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Summary of Responses - Public Consultation on Draft Income Tax (Amendment) Bill 2016

17 Nov 2015

Seventy suggestions received on the draft Income Tax (Amendment) Bill 2016[1]

1. The Ministry of Finance (MOF) held a public consultation exercise on the draft Income (Amendment) Tax Bill 2016 from 26 June to 24 July 2015. The draft Bill contains proposed legislation to effect the tax changes announced at Budget 2015 on 23 February 2015, as well as other changes arising from the periodic review of the income tax system.

2. MOF received a total of 70 suggestions, of which 31 suggestions were accepted, with consequent revisions to be made to the draft Income Tax (Amendment) Bill 2016. The remaining suggestions were not accepted, as they were inconsistent either with the legislative drafting conventions or the policy objectives of the proposed legislative changes.

3. Most of the feedback received focused on the following tax changes:

  • Extending and refining the Mergers & Acquisition scheme
  • Enhancing the Double Tax Deduction for Internationalisation Scheme
  • Introducing the International Growth Scheme
  • Extending and enhancing the Maritime Sector Incentive

4. MOF would like to thank all individuals and organisations who have taken the time and effort to provide their valuable feedback.



[1] The Bill was formerly known as Income Tax (Amendment) Bill 2015, as it was originally slated to be introduced in Parliament in Calendar Year (CY) 2015. The introduction of the Bill was postponed till CY 2016, following the dissolution of the Parliament on 25 August 2015.




Summary of key public feedback received on the Income Tax (Amendment) Bill 2016

1. Extend and refine the Mergers & Acquisitions (M&A) scheme

Feedback: 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: Not accepted. 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).

2. Enhance the Double Tax Deduction (DTD) for Internationalisation scheme

Feedback: There could be situations where an overseas entity bears the manpower expenses, and subsequently recovers the salary cost from the Singapore entity (i.e. the manpower expenses are ultimately recharged to the Singapore entity). The draft amendment does not make clear if such recharges will be allowed to qualify.

MOF’s response: Accepted. The Act will be amended to clarify that the Singapore entity will be treated as having incurred the salary expenditure, if it directly incurs that expenditure, or if the overseas establishment incurs the expenditure and is subsequently reimbursed by the Singapore entity.

Feedback: 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: Not accepted. There is no need to amend the definition of “overseas establishment” as the 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.

3. Introduce the International Growth Scheme (IGS)

Feedback: The intent of the IGS scheme is to support Singapore companies to expand overseas while anchoring their key business activities and headquarters in Singapore. The current definition of “international growth company” does not include a company in Singapore that performs services to persons that are domiciled outside Singapore.

MOF’s response: Accepted. The definition of “international growth company” will be amended to include a company incorporated and resident in Singapore which provides services to a person or permanent establishment outside Singapore.

4. Extend and enhance the Maritime Sector Incentive (MSI)

Feedback: The Maritime Sector Incentive – Approved International Shipping Enterprise award (MSI-AIS) provides for tax exemption on income from qualifying shipping operations derived by a Singapore resident company that owns or operates ships or has a Special Purpose Vehicles (SPV) that owns or operates ships. The Singapore resident company is approved as an international shipping enterprise. 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.

MOF’s response: Accepted. The definition of ‘international shipping enterprise’ will be refined to clarify that an international shipping enterprise includes one that has an SPV that satisfies specified shareholding requirements.

Feedback: The 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. We 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: Not accepted. The definition of finance leasing is aligned with that used in other sections of the Act (e.g. sections 10D, 13S, 43Y and 43ZA). As a new Financial Reporting Standard on leases may be released by the Accounting Standards Council, we will review the definition of finance leasing then.

5. Amend the provisions relating to implementation of Foreign Account Tax Compliance Act (FATCA)

Feedback: Under subsection (2) of the draft section 105PA, 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". The ambit of these words is very wide, and could potentially cover common law legal professional privilege. A carve-out is suggested to be included in the draft section 105PA, to make clear that disclosures under FATCA are not permitted where such disclosures breach legal professional privilege.

MOF’s response: Accepted. Section 105PA will be amended to include a carve-out for information subject to legal professional privilege.