Double tax deductions for expenses incurred on overseas expansion activities

On By taxsgIn Reminders

2 September 2011

One aspect of tax planning is for taxpayers to utilise existing incentives and concessions under the Income Tax Act. One such incentive which is often overlooked by taxpayers who have regional businesses is the double tax deduction under sections 14B and 14K of the Income Tax Act for expenses incurred on overseas expansion activities.

Under the Double Tax Deduction Scheme (“DTD Scheme”) administered by IE Singapore and the Singapore Tourism Board, overseas market and investment development expenses incurred by Singapore-based companies qualify for double tax deduction.  It covers a range of activities along the key stages of the overseas expansion process from market preparation to market presence.

Qualifying activities and expenses under DTD scheme are:

1. Market preparation

Engaging external consultants / professionals for:

  • Design of packaging for overseas markets
  • Products / services certification for overseas markets
  • Overseas market survey/feasibility study

2. Market introduction

  • Participating in overseas business / market development trips or missions
  • Exhibiting in overseas and approved  local trade fairs

3. Marketing and promotion

  • Overseas advertising and promotions
  • Printing of corporate brochures for overseas distribution
  • Advertising in approved  local trade publications

4. Market presence

  • Establishing overseas marketing offices
  • Promoting the company’s master license and franchise overseas
  • Engaging external consultants/professionals for investment feasibility/due diligence studies
  • Participating in overseas investment development trips or missions.

All applications (except for overseas investment  development activities) are to be submitted to IE Singapore before the commencement of projects via the DTD Online System at www.iesingapore.com/DTD.  Currently, IE Singapore has not implemented the on-line submission for overseas investment development activities and therefore applicants are required to submit the hard copy of the application form which can be downloaded from IE Singapore’s website.  In addition, please note that applications pertaining to participation in approved local trade fairs (i.e. Approved International Fairs (AIF) designated shows or STB supported events) will be processed by Singapore Tourism Board via hard copies.

When filing the company’s annual income tax return, successful applicants are required to submit the letter of support,  together with the invoices and receipts of eligible expenses to IRAS. An evaluation form / post-project report also need to be submitted via the DTD Online System.

Note that the DTD scheme is only available for companies who are not already enjoying any other government tax incentives or concessions. In this year’s Budget, it was announced that the DTD scheme will be simplified to allow more businesses to enjoy the incentive. For example, businesses will be allowed to submit their applications up to the day of their overseas marketing trip, instead of seven days before the trip. A sunset clause of 31 March 2016 will also be introduced for this scheme.

For further details click here: DTD scheme

Source: Section 14B and 14K of the Income Tax Act, IE Singapore