27 June 2019
From 19 June 2019 to 10 July 2019, the Ministry of Finance (“MOF”) is conducting a public consultation and inviting feedback on the draft Income Tax (Amendment) Bill 2019 (“draft Bill”).
The proposed amendments to the Income Tax Act (“ITA”) include changes announced in the 2019 Budget Statement as well as other changes.
The following are some of the proposed changes to the ITA:
- Lapse of Not Ordinarily Resident (“NOR”) scheme: The NOR scheme was introduced in Budget 2002 to attract talent with regional and global responsibilities to relocate to Singapore. The NOR scheme will lapse after YA 2020. The last such NOR status will be granted for YA 2020 and expire in YA 2024. Individuals who have been accorded the NOR status and continue to meet the conditions will continue to be granted NOR tax concessions until their NOR status expires.
- Extend and refine tax incentive schemes for funds managed by Singapore-based fund managers (“Qualifying Funds”): To continue to grow Singapore’s asset management industry, the tax concessions relating to Qualifying Funds under sections 13CA, 13R and 13X of the ITA will be extended till 31 December 2024. These tax schemes will also be refined to keep them relevant and to ease compliance burden.
- Extend the income tax concessions for Singapore-listed real estate investment trusts (“S-REITs”) and Singapore-listed real estate investment trusts exchange-traded funds (“REITs ETFs”): To continue to promote the listing of REITs and REITs ETFs in Singapore and to strengthen Singapore’s position as a REITs hub in Asia, the existing tax concessions for S-REITs and REITs ETFs will be extended till 31 December 2025. The sunset clause for the tax exemption on S-REITs and REITs ETFs distributions received by individuals will be removed.
- Extend writing down allowance for acquisition of qualifying intellectual property rights under section 19B of the ITA: The writing down allowance under section 19B will be extended to cover capital expenditure incurred in respect of qualifying intellectual property rights acquired on or before the last day of the basis period for YA 2025.
- Lapse of Approved Unit Trust (“AUT”) scheme: As part of the regular review of tax incentives, the AUT scheme will lapse after 18 February 2019.
- Enhance the Maritime Sector Incentives (“MSI”): With effect from 12 December 2018, the MSI will be enhanced as follows:
- The tax exemption under the MSI for ship operators will be expanded in scope to cover income from finance leases of ships; and
- MSI recipients will be given the option to irrevocably elect on a bundled basis to:
- As lessees - not claim deduction and capital allowance on expenditure incurred for leasing ships and containers; and
- As sub-lessors - not make any reclassification to their sub-lease income for ship and containers, i.e. accept the accounting classification for the sub-lease for tax purpose.
- Clarify on the scope of leasing income under the Maritime Sector Incentive - Maritime Leasing (“MSI-ML”) award: It is proposed to amend the ITA to clarify that income derived from the leasing of ships/containers by MSI-ML recipients, in respect of ships/containers leased (whether via operating leases or finance leases) from an approved related party will qualify for tax benefits under an MSI-ML award. The amendments will take effect from 12 December 2018 to align with the effective date of the MSI enhancements described above.
- Amend the definition of qualifying debt securities (“QDS”) under section 13(16) of the ITA to allow alternative set of qualifying conditions for insurance-linked securities (“ILS”): To continue promoting the development of Singapore’s debt market, ILS issuers would have the option to fulfil an alternative set of conditions to qualify for the QDS scheme, during the period from 20 December 2018 to 31 December 2023.
- Extend the section 13Y tax exemption scheme for sovereign wealth funds: To continue to encourage foreign central banks and other government entities to set up investment offices in Singapore to manage their funds, the tax exemption scheme for sovereign wealth funds will be extended for five years till 31 December 2024.
- Extend the tax exemption schemes for section 13G foreign trust, section 13O foreign account of philanthropic purpose trust, and section 13Q locally administered trust: These schemes will be extended for five years till 31 December 2024 to continue to capture the potential growth in demand for trust services in Asia.
- Certain rent or other payments for the use outside Singapore of tangible movable property not to be treated as income deemed to be derived from Singapore under section 12(7)(d): This proposed amendment treats certain rent or other payments for the use outside Singapore of any tangible movable property as not falling within the scope of income deemed to be derived from Singapore under section 12(7)(d). As such, withholding tax would not apply to these payments made to non-resident persons.
- Broaden the scope of the Business and IPC Partnership Scheme (“BIPS”) under section 14ZB of the ITA: BIPS was introduced to encourage employee volunteerism through businesses Under BIPS, businesses can claim a 250% tax deduction on basic wages and related expenses incurred when their employees volunteer or provide services to institutions of public character (“IPCs”), subject to the IPCs’ agreement. It is proposed to amend the ITA to (a) allow businesses to claim tax deduction for wage expenditures of all employees, including part-time employees, when employees volunteer, and (b) allow businesses the additional option to claim tax deductions for wage expenditures based on fixed hourly rates for general or skills-based volunteerism rather than the actual wage expenditure incurred when employees volunteer.
The following materials are available on the MOF website www.mof.gov.sg:
- MOF press release
- Draft Income Tax (Amendment) Bill 2019
- Summary Table of Budget 2019 Changes
- Summary Table of Non-Budget Changes