The cut in CIT rate from YA2008 to 18% and the increase in
Partial Tax Exemption threshold from $100,000 to $300,000
are also both expected to dent collections in FY 2007.
75% exemption of up to the first $10,000 of normal
chargeable income (excluding Singapore franked dividend);
and
50% exemption of up to the next $290,000 of normal
chargeable income (excluding Singapore franked dividend)
This tax change will take effect from YA2008
qPersonal Income Tax (PIT)
Tax rate for 2007 was cut from 21% to 20%
q
Goods & Services Tax (GST)
Arising from the effect of the 2% increase in GST rate
Businesses in Singapore need to register for GST only if
their turnover exceeds $1 million a year. Otherwise, GST
registration is on a voluntary basis.
GST registration is clearly advantageous for exporters. It
will allow them to claim GST paid on their purchases and
imports (ie input tax) and yet not have to collect GST. (ie
output tax) on their zero-rated exports. For non-exporters,
GST registration will not have an impact on profits where
they are able to pass on the output tax on their supplies
fully on their customers.
q
Dividend
Differences between One-Tier Corporate Tax System and
Imputation System
Full Imputation System (for Singapore resident companies
only)
One-Tier Corporate Tax System (Applies to all companies)
Tax payable on normal chargeable income is not a final tax (i.e.
shareholders will still be taxed on the dividend
income).
Tax payable on normal chargeable income is a final tax (i.e.
shareholders will not be taxed on the exempt one-tier
dividend income).
Tax payable can be passed to shareholders as tax credits on
payment of dividend by way of the Section 44 account
mechanism (franked dividends).
Tax assessed on or after 1.1.03 will not form part of the Section
44 balance as at 31.12.02.
Shareholders are taxed on gross dividend and tax credits are
given.
Dividend paid out of after tax profit will be exempt from tax in
the hands of shareholders (exempt one-tier dividends).
q
CPF Changes and workfare
To help the majority of Singaporeans save more for their
future needs, the employer component of CPF contribution
rates will be increased by 1.5% from 1 July 2007.
1% will go into the worker’s Ordinary Account (OA) and 0.5% will go
into the Medisave Account (MA).
This will not apply to older low-wage workers
– those
who earn $1,500 or less
and
are alsoabove 35 years old.
