While the Singapore budget 2021 ("Budget 2021") continues to provide immediate support for local businesses in the wake of a prolonged pandemic, its key focus is clearly on the medium to longer-term transformation of Singapore's economy and on preparing its workforce to thrive in a digital economy.
What is of particular note in Budget 2021 is the extension of the Goods and Services Tax (GST) on the import of low-value goods and business-to-consumer (B2C) imported non-digital services. This should boost government revenues and allow it to meet its increasing recurring costs, while also addressing the shift toward digital modes of transactions. Budget 2021 also confirms that the proposed GST hike will not happen this year, but the increase will take place sometime during 2022 to 2025, and is likely to be sooner rather than later.
We highlight below the key tax developments from Budget 2021.
- GST has been extended to low-value imports of goods not exceeding SGD 400 in value, and to B2C imported non-digital services. In addition, the basis for determining whether zero-rating applies for media sales has been changed from the place of circulation to the place where the customer and direct beneficiary belong.
- There have been extensions and enhancements to various tax schemes, including the Double Tax Deduction for Internationalisation scheme, and legislating withholding tax exemptions for the financial sector. At the same time, several schemes, such as the Automation Support Package and the Investment Allowance (Energy Efficiency) scheme, have lapsed in order to streamline the schemes available for businesses.
- There has been an extension of the temporary measures (e.g., Jobs Support Scheme and Jobs Growth Incentive) introduced in 2020 to help businesses affected by the COVID-19 pandemic in managing their cash flow and in the hiring of local employees.