Media Factsheet: Income Tax (Amendment) Bill 202113 Sep 2021
The Income Tax (Amendment) Bill 2021 contains:
a) tax measures announced in the Budget 2021 Statement on 16 February 2021;
b) economy-wide and sector-specific measures announced by the Government in May 2021 and July 2021 in response to the COVID-19 pandemic; and
c) tax changes arising from periodic review of our income tax system; and technical amendments.
2 The Bill has taken into account the feedback received during the Ministry of Finance’s (MOF) public consultation on the draft Income Tax (Amendment) Bill 2021 that was conducted from 11 June 2021 to 2 July 2021.
3 The key proposed amendments included in the Bill are as follows:
a) Tax changes announced in Budget 2021.
i. The enhancement to the loss carry-back relief scheme to allow for qualifying deductions to be carried back for up to three years (instead of one) will be extended for Year of Assessment (“YA”) 2021;
ii. The option to accelerate the write-off of the cost of acquiring plant and machinery (“P&M”) over two years (instead of three) will be extended to capital expenditure incurred on the acquisition of P&M in the basis period for YA 2022 (i.e. Financial Year (“FY”) 2021);
iii. The option to claim renovation and refurbishment (“R&R”) deduction in one YA (i.e. accelerated R&R deduction) (instead of three) will be extended to qualifying expenditure incurred on R&R in the basis period for YA 2022 (i.e. FY 2021);
iv. The Double Tax Deduction for Internationalisation (“DTDi”) scheme will be enhanced such as to cover additional qualifying expenses (e.g. specific expenses incurred to participate in approved virtual trade fairs). The enhancement seeks to support internalisation efforts of businesses amidst changes in business environment; and
v. The 250% tax deduction for qualifying donations made to Institutions of Public Character (IPCs) and other qualifying recipients will be extended for another two years, i.e. for donations made during the period 1 January 2022 to 31 December 2023 (both dates inclusive).
b) Economy-wide and sector-specific measures announced by the Government in response to the COVID-19 pandemic in May 2021 and July 2021. Briefly, the proposed amendments follow the same tax treatment for similar measures in 2020:
i. Exempt landlords/master tenants’ mandatory/voluntary support payments made in 2021 from income tax in the hands of the tenant-occupiers and qualifying sub-tenants.
ii. Allow income tax deductions, subject to a cap, for monetary payments made in 2021 by: (a) landlords/master tenants to pass on the rental waiver granted for Government-owned commercial properties and (b) landlords/master tenants on mandatory/voluntary support payments to their tenant-occupiers and qualifying sub-tenants.
iii. Specify that the tax-deductible rental expenses which tenant-occupiers/sub-tenants can claim is the amount of rental expenses net of monetary benefits received from the landlords/master tenants in 2021.
4 The Bill also provides for refinements and proposed amendments of existing tax policies and tax administration arising from periodic review of Singapore’s income tax system. The key proposed amendments are as follows:
a) Amend Section 6 to allow persons authorised by the Comptroller of Income Tax access to IRAS records and/or documents containing taxpayer income information protected under Section 6. Authorised persons, including non-public servants such as private sector auditors and IT consultants, need this access to the information to perform the audits (e.g. on allotment and disbursement files, IRAS’s IT systems), so as to ensure accurate administration of public schemes listed in the Ninth Schedule (e.g. the Jobs Support Scheme). A provision to prohibit authorised persons from using protected data in an unauthorised manner is also included. Similar amendments will be made to Section 6 of the GST Act to allow authorised persons access to information required for audits to ensure accurate administration of public schemes listed in the Sixth Schedule of the GST Act.
b) Provide the tax treatment for two situations: (i) trading stock is appropriated for non-trade or capital purposes, and (ii) non-trade or capital asset becomes trading stock.
i. Singapore’s tax system has an income tax but not a capital gains tax. Thus, gains that are of a revenue nature are subject to income tax. Conversely, gains that are of a capital nature are not taxed. Likewise, tax deductions are allowed only for losses of a revenue nature, but not for losses of a capital nature.
ii. At times, trading stock held by taxpayers may be appropriated for non-trade or capital purposes. Conversely, non-trade or capital assets may become trading stock.
iii. The proposed amendments provide that as and when trading stock is appropriated for non-trade or capital purposes, the market value of the trading stock on the date of appropriation is treated as income that is subject to income tax at that juncture.
iv. Conversely, if a non-trade or capital asset becomes a trading stock that is subsequently sold, the proposed amendments provide that the cost of the trading stock is its market value on the date the non-trade or capital asset becomes trading stock. The gains from the subsequent disposal of the trading stock are then computed accordingly and subject to income tax.
c) Require taxpayers to give a written notice to the Comptroller when a foreign tax authority makes a downward adjustment of foreign tax which results in the foreign tax credit previously allowed in Singapore on foreign-sourced income becoming excessive. Singapore’s corporate income tax system taxes foreign-sourced income upon remittance, and provides for a tax credit for foreign taxes paid on the same income. Where foreign tax paid exceeds the Singapore tax due on the foreign-sourced income, no further income tax is payable in Singapore. The proposed amendment will require taxpayers to notify the Comptroller within one year when a foreign tax authority makes a downward adjustment of foreign tax which results in the foreign tax credit previously allowed in Singapore becoming excessive, as IRAS would need to raise additional tax assessments. The period for IRAS to raise additional tax assessments, in relation to downward adjustment of foreign tax, will also be increased from two years to three years. Correspondingly, in situations where there are upward adjustment of foreign tax, taxpayers can also make the claim for additional foreign tax credits within three years from the date of the upward adjustment.
d) Align the maximum penalty amounts for non-filing and other related offences under the ITA with those for similar offences under the GST Act and Property Tax Act. The proposed amendments update the penalty amounts under the ITA and ensure that penalty amounts across tax legislation are generally consistent.
e) Include a protection of informer provision. The provision is modelled after protection of informer provisions in other domestic legislation such as the Customs Act, the Cybersecurity Act 2018 and the Regulation of Imports and Exports Act. The proposed amendments will protect informers by prohibiting witnesses from disclosing information that may lead to the discovery of an informer’s identity, and thus encourage informers to step forward with information that will enable more effective tax enforcement. Similar provisions will be included in the other tax legislation such as the GST Act, Property Tax Act and the Stamp Duties Act.