Category: Income Tax Act

Second reading of the Income Tax (Amendment No. 3) Bill 2016

On By taxsgIn General News, Income Tax Act, Latest Tax News, Legislative Updates

11 November 2016

The Income Tax (Amendment No. 3) Bill 2016 (Bill) was read for the second time by the Senior Minister of State for Finance and Law, Ms Indranee Rajah in Parliament on 10 November 2016.

The Bill encompasses income tax changes as announced in the 2016 Budget Statement, amendment on the implementation of the Country-by-Country Reporting, changes arising from periodic reviews of the income tax regime and suggestions accepted on the draft Bill from public feedback received in July.

To recap, the major changes outlined by Ms Indranee Rajah relate to the following:

  • Raising of the existing corporate income tax rebate from 30% to 50% of tax payable, with a cap of $20,000 rebate each year for Years of Assessment (YA) 2016 and 2017.
  • Enhancement of the M&A scheme to allow the 25% tax allowance on the first $40 million of the cost of qualifying share acquisitions incurred each year, up from $20 million.
  • Extension of the non-taxation of companies’ gains on disposal of their equity investments until 31 May 2022.
  • Extension of the Double Tax Deduction for Internationalisation scheme to 31 March 2020.
  • Capping of the total amount of personal income tax reliefs that an individual can claim at $80,000 per YA wef YA 2018.
  • Introduction of a pilot Business and Institutions of a Public Character (IPCs) Partnership Scheme from 1 July 2016 till end of 2018.
  • Implementation of Country-by-Country Reporting.

Other changes arising from the Ministry of Finance’s periodic review of the tax regime relate to:

  • Delinking of the income tax relief limit for CPF cash top-ups from the CPF top-up limit from 1 January 2016.
  • Granting of tax deduction of up to 200% for qualifying expenditure incurred on qualifying retail bonds issued from 19 May 2016 to 18 May 2021.

For further details, please refer to the Ministry of Finance’s website.

Source: Ministry of Finance

Results of feedback on draft Income Tax (Amendment) Bill 2016

On By taxsgIn Corporate Tax, Income Tax Act, Latest Tax News

24 November 2015

The Ministry of Finance (MOF) has, on 17 November 2015 accepted for implementation 31 of the 70 suggestions on the draft Income Tax (Amendment) Bill 2016 (formerly know as the Income Tax (Amendment) Bill 2015). The suggestions were received during the public consultation exercise held from 26 June to 24 July 2015.

According to the MOF, the remaining suggestions were not accepted for implementation as they are “inconsistent with the policy objectives of the proposed legislative changes”.

Key suggestions received that were accepted by the MOF where the Income Tax Act will be amended are summarised as follows:

  • Enhance the Double Tax Deduction (DTD) for Internationalisation scheme: In situations where an overseas entity bears the manpower expenses but subsequently recovers the salary cost from the Singapore entity, it is not clear if such recharges qualify.
  • Introduction of the International Growth Scheme (IGS): Current definition of “international growth company” does not include a company in Singapore that performs services to persons that are domiciled outside Singapore.
  • Extension and enhancement of the Maritime Sector Incentive (MSI): The proposed amendment to the definition of ‘international shipping enterprise’ should specify the minimal stake (i.e. the shareholding requirement) that the Singapore resident company should hold in the SPV in order to qualify as an international shipping enterprise.
  • Amend the provisions relating to implementation of Foreign Account Tax Compliance Act (FATCA): Ambit of subsection (2) of the draft section 105PA is very wide (i.e. the duty to provide information prevails over any duty of secrecy “whether imposed by written law, rule of law, any contract or any rule of professional conduct”) and could potentially cover common law legal professional privilege.

Amongst the suggestions rejected were:

  • Extension and refinement of the Mergers & Acquisitions (M&A) scheme: Unlike the other paragraphs under section 37L(4A), the proposed paragraph (d) does not specify a period of acquisition within which the acquisition of ordinary shares in a target company (by the acquiring company or an acquiring subsidiary) will qualify for tax deductions under the M&A scheme.

MOF’s response: The purpose of the insertion of paragraph (d) is to specify that any acquisitions made by an acquiring company (or its acquiring subsidiaries) can qualify for the M&A scheme, so long as the acquisitions are made within the same basis period when the acquiring company (and its acquiring subsidiaries) own more than 50% of the total number of ordinary shares in the target company. As companies have different basis periods, it is not meaningful to specify a date in paragraph (d).

  • Enhancement of the Double Tax Deduction (DTD) for Internationalisation scheme: The definition of “overseas establishment” requires a direct association between the Singapore firm or company, and the overseas establishment (e.g. subsidiary). This may be too restrictive, and the definition should be amended to include other entities that are not subsidiaries of the Singapore firm or company.

MOF’s response:  Current definition already allows for an overseas entity that is not a subsidiary of the Singapore firm or company to qualify for the DTD scheme. There is no requirement for the overseas entity to be a subsidiary of the Singapore firm or company. The overseas establishment must be approved by IE Singapore.

  • Extension and enhancement of the Maritime Sector Incentive (MSI): Proposed new definition of “finance leasing” seems to suggest that there is a finance leasing of a container as long as there is a substantial transfer of obsolescence, risks, or rewards incidental to ownership of the container. Suggest replacing the word “or” with “and” in the definition of finance lease, to make clear that there is a finance leasing only if there is a substantial transfer of obsolescence, risks and reward.

