On 3 November 2014, the Income Tax (Amendment) Bill 2014 (the “Bill”) was passed in Parliament. The Bill seeks to implement the tax changes in the 2014 Budget Statement and make other amendments to the Income Tax Act (the “Act”) arising from on-going reviews of the income tax system.
Key changes arising from the Bill include the following:
Budget 2014 changes
- The Productivity and Innovation Credit (“PIC”) scheme will be extended for three years till YA 2018. For the year of assessment (“YA”) 2016 onwards, the period for satisfying the requirement of employment of three local employees will be extended from one month to three months.
- The 100% tax deduction for qualifying intellectual property (“IP”) registration costs will be extended for another five years till YA 2020. At the same time, the period in which an enhanced deduction for such costs may be allowed will be extended till YA 2018.
- The period in which an enhanced deduction of 50% of qualifying R&D expenditure granted under section 14DA of the Act may be allowed will be extended till YA 2025. Further, the period in which an enhanced deduction of 250% and 300% of qualifying R&D may be allowed will be extended till YA 2018.
- The period during which a person may apply for a land intensification allowance (LIA) will be extended to 30 June 2020.
- Remove requirement to withhold tax for interest payments liable to be paid on or after 21 February 2014 to Singapore branches of non-resident companies.
- Distributions from Basel III Additional Tier 1 capital instruments (other than shares) issued by Singapore-incorporated banks and other specified entities will be treated as interest derived from debt securities. Such distribution will (subject to conditions) then be deductible as interest against the income of the issuer of the instruments, and taxable as interest income in the hands of the holders of the instruments, unless exempt from tax. As it is treated as interest derived from debt securities, it may be taxed at the concessionary tax rate that applies to income derived from qualifying debt securities, where applicable.
- To continue to grow Singapore’s asset management industry, the tax incentive schemes under sections 13CA, 13R and 13X of the Act will be extended for five years till 31 March 2019.
- The Act will be amended to address abusive arrangements where one of the main purposes is to receive PIC benefits. The promoter of such abusive schemes will be guilty of an offence.
- The Act will be amended to enable a multilateral treaty which provides for exchange of tax information between countries to be prescribed as an exchange of information arrangement for the purposes of the Act. This will allow Singapore to ratify the Convention on Mutual Administrative Assistance in Tax Matters done at Strasbourg on 25 January 1988.