28 June 2018
The Ministry of Finance (“MOF”) is conducting a public consultation and inviting feedback on a draft Income Tax (Amendment) Bill 2018. The proposed amendments to the Income Tax Act (“ITA”)include changes announced in the 2018 Budget Statement as well as other changes. The consultation closes on
11 July 2018.
Proposed amendments arising from Budget 2018
The proposed amendments to the ITA include changes announced in the 2018 Budget Statement. The key changes are:
- Enhancing and extending corporate income tax (“CIT”) rebate: To ease business costs and support restructuring, 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.
- Adjusting Start-Up Tax Exemption Scheme (“SUTE”) and Partial Tax Exemption Scheme (“PTE”) from YA 2020: The tax exemption under both schemes will be reduced from the first S$300,000 to S$200,000 of normal chargeable income. Exemption under SUTE will also be lowered from 100% to 75% for the first S$100,000 of normal chargeable income. The changes will take effect from YA 2020.
- Extending tax incentive scheme for Approved Special Purpose Vehicle (“ASPV”) engaged in Asset Securitisation Transactions (“ASPV Scheme”): To continue developing the structured debt market, the tax concessions under ASPV scheme will be extended till 31 December 2023, with the exception of the remission of stamp duties on the instrument relating to transfer of assets to the ASPV for approved asset securitisation transactions. The stamp duty remission will be allowed to lapse after 31 December 2018.
- Extending tax transparency treatment for Singapore-listed Real Estate Investment Trusts (“S-REITs”) to Singapore-listed Real Estate Investment Trust Exchange-Traded Funds (“REIT ETFs”): To achieve parity in tax treatment between investing in individual S-REIT and via REIT ETF with investments in S-REITs, the following tax treatment will be accorded to REIT ETFs:
- Tax transparency treatment on the distributions received by REIT ETFs from S-REITs which are made out of the latter’s specified income;
- Tax exemption on such REIT ETFs distributions received by individuals, excluding individuals who derive any distribution through a partnership in Singapore, or from the carrying on of a trade, business or profession; and
- 10% concessionary tax rate on such REIT ETFs distributions received by qualifying non-resident non-individuals.
Subject to conditions, the tax concessions for REIT ETFs will take effect on or after 1 July 2018, with a review date of 31 March 2020.
- Enhancing tax deductions for qualifying research and development (“R&D”) performed locally: To encourage R&D to be carried out in Singapore, the tax deduction for staff costs and consumables incurred on qualifying R&D projects performed in Singapore will be increased from 150% to 250%. The change will take effect from YA 2019 to YA 2025.
- Enhance the tax deduction for costs on protecting intellectual property (“IP”): To encourage businesses, in particular smaller ones, to register and protect their IP rights, the tax deduction scheme will be extended till YA 2025. The tax deduction will be raised from 100% to 200% for the first S$100,000 of qualifying IP registration costs incurred for each YA. This change will take effect from YA 2019 to YA 2025.
- Enhance the tax deduction for costs on IP in-licensing: To support businesses to buy and use new solutions, the tax deduction will be raised from 100% to 200% for the first S$100,000 of qualifying IP in-licensing costs incurred for each YA. Qualifying IP in-licensing costs include payments made by a qualifying person to publicly funded research performers or other businesses, but exclude related party licensing payments, or payments for IP where any allowance was previously made to that person. This change will take effect from YA 2019 to YA 2025.
- Enhancing Double Tax Deduction for Internationalisation (“DTDi”) scheme: To encourage firms to internationalise, the expenditure cap for DTDi claims without prior approval from Enterprise Singapore or the Singapore Tourism Board will be raised from S$100,000 to S$150,000 per YA from
Other proposed amendments
The Income Tax (Amendment) Bill 2018 will also provide for changes to existing tax policies and administration, arising from the periodic review of Singapore’s income tax system, as well as to strengthen Whole-of-Government law enforcement. The changes include:
- 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. Specifically, the proposed amendments introduce the power of forced entry, power of arrest without warrant and power of body search subject to conditions. Further, IRAS’ power to gather all information relevant to its investigations from any person will be expanded.
- Sharing of information by IRAS with law enforcement agencies (“LEAs”) to combat serious crimes: The activities of criminals including syndicates are often multi-faceted. For instance, their criminal activity may not be limited to tax evasion and may involve other forms of illegal activities such as drug dealing and corruption. A Whole-of-Government approach is needed to better fight such serious crimes. Currently, IRAS is allowed to provide information to LEAs under limited circumstances (e.g. pursuant to a court order). Under the draft Bill, IRAS will be allowed to share with LEAs information that IRAS assesses as critical for investigation or prosecution of serious crimes under the First and Second Schedules of the Corruption, Drug Trafficking and Other Serious Crimes (Confiscation of Benefits) Act.
- Introduce the Intellectual Property (“IP”) Development Incentive (“IDI”): To encourage the use of IP arising from taxpayer’s R&D activities, IP income will be incentivised under the IDI. The IDI incorporates the internationally-agreed tax standard on the design of preferential tax regimes for IP. The IDI will be effective from 1 July 2018.
The following materials are available on the MOF website www.mof.gov.sg:
- Press release: MOF invites feedback on proposed changes to the Income Tax Act
- Draft Income Tax (Amendment) Bill 2018
- Summary table: Budget 2018 changes
- Summary table: Non-Budget changes
- Prescribed template for submission of comments