expense has been extended to Year of Assessment (YA) 2021 and 2022 respectively.
Businesses can make use of the enhanced carry-back relief to improve their cash flow by claiming tax refund from the Inland Revenue Authority Of Singapore (IRAS) immediately.
Goods and Services Tax (GST)
Imported goods via air or post
Currently, goods imported via air or post are not subject to GST if the value of the goods is not more than $400 (“low value goods or LVG”).
However, with effect from 1 January 2023, GST will be imposed on imported LVG by overseas suppliers that has a global turnover exceeding S$1 million and makes Business-to- Consumers (B2C) and Business-to-Business (B2B) supplies of LVG to customers in Singapore exceeding $100,000. B2C refers to supplies made to non-GST registered person. B2B refers to supplies made to GST-registered person that is subject to reverse charge.
Our comment
This would mean that GST will soon be imposed on all goods bought from popular e-commerce website like Taobao and Lazada. This move is to ensure a level playing field for our local businesses to compete effectively.
Imported non-digital services
GST has been imposed for digital services for both B2B and B2C and non-digital service for B2B only from 1 January 2020.
From 1 January 2023, GST will be extended to B2C and B2B imported remote service by overseas suppliers that has a global turnover exceeding S$1 million and B2C supplies of LVG to customers in Singapore exceeding $100,000. Remote service is proposed to be defined as “any services where, at the time of the performance of the service, there is no necessary connection between the physical location of the recipient and the place of physical performance”. This includes both digital and non-digital services. Some proposed examples include the following:
- Membership subscription to professional bodies;
- Supply of professional service; and
- Supply of educational and examination services;
Our comment
This would mean that GST would be imposed on your membership subscription to foreign professional bodies like Association of Chartered Certified Accountants (ACCA). This move is to ensure a level playing field for our local businesses to compete effectively.