27 September 2018
On 10 September 2018, the Income Tax (Amendment) Bill (“Bill”) was tabled in Parliament for first reading. This Bill seeks to implement the tax changes in the Government’s 2018 Budget Statement in the Income Tax Act (“Act”) and to make other amendments to the Act. The following are some of the amendments arising from the Bill.
Amendments arising from Budget 2018
- Enhancing and extending corporate income tax (“CIT”) rebate: The CIT rebate will be enhanced to 40% of tax payable, with an enhanced cap of S$15,000 for the Year of Assessment (“YA”) 2018. The CIT rebate will also be extended to YA 2019, at 20% of tax payable and capped at S$10,000.
- Tax transparency treatment for Singapore-listed Real Estate Investment Trust Exchange-Traded Funds (“REIT ETFs”): The following tax treatment will be accorded to REIT ETFs:
- Tax transparency on certain income of a trustee of a REIT ETF. This includes a distribution in cash received in the period between 1 July 2018 and 31 March 2020 from a real estate investment trust from certain income that is also subject to tax transparency.
- 10% concessionary tax rate on distributions to certain non-individuals from income of the trustee of an approved REIT ETF that is subject to tax transparency.
- Enhancing tax deductions for qualifying expenditure on research and development (“R&D”): Section 14DA will be amended to increase the amount of enhanced tax deduction for qualifying expenditure for R&D from 50% to 150% of the expenditure. The amendment is effective for YA 2019 to YA 2025.
- Enhance the tax deduction for costs for protecting intellectual property (“IP”): To encourage businesses to register and protect their IP rights, the tax deduction scheme for qualifying IP registration costs incurred for the purposes of a trade or business will be extended to YA 2025. The tax deduction will also be enhanced for YA 2019 to YA 2025.
- Enhance the tax deduction for costs on IP licensing: A new provision will be introduced to provide for a deduction for expenditure in the form of licence fees incurred by a taxpayer on licensing from another person of any IP rights, other than trade marks or software user rights. The deduction is granted up to S$100,000 of such expenditure incurred for each year of assessment from YA 2019 to YA 2025. No deduction is allowed for expenditure incurred by a taxpayer on licensing from a related party of any intellectual property rights, among other restrictions.
- Enhancing the Inland Revenue Authority of Singapore’s (“IRAS”) powers to investigate tax crimes: The proposed amendments will enhance IRAS’ enforcement powers for investigation of specified serious tax crimes, or where the suspect attempts to destroy evidence, e.g. power of forced entry and power of arrest without warrant.
- Sharing of information by IRAS with law enforcement agencies to combat serious crimes: Currently, IRAS is allowed to provide information to law enforcement agencies under limited circumstances (e.g. pursuant to a court order). The Act will be amended to allow IRAS to share with law enforcement agencies information that IRAS assesses as critical for investigation or prosecution of serious crimes under the First Schedule or Second Schedule of the Corruption, Drug Trafficking and Other Serious Crimes (Confiscation of Benefits) Act.
Public consultation and Response to feedback on draft Bill
From 20 June 2018 to 11 July 2018, the Ministry of Finance (“MOF”) conducted a public consultation and invited feedback on a draft version of the Bill. On 10 September 2018, MOF issued its Response to the feedback received from the public consultation. The feedback received mostly pertained to the following tax changes:
- Enhancing the IRAS’ powers to investigate tax crimes.
- Facilitating the sharing of information by IRAS with law enforcement agencies to combat serious crimes.
- Clarifying the tax treatment for leases arising from the adoption of Financial Reporting Standard 116 leases.
- Clarifying the tax treatment for REIT ETFs.
- Income Tax (Amendment) Bill
- Summary of Responses to Public Consultation on the Draft Income Tax (Amendment) Bill 2018
- Annex A: MOF’s response to common feedback on the Income Tax (Amendment) Bill 2018