MOF’s response:  The definition of finance leasing is aligned with that used in other sections of the Act (e.g. sections 10D, 13S, 43Y and 43ZA). MOF will also review the definition of finance leasing when the new Financial Reporting Standard on leases is released by the Accounting Standards Council.

For further details, please refer to the MOF’s website.

Source: IRAS, MOF

Income Tax (Employment Gains or Profits –– Furniture and Fittings in Place of Residence) Regulations 2015 comes into operation on 14 January 2015 [S 9/2015]

On By taxsgIn Income Tax Act, Legislative Updates

16 January 2015

The Income Tax (Employment Gains or Profits –– Furniture and Fittings in Place of Residence) Regulations 2015 were published on the Government Gazette, Electronic Edition on 14 January 2015.

For the purposes of section 10(2) of the Act:

  • if an employer provides furniture and fittings in a place of residence, the value of the furniture and fittings is deemed to be 50% of the annual value of the place of residence; and
  • if an employer does not provide any furniture in the place of residence, the value of fittings provided by the employer in the place of residence is deemed to be 40% of the annual value of the place of residence.

These Regulations will take effect for the year of assessment 2015 and subsequent years of assessment.

Source: Government Gazette

Income Tax (Amendment) Act 2015 (No. 38 /2014) passed by Parliament

On By taxsgIn Income Tax Act, Latest Tax News

2 December 2014

The Income Tax (Amendment) Act 2015, passed by Parliament on 3 November 2014 and assented to by the President on 19 November 2014, was published in the Government Gazette, Electronic Edition, on 27 November 2014.

The Act amends the Income Tax Act (Cap 134, 2014 Rev Ed) and makes a related amendment to the Economic Expansion Incentives (Relief from Income Tax) Act (Cap 86, 2005 Rev Ed). Amendments to the Income Tax Act include:

  • 

Extension of the Productivity and Innovation Credit or PIC Scheme for three years till the Year of Assessment, or YA 2018 to provide more time for businesses to put in place productivity improvements.
  • Introduction of a PIC+ scheme to provide additional support to small and medium enterprises (SMEs) where qualifying SMEs can enjoy a higher expenditure cap of $600,000 for each PIC qualifying activity per YA. Other enhancements have also been made to the PIC scheme.
  • From YA 2014, businesses can claim PIC benefits for training of seconded staff from other organisations, or persons working for them under centralised hiring arrangements.
  • Additional 50% tax deduction for R&D activities has been extended for ten years till YA 2025, and the scheme to allow writing down allowance for acquisition of Intellectual Property Rights has also been extended for five years till YA 2020.
  • The addition of a negative list to exclude items which do not meet the definition used by the World Intellectual Property Organization on intellectual property rights.
  • 

Additional Tier 1 hybrid instruments issued by Singapore-incorporated banks will be treated as debt for tax purposes. Distributions on such instruments will be deductible for issuers, and taxable in the hands of investors unless specifically exempted from tax.
  • The increase of the quantum of parent relief, handicapped parent relief and other handicapped dependant-related reliefs from YA 2015 to provide greater recognition to individuals supporting their dependants. Sharing of the parent relief and handicapped parent relief among claimants will be allowed according to a proportion agreed between the claimants.

Key changes arising from MOF’s periodic review of the tax regime include:

  • Introduction of anti-abuse measures for the PIC scheme to tighten the qualifying conditions for PIC cash payouts, as well as to target abusive arrangements and the intermediaries who promote or facilitate such arrangements. These measures include:
  1. Requiring a PIC automation equipment to be in use before an application for PIC cash payout on the equipment can be made;
  2. Strengthening the Comptroller’s powers to deny PIC benefits arising from PIC abusive arrangements; and
  3. Imposing penalties on intermediaries who promote or facilitate PIC claims for such abusive arrangements.
  • Allowing expenses incurred by a person for the purpose of complying with statutory and regulatory requirements of his business, to be tax deductible with effect from YA 2014.
  • Allowing Supplementary Retirement Scheme (SRS) members who have reached the retirement age to withdraw investments from their SRS accounts without the need to liquidate the investments.
  • Amendment to enable Singapore to ratify the Convention on Mutual Administrative Assistance in Tax Matter and to be in a position to engage in spontaneous exchange of information (EOI), as well as administer group EOI requests.

Source: Ministry of Finance (MOF) and Government Gazette.

IRAS issues updated e-Tax Guide, “Tax Treatment of Director’s Fees and Bonuses from Employment (2nd Edition)

On By taxsgIn Income Tax Act, Latest Tax News

15 September 2014

This e-Tax Guide which was published on 12 September 2014 explains the tax treatment of director’s fees and bonuses from employment.

The following has been updated in this edition:

(a) Paragraph 6.1 (Deductibility of director’s fees and bonuses from employment) amended to clarify that a company may claim deduction for director’s fees and employees’ bonuses only when its liability to pay such fees and bonuses actually arises.

(b) Paragraph 7.1 (Administrative procedures) amended such that companies need not submit the documents/information to IRAS but to prepare and retain them.

The first edition of the e-Tax Guide was published on 8 March 2013.

For full details, please refer the e-Tax Guide on the IRAS website.

Source: This article was extracted from the Inland Revenue Authority of Singapore’s (IRAS) website. Visit http://www.iras.gov.sg/ for more information.