Foreign dividends, branch profits and services income earned by individuals or companies from 1 June 2003 onwards will be exempted from tax.  The tax exemption will only apply to income derived from overseas jurisdictions with headline tax rates of at least 15%.

More details will be released by the Inland Revenue Authority of Singapore ("IRAS") by May 2003.
 

To encourage placement of funds in Singapore, interest income derived by individuals on their local standard savings, current and fixed deposits will be exempted from tax.  The tax exemption will be granted in two phases:-

• From the Year of Assessment 2004, tax exemption will apply to the interest on amounts exceeding the first S$100,000 in each of the standard savings, current and fixed deposit accounts; and
   
• From the Year of Assessment 2006, tax exemption will apply to the interest on full amount in these three deposits.

The IRAS will release further details by April 2003.
 

Two measures are taken to encourage employers to implement Portable Medical Benefits Scheme for their employees:-

• Tax exemption limit for additional Medisave contributions for private sector employees will be raised from 1% of an employee’s current monthly salary to a lump-sum of $1,500 per employee per year.  This will take effect from the Year of Assessment 2004.
   
• Deduction limit for medical expenses will reduce from the existing 2% to 1% of the total payroll.  However, employers who implement either of the Portable Medical Benefits Scheme or the Transferable Medical Insurance Scheme will continue to enjoy the deduction limit of 2%.  These changes will come into operations on 1 April 2004.

The Company Legislation and Regulatory Framework Committee has recommended several measures so to promote entrepreneurship in Singapore.  The recommendations, all being accepted by the Government, include:-

• Introduction of two new business structures next year i.e. Limited Partnership or Limited Liability Partnership which are available to all businesses;
  
  These offer limited liability to the partners, as well as the flexibility of being structured as partnerships.
   
• Removal of requirement to appoint professionally qualified company secretaries for private companies; and
   
• No audited accounts are required for dormant companies and exempt private companies with small annual turnover (not more than $2.5 million initially and not more than $5 million after one year of this change).

• Royalty income
  
  Effective from the Year of Assessment 2004, the unilateral tax credit scheme will be extended to royalties remitted from all non-treaty countries.
   
• IP acquisition
  
  Companies can currently apply to EDB or IDA for writing-down allowances over a five-year period for capital expenditure incurred in acquiring one of seven classes of IP:
  
  

  a.	Patents;
  b.	Copyrights and Related Rights;
  c.	Trade Marks;
  d.	Registered Designs;
  e.	Geographical Indications;
  f.	Layout Designs of Integrated Circuits; and
  g.	Protection of Confidential Information

  
  Writing-down allowances will now be granted automatically for capital expenditure incurred in acquiring intellectual property on the condition that the legal and economic ownership of the intellectual property lies with the Singapore entity.  This applies to IP acquired on or after 1 November 2003.
   
• Patenting costs
  

  To encourage more companies to patent their inventions and make Singapore an attractive base for R&D and IP management activities, EDB administers a Patent Application Fund Plus (PAFP) grant scheme, which helps individual inventors and Singapore-based SMEs defray part of the cost of patenting an invention.

  This scheme will now be complemented with a tax deduction for the cost of patenting an invention, provided the invention has not received any PAFP grant and that the legal and economic ownership of the resulting IP lies with the Singapore company.  This incentive will apply to patenting costs incurred on or after 1 June 2003, and will last for an initial period of 10 years.  EDB will release more details by May 2003.
  

• Foreign income for R&D
  
  A new R&D incentive has been introduced which will take effect from 1 June 2003.  Under this incentive, companies will be granted tax exemption on foreign sourced royalties and interest income that are used for R&D purposes.
  
  The incentive will last for an initial period of 5 years.  EDB will release more details by May 2003.
   
• Provision of information and digitised goods
  
  Payments by end-users to non-residents for on-line information and digitised goods are exempted from withholding tax.  This will take effect immediately for an initial period of 10 years.  The IRAS will release more details by March 2003.

At present, capital allowance deductions are only granted on equipment that is used in a company's own trade or business.  There is a rapidly growing trend for corporate groups to concentrate marketing or other high value-added activities in a single centralised company, and have their regional subsidiaries perform other activities.

To accommodate this business model, an Integrated Industrial Capital Allowance incentive will be introduced from 1 March 2003.  Under this incentive, companies will be allowed to claim capital allowance deductions on equipment which they own wholly, but are used by their subsidiaries outside Singapore.

This incentive is part of a package of measures under an “Integrated Industrial Initiative”.  Companies can apply to EDB for this incentive, which will last for an initial period of 10 years.

EDB will release the details of the Integrated Industrial Capital Allowance incentive by March 2003.
 

With effect from the Year of Assessment 2004, the deduction is granted for the upfront land premium paid by a lessee in respect of a designated lease for the construction or use of a building on JTC or HDB industrial land provided the lease is not more than 60 years.  (Prior to the change the lease tenure restriction was 30 years).
 

