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PwC’s Budget 2017 proposals include easier visa rules, tax reliefs

SINGAPORE — Ease work visa regulations for certain firms in the technology sector. Reintroduce incentives for employee share plans to attract talent. Give tax reliefs to help businesses go digital. Allow enhanced tax deduction for overseas research and development activities.

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SINGAPORE — Ease work visa regulations for certain firms in the technology sector. Reintroduce incentives for employee share plans to attract talent. Give tax reliefs to help businesses go digital. Allow enhanced tax deduction for overseas research and development activities. 

These are some of the recommendations that professional services firm PwC Singapore has put forward to the Government for consideration ahead of the upcoming Budget 2017. 

The recommendations cover several areas such as embracing digital disruption, enhancements to research and development, and encouraging local businesses to expand their footprint locally and overseas.

As Singapore continues to face a shortage of talent with digital skills, PwC said that employment rules for work visas could be relaxed for certain employers in the venture fund and technology start-up space. 

It also proposed incentives to help small and medium-sized enterprises (SMEs) attract and retain talent, noting that cash-strapped start-ups and smaller companies often resort to share option and stock award schemes to woo talent and reward entrepreneurship. 

“The Government should consider reintroducing an incentive for employee share option and stock award schemes, similar to the employee equity-based remuneration scheme for SMEs and start-ups that was previously available under sections 13J and 13M of the Income Tax Act. This could be restricted to employees of start-ups or SMEs,” it said.

As Singapore embraces digital disruption to remain competitive, the main driver for companies to move up the value chain is developing knowledge-intensive and high value-added activities, PwC said as it called for a conducive fiscal environment to spur innovation.

“Attracting companies and intermediaries to manage their intellectual property (IP) portfolios and site IP management functions in Singapore will also add to high-end employment creation and knock-on demand for IP support services,” it said.

To speed up the transformation to a digital landscape, tax reliefs such as enhanced deductions or capital allowances could be introduced to help businesses alleviate the investment cost to digitise and modernise their processes, PwC recommended.

“There are hefty costs involved for a company to move into a digital environment. With the expiry of the Productivity and Innovation Credit (PIC) scheme in Year of Assessment 2018, companies including start-up enterprises that have yet to benefit from the scheme will incur expenditure that span from the hardware infrastructure to labour costs of digitising data, information migration and staff training,” it said.

With the expiry of the PIC scheme, qualifying R&D activities conducted overseas will also not qualify for enhanced deduction. 

“This would be non-competitive and section 14DA of the Income Tax Act should be amended to include qualifying R&D activities conducted overseas so long as the activities have a nexus to the Singapore business, e.g. the majority of the IP developmental activities will be carried out in Singapore or the IP developed out of the R&D will be owned by a Singapore-resident enterprise,” it said.

To promote enterprise, measures could be introduced to help local businesses reinvent themselves to expand their footprint locally and overseas. 

“The tax treatment of expenses relating to new ventures should be liberalised. Such expenses are currently not deductible as they are considered capital in nature. Companies should be allowed to deduct expenses incurred in respect of new business ventures against profits from their existing trade or business. This would encourage businesses to take the extra step to develop innovative capabilities,” PwC said.

“As a further incentive, new companies in industries with long gestation periods, e.g. technology, pharmaceuticals and healthcare, should be allowed to carry forward such expenses as trade losses beyond the period contemplated in section 14U of the Income Tax Act, notwithstanding that they may be pre-commencement expenses,” it added.

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