Currently, companies doing business in Singapore pay income tax at the corporate tax rate of 17%, effective from Year of Assessment 2010. Partial tax exemptions of 75% of the first S$10,000 of chargeable income and of a further 50% on the next S$290,000 of chargeable income, provide for tax exemption of S$152,500 on the first S$300,000 of a company’s chargeable income. Companies can achieve more tax savings under specific tax regimes.
Among the tax changes in the 2010 Budget is a Land Intensification Allowance incentive which is available to businesses in certain industry sectors, including the food and beverage industry. The incentive is a targeted scheme to promote the intensification of industrial land use. Following recent amendments in October 2010 to Singapore tax legislation, capital allowances are available to the food and beverage industry for capital expenditure incurred on or after 23 February 2010 on the construction or renovation of a qualifying building or structure. In addition to the building or structure and the land it is built on having to meet certain requirements, the incentive is also granted on the basis that a qualifying activity is carried on in the building or structure.
The list of such qualifying activities, published in December 2010, covers a range of food products of animal and vegetable origin, as well both alcoholic and non-alcoholic beverages, and includes the following:
- Processing and preserving of meat
- Processing and preserving of fish, crustaceans and molluscs
- Processing and preserving of fruits and vegetables
- Manufacture of vegetable and animal oils and fats
- Manufacture of dairy products
- Manufacture of grain mill products
- Manufacture of starches and starch products
- Manufacture of bakery products
- Manufacture of sugar
- Manufacture of cocoa, chocolate and sugar confectionary
- Manufacture of macaroni, noodles, vermicelli and other related products
- Manufacture of prepared meals and dishes
- Manufacture of coffee, tea and related products
- Manufacture of prepared animal feeds
- Distilling, rectifying and blending of spirits
- Manufacture of wine
- Manufacture of malt liquors and malt
- Manufacture of soft drinks, production of mineral waters and other bottled waters
This incentive is granted on an application being made to the Economic Development Board between 1 July 2010 and 30 June 2015. A qualifying activity is to be carried out by a single user as its principal activity and using at least 80% of the total floor area of the building or structure. Other conditions on zoning of land and gross plot ratio benchmark of the building or structure also apply.
The capital allowances come in two parts. First, an initial allowance of 25% of the qualifying capital expenditure is granted to the user in the year of assessment relating to the basis period during which the capital expenditure is incurred. Secondly, upon completion of the construction or renovation of the building or structure, an annual allowance of 5% of the qualifying capital expenditure incurred is granted for each year of assessment where at least 80% of the total floor area of the building or structure is in use by the user for the qualifying food and beverage activity.
Other details on this incentive include consequences on cessation of permanent use of the building or structure for the qualifying activity, adjustments upon sale of the building or structure, transfer of the building or structure to an amalgamated company, carry forward of unutilised capital allowances and carry back of such allowances.
As both existing and new players in the food and beverage industry may avail themselves of this new tax incentive, it may attract new entrants into this business sector in Singapore. New players can choose from any of the long list of qualifying activities, and may wish to do their calculations on the tax and non-tax costs and benefits of venturing into the food and beverage industry in Singapore.