From 26 June 2015 to 24 July 2015, the Ministry of Finance (the “MOF”) conducted a public consultation seeking feedback on a draft Income Tax (Amendment) Bill 2015 (the “Draft Bill”). The proposed changes to the Income Tax Act seek principally to implement changes announced in the 2015 Budget Statement (the “Budget 2015 changes”), although non-Budget 2015 changes are also proposed.
Budget 2015 changes
The draft amendments to the Income Tax Act to address the Budget 2015 changes include the following:
- Extend and refine Merger & Acquisition (“M&A”) scheme: The M&A scheme will be extended for five years till 31 March 2020 to provide greater support to small and medium enterprises to grow via strategic acquisitions. The M&A allowance rate will be increased from 5% to 25%, with the cap on the value of qualifying acquisitions revised from S$100 million to S$20 million.With the lower cap on the value of qualifying acquisitions, the total amount of stamp duty relief available will correspondingly be reduced from S$200,000 to S$40,000.The total amount of the M&A allowance remains unchanged at S$5 million.
- Introduce new International Growth Scheme (“IGS”): This new scheme will be introduced to support larger Singapore companies in their internationalisation efforts by providing qualifying Singapore companies with a concessionary tax rate of 10% for five years till 31 March 2020 on incremental income from qualifying internationalisation activities, e.g. export of goods and services, or global or regional HQ-related activities.
- Enhance the Double Tax Deduction (“DTD”) for Internationalisation scheme: The DTD for Internationalisation scheme will be enhanced to cover qualifying salary expenditure incurred from 1 July 2015 to 31 March 2020 for Singaporeans posted to newly set up or newly acquired overseas entities.
- Refine tax incentives for venture capital funds (“VCF”) and VCF management companies: Approved VCF management companies managing Section 13H funds will be given a 5% concessionary rate on their specified income with an approval window from 1 April 2015 to 31 March 2020.
- Improve enhanced-tier fund tax incentive scheme: To accommodate master-feeder fund structures that hold their investments via Special Purpose Vehicles (“SPVs”), the existing concession for master-feeder fund structures will be enhanced to apply to SPVs held by the master fund, subject to conditions. This will allow both master-feeder-SPV and master-SPV fund structures to apply for the scheme and meet the economic conditions on a collective basis.
- Extend income tax concessions for real estate investment trusts (“REITs”): The income tax concessions for REITs, i.e. tax exemption for qualifying foreign-sourced income received by the trustees of REITs and their wholly-owned Singapore resident subsidiary companies, and the 10% concessionary tax rate for distributions received by qualifying non-resident non-individual investors from REITs, will be extended till 31 March 2020.
- Enhance progressivity of the personal income tax rate structure: The marginal tax rates for individual tax residents with chargeable income exceeding S$160,000 will be increased with effect from YA 2017. A new tax rate of 22% will also be introduced into the personal income tax rate structure for chargeable income exceeding S$320,000.
- Extend the 250% tax deduction for qualifying donations: The 250% tax deduction will be extended for three years from 1 January 2016 to 31 December 2018. In addition, as part of the SG50 jubilee celebration, the tax deduction rate will raised to 300% for qualifying donations made in 2015 to institutions of public character and other qualifying recipients (such as approved museums, prescribed schools).
The following materials are available from the MOF website www.mof.gov.sg: