23 November 2011
On 22 November, the Income Tax (Amendment) Bill 2011 was read for the second time in Parliament by Mrs Josephine Teo, Minister of State for Finance and Transport.
Key changes are summarised as follows:
A. Changes resulting from 2011 Budget Statement
- The Productivity and Innovation Credit (“PIC”) Scheme enhanced to encourage innovation and productivity efforts. Changes include increasing the PIC deduction from 250% to 400%, increasing the cap on qualifying expenditure from $300,000 to $400,000 per activity, and raising the cash payout in lieu of deduction to $30,000. (Clauses 17, 19, 23, 24, 25, 29, 30, 31 and 33.)
- A one-off corporate income tax rebate of 20% up to $10,000, or an SME cash grant of up to $5,000 granted to help companies cope with rising cost (Clause 61).
- Businesses can pool their tax credits for foreign tax suffered on their foreign incomes with the new Foreign Tax Credit (“FTC”) Pooling system (Clause 54).
- All existing maritime tax incentives will be streamlined under a new umbrella incentive – the Maritime Sector Incentive. Existing shipping-related incentives are improved by covering more shipping-related support services and new entrants into the industry (Clauses 7, 10, 12, 43, 45, 46, 48, 49, 69(a) and 71).
- A new tax deduction introduced to allow a company to claim for the cost incurred on acquisition of its parent company’s shares, through a Special Purpose Vehicle, for its Employee Equity-Based Remuneration Scheme (Clauses 22 and 27(b) and (c)).
- Start-ups can claim tax deduction for expenses incurred prior to its earning any revenues. The expenses should be incurred in the accounting year before that in which it earns the first dollar of revenues. (Clause 26)
- The tax deduction of 250% for donations made to Institutions of a Public Character, Government, approved persons and prescribed educational or research institutions to be extended for another five years to 31 December 2015 (Clause 32(a)).
- Personal income tax rate structure amended effective from the next year of assessment in 2012. The new personal income tax schedule is more progressive. A one-off personal income tax rebate of 20% up to $2,000 has also been granted for Year of Assessment 2011 (Clauses 68 and 70 respectively).
- Following an increase in the employer’s CPF contribution rate from 1 September 2011, the corresponding tax deduction allowable to the employer is increased to the new CPF contribution rate of 16%. The contribution that is exempt from tax or the contribution in excess of which is deemed taxable, as the case may be, is accordingly raised to $5,000 per month (Clauses 4(b) and (c) and 16(a)).
B. Changes resulting from the on-going review of the Income Tax Act.
- Clarification that Government-Paid Childcare Leave payments received by self-employed individuals are taxable income since their introduction on 31 October 2008 (Clause 3) and which ensures consistency with the tax treatment of Government-Paid Maternity Leave payments received by self-employed women.
- Greater clarity to the income tax appeal procedures in the timely resolution of tax disputes, and savings in tax compliance and administration costs. Changes include enabling taxpayers to take their case to the Income Tax Board of Review even if their case is non-taxable for that year, and extending the time to file appeals from 14 days to 30 days (Clauses 56 to 60).
- The provision of Unique Identity Number (“UIN”) or Unique Entity Number (“UEN”) to be made compulsory and extended to donors who make cash donations to IPCs through grant maker, cash donations to Government, donations of computers to prescribed institutions, and donations of art works to approved persons. This requirement was already introduced for qualifying donations made to IPCs directly. With the amendment, donors will not need to declare their donations in their tax returns in order to enjoy tax deductions on their donations (Clause 32(b)).
- The Income Tax Act is amended to allow Singapore to exchange information via separate Exchange of Information (“EOI”) arrangements, where necessary. Presently EOI can only be done through Avoidance of Double Taxation Arrangements (Clauses 62 to 67).
The remaining legislative changes arising from periodic review of the income tax system are either technical in nature or relate to improvements in tax administration.
A copy of the Bill is available here.
Source: Ministry of Finance