Singapore Budget 2011 & How It Affects A Small Business Owner Like Me

For the Singapore Budget 2011, how it'll affect small businesses like mine is:

Corporate Income Tax Rebate and SME Cash Grant

C.55.          First, companies will receive a 20% corporate income tax rebate, capped at $10,000, in YA 2011.

C.56.          However, many of our small companies may not benefit fully from the corporate tax rebate as they pay very little taxes. In fact, more than 85% of eligible companies will receive less than $5,000 from the tax rebate. Therefore, I have also decided to provide the option of a one-off SME Cash Grant this year, amounting to 5% of a company’s revenues in YA 2011, subject to a cap of $5,000. They must, however, have made CPF contributions in YA 2011.

C.57.          Companies will automatically receive the higher of the corporate tax rebate or the grant when IRAS assesses their tax returns. In total, this will cost the Government about $560 million. 

To put it simply...

For not so profitable SMEs

Revenue      - $100,000

Expenses    - $90,000

Profit          - $10,000

Tax(17%)   - $1,700

Government 5% Grant of revenue = $5,000

Tax Payable = $5,000 - $1,700 = $3,300 

Receive cash of $3,300 (Total gain of $5,000)

For more profitable SMEs

Revenue      - $1000,000

Expenses    - $500,000

Profit          - $500,000

Tax(17%)   - $85,000

Government tax rebate of 20% to a cap of $10,000

Tax Payable = $85,000 - $10,000 = $75,000 (Total gain of $10,000)

Also,

C.41.          To support such initiatives, I will grant tax deduction to eligible companies that make voluntary contributions to the Medisave accounts of their SEP partners, up to $1,500 per SEP per year. I will also exempt SEPs from paying tax on these contributions. This will take effect from YA 2012.