Think Tax, as you plan your year ahead

Let’s welcome 2018 with optimism as the heavy rain showered on Singapore should signify prosperity, abundance and opportunities amidst rapid pace of change and global uncertainty.

Taking some important steps at the beginning of the year would pave way for a bright year ahead.  The first step would be to review and plan your business tax situation for the year and consider which tax opportunities may be available and beneficial to your business. Talking to a trusted BDO advisor can help alleviate your burden, answer any questions in your planning process and potentially identify tax savings opportunities specific to your circumstances.

1. Purchase big-ticket items early and consider GST registration

With the Finance Minister Heng Swee Keat hinting at upcoming tax hikes in his 2017 Budget Speech  and more recently, Prime Minister Lee Hsien Loong’s comments that Singapore will be raising taxes as government spending on social services and investments grows, an increase in GST rate seems inevitable. The big question seems to be “When?”

Currently, only GST-registered businesses are able to recover GST on their business purchases and expenses (subject to certain conditions). For businesses who are not GST-registered or are partially exempt GST-registered businesses (and not able to recover GST in full), the businesses may wish to make its big businesses purchases (e.g. renovation of office, machinery or equipment) before the GST hike.

For non GST-registered businesses, it is also timely to re-consider if it is worthwhile to apply for GST registration by performing a cost-benefit analysis, as the irrecoverable GST will add on to your business costs.

2. Preparing for a GST hike

For businesses who choose to remain non GST-registered, you may want to prepare for any upcoming GST hike by budgeting in a higher GST rate in your costing. It may be safe to budget a GST rate of 10%, considering the GST rates in the region. Businesses should also take into account proposed changes that may see GST been charged on digital supplies and online purchases going forward.

Steps to prepare your business for any upcoming GST hike e.g. training and updating your staff with the new and/or transitional rules, getting your software ready should also be in your to do list, although not immediate.

3. The Road to Internationalisation 

As you plan your business expansion, going regional or international may come to mind. Businesses can automatically claim 200% tax deduction on the first S$100,000 of eligible expenses for the following four activities per assessment year with no prior approval from International Enterprise Singapore required:-

  • Overseas business development trips and missions;

  • Overseas investment study trips and missions;

  • Overseas trade fairs; and

  • Approved local trade fairs.

Businesses will need to maintain relevant documentation as proof of expenditure and purpose in the event of a tax query. In this regard, businesses should start collating information for qualifying expenses incurred during the year 2017 on qualifying overseas business development trips or start planning for overseas business development / investment study trips / trade fairs for 2018 to maximize tax savings available under this scheme.    

4. Personal Income Tax Relief Cap

At the personal front, be prepared for less disposable income when with effect from the YA 2018, the total amount of personal income tax reliefs that an individual taxpayer can claim is subject to an overall relief cap of S$80,000 per assessment year.

As an individual taxpayer, you should continue to claim the applicable personal income tax reliefs if you have fulfilled the qualifying conditions.  If the total amount of reliefs claimed is in excess of the relief cap, the personal income tax reliefs will be limited at S$80,000. It may be timely to start the conversation with family members as you consider your tax relief claim and/or your share of the tax reliefs.

5. Key Take-Away

The fundamental premise is that taxation is inevitable and there is little to like about it. Whether it is direct or indirect tax, it will hit your pocket and good planning will bring you a long way. At BDO, we believe in providing our clients with bespoke advice, please feel free to contact us today and a trusted BDO advisor would be happy to assist you with your business and personal tax planning.