SUMMARY TABLE ON PROPOSED NON-BUDGET CHANGES TO THE INCOME TAX ACT (“ITA”)
s/n. / Legislative Change / Brief Description of Legislative Change / Amendment to Income Tax Act[Clause in Income Tax (Amendment) Bill] /
1 / Introduce additional measures to curb abuses of the Productivity and Innovation Credit (“PIC”) Scheme / New anti-abuse measures will be introduced to address abusive arrangements where one of the main purpose is to receive PIC benefits:
(a) For PIC cash payouts pertaining to IT and automation equipment, the equipment must be “in use”[1]. This will take effect from YA 2016; and
(b) To strengthen the Comptroller’s power to deny PIC benefits arising from arrangements which involve artificial, contrived or fraudulent steps, or are not carried out for bona fide commercial reasons, or where transactions are overvalued and not based on open market value. This will take effect from the gazette date of the Income Tax (Amendment) Bill.
(c) Penalties will be imposed on intermediaries who promote or facilitate claims for PIC benefits for such abusive arrangements. This will take effect from the gazette date of the Income Tax (Amendment) Bill. / Sections 37I, 37ID and 37IE
[Clauses 40 and 42]
2 / Clarify that penalties are imposed on the excess amount of PIC cash payout/ PIC Bonus obtained by taxpayers / To make clear that where the taxpayer wrongfully obtains a higher amount of PIC cash payout and/or PIC Bonus than what he was entitled to, the penalty imposed is computed based on the excess amount of PIC cash payout/ Bonus wrongfully obtained, rather than the full amount of cash payout/ Bonus obtained. / Sections 37J, 95, 96 and 96A
[Clauses 43, 58, 59 and 60]
3 / Remove the requirement to withhold tax for certain payments made to branches in Singapore / To remove the requirement to withhold tax on payments made to permanent establishments that are Singapore branches of foreign companies, for the following payments:
(a) Distributions made by unit trusts (section 45C);
(b) Gains from real property transaction (section 45D);
(c) Distributions from any real estate investment trust (section 45G); and
(d) Commission or other payments of licensed international market agent (section 45H).
This will take effect for payments made or liable to be made on or after 1 January 2015. / Sections 45C, 45D, 45G and 45H
[Clauses 51, 52, 54 and 56]
4 / Introduce a sunset clause for tax exemption schemes for section 13G foreign trust, section 13O foreign account of philanthropic purpose trust, and section 13Q locally administered trust / To provide for a review date of 31 March 2019 for the schemes to ensure that the relevance of the schemes is periodically reviewed. / Sections 13G, 13O and 13Q
[Clauses 11, 12 and 13]
5 / Extend and enhance section 13Y tax exemption scheme for sovereign fund / To enhance and extend the scheme for five years till 31 March 2019. / Section 13Y
[Clause 17]
6 / Refine section 43N to allow a primary dealer to opt out of the tax exemption / To allow primary dealers to opt out of the tax exemption by way of a written notification to the Inland Revenue Authority of Singapore (“IRAS”). The election to opt out of the tax exemption is irrevocable. / Section 43N
[Clause 48]
7 / Grant tax deduction for expenses incurred to comply with statutory and regulatory requirement / Recognising that businesses incur costs to comply with laws and regulations, including those of other jurisdictions (hereafter referred as “statutory and regulatory expenses”), a specific tax deduction is given for qualifying statutory and regulatory expenses with effect from YA 2014. Allowing a tax deduction for such expenses is aligned with our policy of promoting voluntary compliance with statutory and regulatory requirements. The amendment to the ITA will also provide certainty on the deductibility of such expenses, some of which have been allowed deduction by way of administrative concession or tax remission currently.
Qualifying statutory and regulatory expenses are non-capital expenditure incurred for the purpose of the business[2] from which the taxpayer’s income, which is subject to tax in Singapore, is acquired, and are incurred by him for the purposes specified in the new Section 14X.
Please refer to Annex A for examples of qualifying statutory and regulatory expenses. / Section 14X and 15
[Clause 27 and 28]
8 / Refine the Designated Unit Trust (“DUT”) Scheme / To deem the undistributed DUT income as income taxable in the hands of specified investors on a specified date, when a unit trust ceases its DUT tax status or fails to meet any DUT condition. This is an additional change to the changes to the DUT scheme announced in Budget 2014, and will be effected from 1 June 2015. / Sections 10 and 35
[Clauses 3 and 34]
Miscellaneous amendments
[Clause 70]
9 / Allow foreign-sourced income exemption (“FSIE”) to apply for the life of the properties acquired by Real Estate Investment Trusts (“REITs”) on or before 31 March 2015 / To align with the foreign-source income tax exemption granted under section 13(12) for companies and qualifying offshore infrastructure projects/ assets, the existing tax exemption granted on specified foreign-sourced income derived by REITs (or their wholly-owned subsidiaries) from properties acquired on or before 31 March 2015, will be modified such that the exemption will apply regardless of when the income is received in Singapore, subject to conditions. This will provide tax certainty for REITs. / Section 13
[Clause 8]
10 / Clarify the basis of computing accommodation benefits provided by employers to their employees / To clarify that where the Annual Value (“AV”) of a property is not available on the e-Valuation List for the purpose of ascertaining the value of the accommodation benefits provided by employer for tax purpose, the AV may be ascertained in the same manner as it is determined under the Propery Tax Act. / Section 10
[Clause 3]
11 / Allow the Minister to make regulations to provide for the taxable value of furniture & fittings provided by employers to their employees / To allow the Minister for Finance to make regulations to prescribe the formulae for determining the taxable value of furniture & fittings provided by employers to their employees. / Section 10
[Clause 3]
12 / Extend the section 45GA reduced withholding tax rate of 10% on income derived by non-resident public entertainers / To extend the concessionary 10% withholding tax rate applicable to income derived by non-resident public entertainers for 5 years from 31 March 2015 till 31 March 2020. / Section 40A and 45GA
[Clauses 47 and 55]
13 / Amend section 37(18B) to provide for remission of financial penalty by the Comptroller of Income Tax / To provide the Comptroller powers to remit wholly or in part the financial penalties imposed on registered grant-makers for contravening the regulations made under section 37(18A). This is aligned with provisions under the Charities Act where the Commissioner of Charities is empowered to remit financial penalties imposed on Institutions of a Public Character . / Section 37
[Clause 36]
14 / Enable the ratification of the Convention on Mutual Administrative Assistance in Tax Matters (“Convention”) / To allow Singapore to ratify the Convention, the ITA is amended to provide for the prescription of multilateral exchange of information arrangements, and spontaneous exchange of information (“EOI”), which is an obligation stipulated in the Convention. In line with this, the ITA will also be amended to allow Singapore to engage in spontaneous EOI in respect of all its EOI arrangements besides the Convention, such as DTAs / TIEAs. / Sections 6, 105A and 105BA
[Clauses 2, 61 and 62]
15 / Allow SRS members who qualify for the 50% tax concession to withdraw their SRS investments without liquidation of such investments / To allow SRS members, who qualify for the “50% tax concession”[3] to make SRS withdrawals in the form of investments, Currently SRS members can only make withdrawals in the form of cash, which necessitates the liquidation of SRS investments. To allow these members to make withdrawals in the form of investments, the ITA will be amended to tax the value of the SRS investments withdrawn and provide the Minister the power to make regulations to provide for the method of valuing the SRS investments withdrawn.
These amendments will take effect on 1 January 2015. / Sections 10L, 45EA and 89
[Clauses 5, 53 and 57]
16 / Replace the reference to the term "foreign law firm" in section 13V with “foreign law practice” / To replace the reference to “foreign law firm” in the ITA with “foreign law practice”. When section 13V was enacted, the term “foreign law firm” was included in subsection 15. The term “foreign law firm” was subsequently deleted from the Legal Profession Act. This is a consequential amendment. / Section 13V
[Clause 15]
17 / Amend the definition of "qualifying investment" in section 37K(12) to exclude all stock option and share award schemes. / To amend the definition of “qualifying investment”, under the Angel Investor Tax Deduction (“AITD”) scheme such that it is similar to that in section 97U(1)(c) of the Economic Expansion Incentive (Relief from Income Tax) Act. The Angel Investor Tax Deduction (“AITD”) scheme was introduced to encourage approved investors to invest in qualifying start-ups by providing a tax deduction on their qualifying investment. / Section 37K
[Clause 44]
18 / Amend section 37C(15) and (19), concerning the references to “the date of commencement of the Economic Expansion Incentives (Relief from Income Tax) (Amendment) Act "2004”. / To make technical amendments to section 37C by removing the references to “the date of commencement of the Economic Expansion Incentives (Relief from Income Tax) (Amendment) Act 2004” and substituting them with “28 April 2004”, being the date of commencement of the Economic Expansion Incentives (Relief from Income Tax) (Amendment) Act 2004. / Section 37C
[Clause 37]
19 / Delete sections 10I, J, K & M and amend section 36B(1)(d) / To repeal sections rendered irrelevant with the implementation of the one-tier corporate tax system (where dividends paid by Singapore companies are tax-exempt). With the move to the one-tier corporate tax system with effect from 1 January 2008, sections 10I, 10J, 10K and 10M are no longer relevant and will be repealed. Consequently, section 36B(1)(d) which reference to sections 10I, 10J, 10K and 10M will also be deleted. / Sections 10I, 10J, 10K, 10M and 36B
[Clauses 4 and 35]
20 / Amend section 12(7) and relevant ITA provisions to provide that royalty does not include payment for copyrighted article / To amend Section 12(7) to specify that a payment borne by a person resident in Singapore or a Singapore permanent establishment for a right to use software, information or digitised goods will not be treated as having been derived from Singapore, provided that the payer does not acquire a right to commercially exploit the copyright of that software, information or digitised goods. This is in line with the international practice in respect of the characterization of such payments. / Section 12
[Clause 7]
21 / Clarify that a reference in each of the specified provisions[4] to a period between two dates, is inclusive of both the dates. / To clarify that a reference in each of the specified provisions to a period between two dates, is inclusive of both the dates for consistency. / Miscellaneous Amendments
[Clause 70]
22 / Clarify that the 50% related party rule[5] for the purpose of the Qualifying Debt Securities (“QDS”) incentive is determined based on the amount of debt securities issued and outstanding / To align with the policy intent and current practice, sections 13 and 43N are amended to clarify that the 50% related party rule is applied to QDS that are issued and outstanding. Currently, sections 13 and 43N are worded such that the 50% related party rule is applied to QDS that are issued (which could include those that are no longer outstanding, e.g. QDS that have been repurchased or redeemed by the issuer). / Sections 13 and 43N
[Clauses 8 and 48]
23 / Apply section 37B for Lloyd's Scottish Limited Partnership (“SLP”) and Limited Liability Partnership (“LLP”) members / To allow SLP and LLP members of Lloyd’s syndicates to apply the section 37B[6] rules with effect from YA 2015. Their losses carried forward from earlier YAs will also be subject to the section 37B rules with effect from YA 2015. / Section 26A
[Clause 33]
24 / Preserve confidentiality of EOI court proceedings / This ensures that Singapore can adhere to its confidentiality obligations under its EOI arrangements by controlling the confidentiality of the proceedings and documents used in any court proceedings relating to EOI. / Sections 105I and 105Q
[Clauses 63 and 68]
25 / Facilitate Singapore-based financial institutions’ reporting of data under the Singapore-US Foreign Account Tax Compliance Act (“FATCA”) inter-government agreement (“IGA”) / To allow Singapore-based FIs to submit data directly to the International Data Exchange Service (“IDES”), sections 105L(1) and 105M will be amended to allow FIs to submit the data to “any other person which may be authorised by the Comptroller”. Under the data submission approach for FATCA, Singapore-based financial institutions (“FIs”) will transmit data to the Comptroller via the IDES. The Comptroller will subsequently authorise the onward transmission of such data held at the IDES to the US Internal Revenue Service. / Section 105L
[Clauses 64]
26 / Amend sections 105M and 105P to specify that non-compliance with certain regulations under section 105P will constitute an offence. / To give IRAS the power to ensure the compliance of financial institutions with Section 105P regulations, which amongst others, include the requirement for financial institutions to conduct specific due diligence to identify reportable accounts under the FATCA IGA. / Sections 105M and 105P
[Clauses 65 and 67]
27 / Include a new section 105MA to allow the Comptroller to address measures taken to circumvent FATCA reporting requirements / To give the Comptroller the power to give directions to ensure that any arrangements designed to circumvent the reporting obligations under the FATCA IGA may be disregarded. / Section 105MA
[Clause 66]
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