Public consultation sought by IRAS for categorisation of payment for software and provision of information and digitised goods

23 April 2012

IRAS is seeking public consultation for its plans to change from an “exemption-approach” to a “rights-based approach” to characterise the following payments for tax purposes:

  • payments for software, and
  • payments for the provision of information and digitised goods.

Under  the  existing exemption-based approach, payments made by an end user to a non-resident person which do not give  the  end user the right to commercially exploit  the copyright (including  duplicating copies, modifying or adapting the software, information or digitised goods) constitute royalty payments but these payments are currently exempt from tax. As a result of the exemption, withholding tax is not applicable.

With the adoption of the rights-based approach for characterising software payments, as well as payments for information and digitised goods, the existing withholding tax exemption regimes for such payments will no longer be relevant and as such, will be removed.

The current  prescriptive  method  of  exempting  specific categories of royalty payments, whose descriptions may not have covered all possible intended transactions and require constant updating within a short period of time to keep up with rapidly changing technology and business practices, may no longer afford the same level of tax certainty needed by businesses as compared to the rights-based approach.

The consultation period is from 16 April 2012 to 14 May 2012.

Source: IRAS

IRAS seeks public feedback on sharing of Parent Relief

25 April 2012

IRAS has released a consultation paper that will sharing of parent relief amongst claimants in such proportion as they may agree. It also sets out three options which the Comptroller of Income Tax (“CIT”) may adopt for cases where claimants cannot agree on the proportion of parent relief to be shared by each of them.

Under the proposed framework, parent relief may be shared among all claimants in the proportion they agree on, so long as the combined amount of claims submitted  by all  claimants  does  not  exceed  the current amount of parent relief. The amount of relief to be granted for each parent will depend on whether the claimants are staying with the parent or not.  To maximise the benefit to taxpayers, where at least one claimant is staying with the parent, the higher amount of relief (i.e. $7,000 or $11,000 as the case may be) will apply for sharing among the claimants.

If all claimants agree on their respective share of parent relief, each claimant is required to indicate his or her share of the parent relief in his or her personal income tax return.

For cases where the combined amount of claims submitted by all claimants exceeds the total parent relief allowable, the CIT will request the affected claimants to submit a revised proportion as agreed among themselves within 21 days from the date of request.

Where no reply is received or if the affected claimants are unable to reach an agreement within the stipulated timeline, the CIT is considering adopting one of the following options:

  • Apportion parent relief equally among all claimants
  • Allow parent relief to only one claimant. The relief will first be given to the claimant who is staying with the parent. Where there is none, or where more than one claimant is staying with the parent, the relief will be given to the claimant whose parent relief claim will result in the highest tax benefit for the family unit.
  • Disallow parent relief to all claimants.

The closing date for submission of feedback is 23 May 2012.

Source: IRAS