28 July 2020
From 20 July 2020 to 7 August 2020, the Ministry of Finance (“MOF”) is conducting a public consultation and seeking comments on the draft Income Tax (Amendment) Bill. Among other things, the MOF is proposing amendments to the Income Tax Act (“ITA”) to effect tax measures announced in the Budget Statements issued in 2020, clarify the tax treatment of Covid-19 measures taken to support businesses and households, and improve tax administration and the clarity of existing provisions.
Some of the key proposed changes are set out below.
Changes arising from Unity Budget
Amendments to the ITA are proposed to implement measures announced by Deputy Prime Minister and Minister for Finance Heng Swee Keat in the Unity Budget Statement on 18 February 2020. Some of the measures which are sought to be implemented by the proposed amendments as follows:
- Corporate income tax rebate: To help companies with cash flow, a 25% rebate of corporate income tax payable, capped at S$15,000 per company, is to be granted for Year of Assessment (“YA”) 2020.
- Carrying back of qualifying deductions: The number of YAs for which the current year unabsorbed capital allowance (“CA”) and trade losses for a YA (collectively referred to as “qualifying deductions”) may be carried back will be increased. Qualifying deductions for YA2020 may be carried back up to three, instead of one, immediate preceding YAs, capped at S$100,000 of qualifying deductions. This initiative seeks to help businesses with cash flow.
- Extend and enhance Double Tax Deduction for Internationalisation (“DTDi”) scheme: To continue encouraging internationalisation, the DTDi scheme, which allows a tax deduction of 200% on qualifying market expansion and investment development expenses, will be extended till
31 December 2025. The scope of the DTDi scheme will also be enhanced to cover more qualifying expenses.
- Extend Mergers & Acquisitions (M&A) scheme: To continue encouraging companies to consider M&A for growth and internationalisation, the M&A scheme will be extended to cover qualifying acquisitions made on or before 31 December 2025.
Changes arising from measures announced in the Resilience, Solidarity and Fortitude Budgets in response to the Covid-19 pandemic
It is proposed to amend the ITA for the following:
- Exempt from income tax the prescribed payouts received by individuals in 2020 for YA2021, such as Self-Employed Person (“SEP”) Income Relief, Workfare Special Payment (under the Care and Support Package), and Covid-19 Support Grant.
- Exempt from income tax the prescribed payouts received by businesses in 2020 (for YA2021 and/or YA2022, depending on the financial year end of
the businesses), such as Jobs Support Scheme (“JSS”) payouts, Covid-19 Quarantine Order Allowance (QOA), Leave-of-Absence (LOA) and
Stay-Home Notice (SHN) payouts to affected SEPs and employers.
- Exempt from income tax for YA2021 the benefits-in-kind and cash allowances received by qualifying employees in 2020 for accommodation, food, transport and other necessities, subject to conditions and caps.
- Lift the tax deduction cap for provisions for doubtful debts and debt securities for banks and qualifying finance companies for YAs 2021 and 2022.
- Allow disclosure and access to information necessary for the Inland Revenue Authority of Singapore (“IRAS”) to administer public schemes, without requiring the express consent of the person to whom the information relates. The proposed amendment seeks to allow the Comptroller to provide information to the IRAS Chief Executive Officer (“CEO”) or officers authorised by the CEO that is necessary for the purpose of administering any public scheme such as the JSS. A similar amendment to the Goods and Services Tax will also be proposed.
Other proposed amendments
Amendments to the ITA relating to existing tax policies and administration are also proposed. For example, to further deter tax avoidance arrangements, a surcharge for tax avoidance arrangements equal to 50% of the amount of additional income tax imposed by the Comptroller as a result of the adjustments made to counteract the tax avoidance arrangement will be introduced. A similar amendment will be proposed for the Stamp Duties Act and Goods and Services Tax Act. It is also proposed to amend the ITA to mandate that tax refunds be made electronically.
The following materials are available from the MOF website www.mof.gov.sg:
- Press release: Public consultation on draft Income Tax (Amendment) Bill 2020
- Draft Income Tax (Amendment) Bill 2020
- Annex A: Proposed amendments to the Income Tax Act as announced in the Unity Budget on 18 February 2020
- Annex B: Proposed amendments to the Income Tax Act arising from Covid-19 measures announced in the Resilience, Solidary and Fortitude Budgets
- Annex C: Proposed non-Budget amendments to the Income Tax Act