News Stop: Notes for Entrepreneurs on Budget 2007

Yesterday, the Singapore government announced the Budget for the year 2007. We have extracted excerpts for the entrepreneurs on the important highlights of the budget: (i) corporate tax cuts by 2%, (ii) increment of CPF contribution to 14.5% and (iii) GST will be increased one shot to 7% from July 2007.

The important highlights of the budget includes the following:

• Singapore cuts corporate tax rate by 2 percentage points to 18%: That will put us about 0.5% above the corporate tax rate in Hong Kong (17.5% and it is the lowest in Asia). The big companies will most likely benefit in bringing their operations into Singapore.
• GST rate to rise to 7% from July 1: The GST will be increased directly from 5% to 7% at one shot, starting from 1st July. The entrepreneurs from all sectors (particularly, the retail sector) will have to take note how the changes are going to be implemented.
• Singapore to raise employers’ CPF contribution by 1.5% percentage points: The new budget will see an increase on the CPF employer contribution rate to 14.5% from July 2007. The breakdown is 1% will go to the ordinary account and the remaining 0.5% goes to Medisave.

From TodayOnline, “Can do, will do, do well”, you find a summary of how the self-employed (or the entrepreneurs) are affected by the new policies put in place for businesses. We place excerpts from Today (for the self-employed group on how the new Budget 2007 affects them).

SELF-EMPLOYED: Medisave contribution rates will be lowered to one-third the full rates. The rate will gradually rise to the full rates for those with an annual net trade income of between $12,000 and $18,000. The self-employed earning an annual net trade income of $6,000 or less do not have to contribute to the CPF.

Workfare Income Supplement SCHEME: To boost take-home pay and CPF savings of low-income workers, those aged between 35 and 45 will receive up to $900 a year, in cash and CPF. Those above 45 will get higher payouts, up to $1,200 a year.FOR BUSINESSES …Corporate Taxes: Reduced from 20% to 18% from Year of Assessment 2008

Corporate Tax Exemption: Threshold for companies increased from $100,000 to $300,000 from YA2008. This means almost 80% of taxable companies here will pay tax at effective rates of less than 10%. For start-ups, the YA2009 expiry date for corporate tax exemption will be scrapped. The scheme exempts the first $100,000 of chargeable income.

REBATES AND GRANTS: SMEs will enjoy cash rebates on the first $80,000 of employer and employee CPF contributions over two years. There will also be a grant of up to $5,000 per SME for firms, who voluntarily register for GST.

PROMOTING LEGAL AND FINANCIAL 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. To promote financial services, the Government will remove the 80/20 rule under the tax exemption scheme for non-resident funds, subject to conditions.
Promoting Philanthropy: Income tax exemption for registered charities without requiring them to spend at least 80% of their annual receipts in Singapore within two years. Relaxing the 80/20 spending rule under the fund raising permit for foreign charitable causes for donations raised from private donors.

For details, please refer to Budget 2007 Speech.

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