Summary of responses to public consultation on the draft Income Tax (Amendment) Bill 202002 Oct 2020
1. The Ministry of Finance (MOF) invited the public to provide feedback on the draft Income Tax (Amendment) Bill 2020 from 20 July to 7 August 2020. The draft Bill proposes legislative amendments to effect tax changes arising from the Financial Year (“FY”) 2020 Budgets and Ministerial Statement by the Deputy Prime Minister, Coordinating Minister for Economic Policies and Minister for Finance, Mr Heng Swee Keat, on 17 August 2020, periodic review of the income tax regime, and technical amendments.
2. The key feedback received pertained to the following tax changes:
- Introduce a surcharge for tax avoidance arrangements;
- Extend and refine the upfront certainty of non-taxation of companies’ gains on disposal of ordinary shares; and
- General tax treatment of COVID-19 support measures.
Responses to the key feedback are in Annex A.
3. The proposed legislative changes will be incorporated into the Income Tax (Amendment) Bill 2020 to be presented to Parliament in the last quarter of 2020. MOF thanks all individuals and organisations who have taken the time
and effort to provide their input.
Ministry of Finance
2 October 2020
Annex A: MOF’s response to key feedback on the draft Income Tax (Amendment) Bill 2020
1. Introduce a surcharge for tax avoidance arrangements.
a) Feedback: The Comptroller of Income Tax (“Comptroller”) / Commissioner of Stamp Duties (“Commissioner”) should be allowed to retain discretion on whether to take action against tax avoidance arrangements.
Response: Not accepted. The amendment is aligned with the consistent stance we have adopted towards tax avoidance in Singapore. Where the Comptroller / Commissioner is satisfied that the purpose or effect of any arrangement is for tax avoidance purposes, the Comptroller / Commissioner will vary or disregard that arrangement and make the appropriate adjustments.
b) Feedback: The surcharge of 50% is too high, and there is no recourse for taxpayers to dispute the surcharge.
Response: Not accepted, and the second part of this feedback is not factually correct. Currently, there is no surcharge being imposed on tax avoidance arrangements, and the existing anti-avoidance provisions only restore taxpayers to their initial tax position, as if the arrangement had not been entered into. The proposed surcharge quantum is set at 50% to ensure that there is sufficient deterrence against tax avoidance arrangements.
To clarify, the draft legislation does provide for recourse for taxpayers to appeal against the Comptroller / Commissioner’s determination that the purpose or effect of an arrangement is for tax avoidance purposes.
c) Feedback: Provide clarity on how the penalty provision (i.e. sections 94, 95, 96, and 96A of the Income Tax Act (“ITA”)) would work in tandem with the surcharge.
Response: The penalty provisions under sections 94, 95, 96 and 96A of the ITA, and the proposed surcharge under section 33A of the ITA, serve different purposes. The penalty provisions under sections 94, 95, 96 and 96A of the ITA relate to general penalties, penalties for filing of incorrect tax return and tax evasion penalties, and are imposed on a taxpayer who committed such offences. These are separate from the proposed surcharge under section 33A of the ITA, which will be imposed on a taxpayer who entered into a tax avoidance arrangement.
d) Feedback: Late payment penalties for stamp duties should be computed based on the amount of duty/additional duty, and not the surcharge. Up to 4 times penalty on late payment of surcharge is excessive.
Response: Not accepted. All duties payable under the Stamp Duties Act (“SDA”), are subject to the same penalties if they are not paid within the stipulated timeline. Where the delay does not exceed 3 months, there is a penalty of $10 or an amount equal to the duty payable, whichever is greater. Where the delay exceeds 3 months, there is a penalty of $25 or 4 times the duty payable, whichever is greater.
The surcharge is an additional duty payable. Hence, the same penalties should apply if the amount is not paid within the stipulated timeline.
e) Feedback: Provide clarity on whether the surcharge would affect taxpayers’ rights retroactively.
Response: The imposition of the surcharge would not adversely affect taxpayers’ rights retroactively, as the surcharge will only apply to adjustments made in the Year of Assessment 2023 or later for income tax, and for instruments executed on or after the date of commencement of section 63 of the Income Tax (Amendment) Act 2020 for stamp duty.
2. Extend and refine the upfront certainty of non-taxation of companies’ gains on disposal of ordinary shares
Feedback: Provide clarity on what activities constitute “property development”, and what type of renovations or “alterations or additions” would be caught within scope of exemption.
Response: Accepted. The draft legislation has been updated to exclude from the definition of “property development”, building works such as alterations or additions which do not require the approval of the Commissioner of Building Control under the Building Control Act (or would not have been so required, if the alterations or additions were done in Singapore).
3. General tax treatment of COVID-19 support measures
Feedback: The tax exemption for payouts under the Jobs Support Scheme (“JSS”) may cause doubt as to the tax deductibility of wage expenses supported by the JSS.
Response: Accepted. Clarifications will be provided on IRAS’ website to explain that employers will be allowed tax deductions on such wages paid to employees which are funded out of JSS payouts.
 Please refer to the press release issued on 20 July 2020 for the public consultation documents on the draft Income Tax (Amendment) Bill 2020.
 Refer to proposed amendments for sections 33(4) and 33A(8) of the ITA (to be amended under clause 30 of the draft Income Tax (Amendment) Bill 2020), and sections 33C(6) and 40 of the Stamp Duties Act (to be amended under clause 63 of the draft Income Tax (Amendment) Bill 2020)