27 October 2021
On 5 October 2021, the Income Tax (Amendment) Bill 2021 (“Bill”) was passed in Parliament. Set out below are the key changes to the Income Tax Act, as outlined by Minister for Finance Lawrence Wong in his second reading speech.
Tax changes announced in 2021
The following are key amendments that give effect to the Budget 2021 Statement, and the support measures announced earlier this year:
- Loss carry-back relief scheme: To help businesses with cash flow, the enhancement to the loss carry-back relief scheme has been extended for another year. Qualifying deductions for the Year of Assessment (“YA”) 2021 may be carried back up to three preceding YAs or Year of Assessments, instead of one. The amount of qualifying deductions that may be carried back is capped at S$100,000. This allows businesses to get a refund of up to S$17,000 of income tax paid for YA 2018 to YA 2020.
- Double Tax Deduction for Internationalisation scheme: To encourage firms to internationalise, the scope of the Double Tax Deduction for Internationalisation (DTDi) scheme has been enhanced to cover additional qualifying expenses, for example, specific expenses incurred to participate in approved virtual trade fairs.
- Donations to IPCs: The 250% tax deduction for qualifying donations to Institutions of Public Character (“IPCs”) has been extended for another two years to Calendar Year (“CY”) 2023. To continue supporting corporate volunteering, the Business and IPC Partnership Scheme (BIPS) has been extended for another two years to CY 2023.
- Monetary support payments received from landlords: Mandatory or voluntary monetary support payments that tenants receive from their landlords in 2021 will not be taxed. This will allow tenants to benefit from the full amount of the monetary support payments. Landlords will be allowed to claim income tax deductions for the monetary support payments they made to tenants in 2021. This is to facilitate the passing on of rental waivers granted to master tenants of qualifying Government-owned commercial properties to their sub-tenants, as well as the making of monetary support payments by landlords to their tenants in 2021.
Non-Budget 2021 amendments arising from the periodic review of the income tax regime
The following are three key amendments following a regular review of the income tax regime by the Ministry of Finance (“MOF”):
- Tax treatment of trading stock: Amendments to set out the tax treatment for two situations: where trading stock is appropriated, or used, for non-trade or capital purposes, and vice-versa, that is to say, where capital assets become trading stock. The current tax treatment of such situations by the Inland Revenue Authority of Singapore (“IRAS”) is similar to UK practice and case law. The proposed amendments will codify the current tax treatment into legislation.
- Administration of public schemes by IRAS: The Income Tax Act currently restricts the disclosure of protected income tax data to non-public servants including external auditors. To facilitate IRAS’ administration of public schemes, an amendment will be made to allow persons authorised by the CEO of IRAS to have access to selected income tax data and documents, subject to safeguards, for the sole purpose of auditing the administration of public schemes such as the Jobs Support Scheme and the Jobs Growth Incentive. A similar amendment will be made to the Goods and Services Tax Act.
- Protection of informers: A provision to protect informers will be introduced by prohibiting witnesses in court (who might be the informers themselves) from disclosing information that may lead to the discovery of an informer’s identity and thus encourage informers to step forward with information that will enable more effective tax enforcement.