Opinions on Budget 2010: Personal Tax

By and large, Budget 2010 contained nothing very significant for individual taxpayers.

However, there were two changes of note.

Revision Of Tax Rebate for Owner-Occupied Residential Properties

Currently, the property tax rate for owner-occupied residential properties is at a concessionary 4 percent rate instead of the 10 percent rate for all other properties.

Furthermore, owner-occupied residential properties with an Annual Value (AV) lower than $10,000 can enjoy the on-going 1994 property tax rebates ranging from $25 to $150, depending on the AV of the property.

From January 2011, the 1994 property tax rebates would be replaced with the following progressive tax schedule:
1st $6,000 of AV 0%
Next $59,000 of AV 4%
AV balance in excess of $65,000 6%

Non-owner occupied residential properties and other properties would continue to be taxed at the 10 percent rate of their AV.

Due to the tax exemption on the first $6,000 of the AV and the progressive tax rates for the balance in excess of $6,000, the proposed property tax system for owner-occupied residential properties would benefit individual home owners of properties with an AV not exceeding $77,000.

For owner-occupied residential properties with an AV of more than $77,000, there would be a small increase in property taxes.

Tax Deduction for Angel Investors

A new tax deduction has been introduced to encourage greater angel investment from private individuals with appropriate investment and business expertise to provide financing and to add value to start-ups.

Currently, the cost of equity investment is not tax deductible as it is capital in nature.

Details of the proposed incentive are as follows:
• The approved angel investor has to commit at least $100,000 of equity investments in a qualifying start-up in a YA.
• The approved angel investor would be eligible for a tax deduction of 50 percent of his investment at the end of a two-year holding period.
• The tax deduction is subject to a cap of $500,000 of equity investments in a qualifying start-up per YA.
• The incentive applies to qualifying investments in qualifying start-ups made during the effective period.
• The incentive would be administered by SPRING Singapore.

This incentive is valid from 1 March 2010 to 31 March 2015. It will assist start-ups in Singapore to secure financing at the early stage of their growth and it aims to attract investors to nurture start-ups.

An angel investor who qualifies for the incentive would enjoy a maximum tax saving of $50,000 per YA. To qualify, the angel investors would have to seek approval from SPRING Singapore. There would also be qualifying conditions for both the investments and the start-ups.

SPRING Singapore is expected to release more details of the incentive by June 2010.

The writer is an Executive Director of KPMG Tax Services in Singapore. The views expressed herein are those of the author and do not necessarily represent the views of KPMG in Singapore.