Monday, February 19, 2007

Singapore Budget 2007: From an entrepreneur’s point of view

There are a few areas in the Singapore Budget 2007 that have direct effects on me and my company. I shall address them in this post. And when I have time, I shall write about other aspects of the Budget which I am interested in but not directly affecting me.

For information of the full Singapore Budget 2007, please visit this

  • Reduction of Corporate Tax from 20% to 18%

    That’s certainly good news for me and all business owners that are liable for corporate tax, though it should have greater effects on large companies. For small companies like mine, where the chargeable income is not that high, the effect isn’t that obvious. Nevertheless, still a welcome move from the government.

  • Removal of YA2009 expiry date for full tax exemption

    Now, that’s the one that has a greater impact on future startups. Start-ups currently enjoy full tax exemption on the first $100,000 of their chargeable income for each of their first three years of assessment between YA2005 and YA2009. Removal of the expiry date indicates that all future startups that meet the criteria shall enjoy full tax exemptions for their first three years.

    However, there’s still a little suggestion that I wish to make. Very often, startups do not have much profits or are making losses in their first few years. Considering a startup that is making losses for its first 3 years and only manage to obtain some profits on the forth year, the current tax exemption scheme will not serve any help to them.

    Also, for startups that do not make much profits in the first 3 years, they will not be able to take full advantage of the tax exemptions. So, instead of rigidly stick to exactly S$100,000 for each of the first three YAs, maybe we can have something like this:

    Total combined tax exemption of up to S$300,000 for the first 5 years of assessments. Startups can choose when to utilize the tax exemption within the first 5 years, and how much to utilize for each of the year of assessment. Let say, the chargeable income of company A is S$40,000 for the first YA, the director can choose to utilize S$40,000 of the tax exemption his company is entitled to, and leave S$260,000 for the next 4 years. If a company is making losses for the first two YAs, he still have the full S$300,000 tax exemptions to utilize for his next 3 years.

    I do not know how difficult it would be to implement the above suggestion, but at least I feel that it is more flexible and caters more to the needs of startups, without exceeding the limits of the original tax exemption scheme.

  • GST increase from 5% to 7%

    Currently, my company does not register for GST. But, my suppliers do. As such, the operation cost of my company will inevitably increase since I will have to absorb more GST. Hopefully, the corporate tax reduction is enough to cover for the loss.

Alright, that’s about those that have direct impacts on me. The SME rebates on CPF contributions do not affect my company at the moment, but may have some implications in future. However, it is rather insignificant compared to the above three areas.