During Budget 2011, a one-off scheme was introduced by the Government to allow corporate taxpayer to enjoy either a corporate tax rebate or a SME Cash Grant, whichever is higher.
The corporate tax rebate of 20%, computed on the tax payable amount after deducting tax set-offs (e.g. double tax relief, unilateral tax credits and tax deducted at source), was capped at $10,000.
For small companies that may not have significant tax payable or may be loss making, a tax exempt SME Cash Grant amounting to 5% of the company's revenue for the YA 2011 may be granted instead, subject to a cap of $5,000.
No corporate tax rebate is provided for YA 2012. The corporate tax rate also remains unchanged at 17%.
However, the Government will continue to provide a one-off SME cash grant for all companies (excluding dormant and inactive companies as well as trusts and REITs) for YA 2012.
The tax exempt SME Cash Grant would be pegged to 5% of the company's revenue for the YA 2012 (as declared in its tax returns), subject to a cap of $5,000. To be eligible for the SME Cash Grant, the company must have made CPF contributions for at least one employee (who must not be a shareholder of the company) during the basis period of YA 2012.
For companies which derive concessionary income and normal income, the SME Cash Grant would be computed based on the aggregated revenue.
Eligible companies would automatically receive the cash grant after their tax returns for YA 2012 has been filed and tax has been assessed. The SME Cash Grant may be used to set off against the company's tax payable for YA 2012.
The Government recognises the cost pressures faced by Singapore businesses, especially in the wake of an anticipated continuing slowdown in the global economy. Although the quantum of the SME Cash Grant is, on the whole, not as attractive as the corporate tax rebate provided in YA 2011, the SME Cash Grant would certainly still provide some welcome relief to these businesses, especially SMEs, in the current economic climate.
The cash flow benefit that the businesses can enjoy from the SME Cash Grant is however not immediate since they would have to wait till the submission and assessment of their income tax returns to enjoy the benefit.