Singapore Budget 2019: Sustaining growth through economic transformation28 Feb 2019
As Singapore marks its bicentennial year, the Finance Minister of Singapore, Mr Heng Swee Keat, delivered his fourth budget speech for Financial Year 2019 on 18 February 2019, themed "Building a strong, united Singapore".
Against the backdrop of a changing economic, geopolitical and technological landscape and challenges both domestically and globally, Mr Heng outlined the Government's plan to allocate resources to key areas: domestic companies, education, healthcare, security, technology and the workforce. With scarce mention of international business, it is to be noted that the Budget 2019 is largely domestically focussed, with the Finance Minister citing five long-term domestic challenges to address: ageing, social mobility, inequality, economic transformation, and climate change.
What were the main points of Budget 2019?
Here are the main takeaways from the Budget:
- Greater support to small and medium sized enterprises (“SMEs”) by providing financial schemes through co-government investment and quicker access to bank financing. Other initiatives include partnering with experienced industry experts and expanding the Industry Digital Plans (IDPs) to help high-growth firms innovate, grow and internationalise.
- Creating more work opportunities for Singaporeans through wage support to companies who hire Singaporeans and a further three years’ extension of the Enterprise Development grant and Productivity Solutions grant. The rules for foreign workers in the services sector will also be tightened by reducing the dependency ratio ceiling in two steps, that is, from the current 40% to 38% on 1 January 2020 and to 35% on 1 January 2021.
- A $6.1bn in Merdeka generation package and $1.1bn Bicentennial Bonus package will benefit a wide range of Singaporeans, from lower-income individuals to parents with schoolchildren to those in their silver years, in terms of greater healthcare assurance and access to opportunities.
The Budget was also light on tax-related changes. Some of the fiscal measures that impact the business and financial sector are summarised below:
- Extension of the Writing Down Allowance (“WDA”) for acquisition of qualifying Intellectual Property Rights (“IPRs”) under section 19B of the Income Tax Act (“ITA”).
- Extension of the income tax concessions for Singapore-listed Real Estate Investment Trusts (“S-REITs”) until 31 December 2025.
- Extension of the income tax concessions for Singapore-listed Real Estate Investment Trusts Exchange-Traded Funds (“REITs ETFs”) until 31 December 2025.
- The Designated Unit Trust (“DUT”) scheme will lapse after 31 March 2019.
- The Approved Unit Trust (“AUT”) scheme will lapse after 18 February 2019.
- Extension and Refinement of the Tax Incentive Schemes (under Sections 13CA, 13R, 13X) for funds managed by Singapore-based Fund Managers ("Qualifying Funds") until 31 December 2024.
- Recovery of GST for Qualifying Funds.
Where do trusts fit in?
The Budget, however, did not make any mention of the Sections 13G and 13Q schemes which are widely used by the trust industry in private trust planning. Section 13G provides tax exemption to a trust set up by a foreign settlor for benefit of foreign persons that is administered by a Singapore trust company. Section 13Q addresses the taxation of income for a trust administered by a Singapore trust company for the benefit of a Singapore family. The schemes are due to lapse after 31 March 2019. However, given that Singapore has been supportive of the local asset and wealth management industry, it is likely that an announcement will be made before the expiry date to extend both schemes.
Commenting on the Budget, John Tan, Managing Director of Ocorian Singapore said:
“The Budget is largely a domestically focused one, from investing in security and restructuring the economy to nurturing a caring society and building a global city. Certain tax incentives are also extended and strengthened to enhance Singapore's competitiveness. By and large, the Budget has been consistent with previous Budgets to keep Singapore competitive in an increasingly challenging environment and, at the same time, ensuring its people continue to be taken care of.”
John Tan, Managing Director, Ocorian Singapore