Second Reading Speech by Senior Minister of State for Finance Indranee Rajah on The Income Tax (Amendment) Bill 2017, at the Parliament, 2 Oct 201702 Oct 2017
Mr Speaker, on behalf of Second Minister for Finance, I beg to move, "That the Bill be now read a second time."
2. The Income Tax (Amendment) Bill 2017,, covers eight income tax changes announced in the 2017 Budget Statement as well as 28 tax changes arising from the periodic review of our income tax regime. Of the 28 non-Budget proposed tax changes, 16 changes are proposed refinements to the income tax regime while the remaining 12 changes are technical amendments to remove obsolete provisions or to provide clarification on the law.
3. We sought views from the public on the draft Bill from 19 June to 10 July 2017. MOF has evaluated the feedback received and where relevant, taken the suggestions in.
4. Sir, the Minister for Finance had in his Budget 2017 statement introduced several tax measures to help companies and individuals cope during a period of economic uncertainty. The tax measures have already been debated in this House, but I will highlight the key ones.
5. First, the existing Corporate Income Tax (“CIT”) rebate for Year of Assessment (“YA”) 2017 is enhanced by raising the cap from $20,000 to $25,000, while keeping the rebate percentage unchanged at 50%. The CIT rebate will also be extended to YA 2018, at 20% of tax payable, capped at $10,000. This will help companies navigate through the economic uncertainty and continue with restructuring. Clauses 39 and 40 of the Bill provide for the change.
6. Second, to ease compliance, taxpayers will be able to claim a tax deduction for the full amount of payments made under Cost Sharing Agreements for qualifying Research & Development projects without the need to provide a cost breakdown from YA 2018. Clauses 11 and 14 of the Bill provide for the changes.
7. Third, to provide relief to individuals who pay income tax, a Personal Income Tax rebate of 20% of tax payable will be granted to all individual tax residents for YA 2017, capped at $500 per taxpayer. Clause 46 of the Bill provides for the change.
8. Sir, as mentioned, the Ministry of Finance also regularly reviews and refines the income tax regime. I shall now outline two key changes arising from MOF’s periodic review of the tax regime.
9. First, we will require businesses to maintain Transfer Pricing Documentation (“TPD”). Transfer Pricing refers to the pricing of transactions among related parties, which in turn determines the allocation of profits among these parties. TPD are records kept by businesses to show that they have priced their transactions with related parties at the equivalent of what they would have transacted with unrelated parties in similar circumstances. This arm’s length principle is an internationally accepted tax standard.
10. Since 2006, under IRAS’ guidelines, IRAS has been encouraging businesses to maintain TPD. Many businesses currently do so. With effect from YA2019, businesses will be required to maintain TPD. Jurisdictions such as Canada, China, Germany, Korea and USA also have such requirements.
11. Requiring businesses to maintain TPD demonstrates our commitment to uphold international standards, and ensures that the profits taxed in Singapore are commensurate with the functions, assets and risks undertaken by businesses in Singapore.
12. When transactions between related parties are appropriately priced, profits are correctly attributed to the jurisdictions involved in the transactions. Domestically, TPD ensures that we are collecting the due taxes which are attributable to Singapore. Internationally, TPD serves as useful evidence to other tax authorities, which our businesses can use to show that they have complied with the arm’s length principle for cross-border related party transactions. TPD will help our businesses minimize and manage cross-border tax disputes as they go global.
13. To limit the compliance burden for smaller businesses, this requirement will apply to businesses only if they have gross revenue exceeding $10m and significant related party transactions. We expect this requirement to apply to fewer than 5% of companies, many of which have been already maintaining TPD. Clause 21 of the Bill provides for the change.
14. Second, with effect from 1 January 2018, the Government will raise the maximum amount that an employer can voluntarily contribute to his employee’s Medisave account under the Additional Medisave Contribution Scheme from $1,500 to $2,730 per year. Accordingly, we will increase the maximum amount of tax exempt voluntary contributions made by employers to employees’ Medisave account, and the tax deduction allowable to the employer for these voluntary contributions. Similarly, for eligible companies that make voluntary contributions to the Medisave accounts of the self-employed persons they work with, we will increase the maximum tax deduction allowable to $2,730. Self-employed persons will receive tax exemption on such contributions up to the same limit. These changes for voluntary contributions to the Medisave accounts of employees and self-employed persons are in line with the Government’s efforts to promote portable medical benefits. All other conditions for granting tax benefits in respect of such voluntary contributions remain unchanged. Clauses 4, 6 and 10 of the Bill provide for the changes.
15. The remaining legislative changes are mostly technical in nature or relate to improvements in tax administration.
16. Mr Speaker, I beg to move.