Private wealth management

• With effect from the Year of Assessment 2004, income tax exemption is extended to foreign trusts administered by all trust companies in Singapore, not just those administered by Approved Trustee Companies (ATCs).
   
• By 1 June 2003, the existing lists of designated investments and specified income under the ATC scheme will be replaced with an exclusion list.
   
• The sets of conditions for the purpose of income tax exemption for foreign trusts and the zero-rating of trustee services provided to foreign trusts will be aligned for both from 1 June 2003.
   
• The GST relief provision in respect of trustee services is to be extended to trust administration services provided by a Singapore trust company to a foreign trust of which it is not the trustee from 1 June 2003.

Payments for use of capacity on submarine cables operated by non-residential persons is exempted from withholding tax with immediate effect.

With effect from the Year of Assessment 2004, writing-down allowance will be granted for payments for the purchase of Indefeasible Rights of Use on submarine cable system over its useful life.
 

The course fee relief will be increased from $2,500 to $3,500 with effect from Year of Assessment 2004.  The scope of relief will be expanded to include:-

• Fees for seminars and conferences; and
• Courses not directly related to current profession. The condition for the relief is that the applicant has to prove that the course resulted in a career switch to a relevant job within two years.

Under the Double Tax Deduction (DTD) for Overseas Talent Recruitment Scheme, employers can claim DTD for:

a.	recruitment and relocation costs incurred in hiring P1 talent from abroad;
b.	relocation costs for hiring P2 talent from abroad; and
c.	recruitment and relocation costs for hiring returning Singapore citizens and permanent residents of standing equivalent to P employment pass holders.

The amount of DTD that employers can claim has been enhanced with immediate effect to take into account expenses that employers may incur in relocating the employees’ family members to Singapore. The revised caps are shown in the table below.

Description P1 Employment Pass (or equivalent) P2 Employment Pass (or equivalent) Relocation expenses for employee $15,000 (includes recruitment expenses) $5,000 Relocation expenses for spouse $5,000 $5,000 Relocation expenses for unmarried children under the age of 21 years $2,500 perchild (maximum of 2 children) $2,500 per child  (maximum of 2 children) Total cap per employee $25,000 $15,000

The total deduction an employer can claim for qualifying expenses incurred has been revised from $150,000 to $275,000. 

The CPF salary ceilings for private sector employees will be lowered in phases from 1 January 2004.  The CPF salary ceilings of the public sector employees (both pensionable and non-pensionable) will also be rationalized to match that of the private sector.

The current employee contribution rate for older workers aged 50 to 55 of 20% will be reduced in phases from 1 January 2004.

Currently, excise duties on petrol are levied either at an ad valorem rate on the final pump price before GST, or at a prescribed floor rate, whichever is higher.

The Government will impose specific rates on the excise duties on petrol with immediate effect.  The new specific duty rates for various grades of petrol will be set at the current floor rates of the petrol excise duties.
 

To help households, especially lower-income ones, cope with their utilities charges, the Utilities Save Scheme will be extended by one year.

In addition, effective from April 2003, all 1- to 5-room HDB flats will receive an extra month of rebate on S&C charges.
 

• Increased excise duties on all tobacco products with immediate effect.
• To tax cigarettes by sticks, instead of by weight, from 1 July 2003.
• Reduction of the amount of tobacco products that can be brought in by individuals without a permit from 2kg to 400g, from 1 April 2003.

• Change in the basis of valuing motor vehicles
   
  The basis for valuing motor vehicles will be changed from the Brussels Definition of Value method to the Customs Valuation Code method with effect from 1 April 2003.
   
• Exclusion of the cost of wheelchair lifts
   
  The cost of wheelchair lifts and other costs associated with the installation of such lifts will be excluded from the OMV of a vehicle in computing the ARF and the excise duty payable with immediate effect.

• Stamp duty on leases
   
  Currently, all property leases are levied with stamp duty.  With effect from 1 April 2003, leases with annual rents that do not exceed $1,000 will be exempt from stamp duty.  The exemption will also cover the fixed duty levied on 99-year leases on the purchase of flats from HDB.
   
• Seller’s stamp duty
  
  The seller’s stamp duty on the sale of residential properties within three years of purchase which was introduced in 1996 and suspended indefinitely in November 1997 will be abolished.

• Income tax deduction for donation of land and buildings
   
  With effect from 1 April 2003, income tax deductions will be given for donations of buildings and parcels of land made to Institutions of a Public Character (IPCs).
   
  Donors will have the option to donate the sales proceeds of the asset or the asset itself, as both options will allow the donor an equivalent amount of tax deduction.
   
• Exemption of stamp duty on donations of immovable properties and shares
   
  All donations of immovable properties and shares to IPCs are exempt from stamp duty with immediate effect.
   
• Enhancements to the public sculpture donation scheme
  
  Three enhancements will be introduced with effect from 1 July 2003 to the Public Sculpture Donation Scheme to encourage donors to adopt existing sculptures, commission and donate sculptures or publicly display sculptures from their private collections.  Details of the scheme will be announced by the National Heritage Board.