Second Reading Speech by Senior Minister of State for Finance and Law Indranee Rajah on the Income Tax (Amendment No. 3) Bill 201610 Nov 2016
Mdm Speaker, I beg to move, "That the Bill be now read a second time."
2 The Income Tax (Amendment No. 3) Bill 2016, or the Bill in short, covers income tax changes announced in the 2016 Budget Statement, an amendment to implement Country-by-Country Reporting, as well as other changes arising from the periodic review of our income tax regime.
3 We sought views from the public on the draft Bill from 8 to 29 July 2016. MOF has evaluated all the feedback received and where relevant, accepted the suggestions.
4 Madam, the tax changes announced in the 2016 Budget Statement have already been debated in this House. These changes seek to transform our economy through enterprise and innovation, as well as to build a more caring and resilient society. Let me highlight the key changes.
5 First, the existing Corporate Income Tax rebate will be raised from 30% to 50% of tax payable, with a cap of $20,000 rebate each year for Years of Assessment 2016 and 2017. This will provide greater support to help all qualifying companies, especially SMEs, to address immediate concerns, while encouraging restructuring. Clause 51 of the Bill provides for the change.
6 Second, to support more mergers and acquisitions (“M&As”), the M&A scheme was enhanced to allow the 25% tax allowance on the first $40 million of the cost of qualifying share acquisitions incurred each year, up from $20 million. Companies can therefore enjoy a maximum tax allowance of $10 million on their qualifying share acquisitions, up from $5 million. Clauses 23 and 63 of the Bill provide for the changes.
7 Third, to provide upfront certainty to companies for their corporate restructuring, the non-taxation of companies’ gains on disposal of their equity investments has been extended until 31 May 2022. Clause 11 of the Bill provides for the change.
8 Fourth, to support firms, especially SMEs, to seek new markets and new growth opportunities overseas, the Double Tax Deduction for Internationalisation scheme has been extended till 31 March 2020. Clauses 13 and 14 of the Bill provide for the changes.
9 Fifth, to enhance progressivity of our personal income tax systems, the total amount of personal income tax reliefs an individual can claim will be capped at $80,000 per Year of Assessment. This change will take effect from Year of Assessment 2018. Clauses 25 to 28 of the Bill provide for the changes.
10 Sixth, to encourage volunteerism among businesses, a pilot Business and Institutions of a Public Character (“IPCs”) Partnership Scheme was introduced from 1 July 2016 till end of 2018. Businesses that organise their employees to volunteer and provide services to IPCs, including secondments, will receive a total of 250% tax deduction on qualifying expenditure incurred, subject to the receiving IPC’s agreement. The qualifying expenditure will be subject to a yearly cap of $250,000 per business and $50,000 per IPC. Clauses 17 and 18 of the Bill provide for the changes.
11 Madam, Singapore has joined the inclusive framework for the global implementation of the Base Erosion and Profit Shifting (“BEPS”) project. As a BEPS associate, Singapore has committed to implementing Country-by-Country Reporting, a minimum standard under the G20 / OECD action plan to counter BEPS. Singapore-headquartered multinational enterprise groups with global consolidated revenues exceeding S$1.125 billion will be required to submit to the Inland Revenue Authority of Singapore (“IRAS”) an annual report containing the income, taxes paid and other indicators of their level of economic activities in every tax jurisdiction where they operate, from their financial years commencing on or after 1 January 2017. IRAS will then exchange the reports bilaterally with jurisdictions with whom Singapore has concluded Competent Authority Agreements. Clauses 53, 54, 55, 56 and 58 of the Bill provide for the implementation of Country-by-Country Reporting.
12 Madam, the Ministry of Finance regularly reviews and refines the income tax regime. I shall now outline two other key changes arising from MOF’s periodic review of the tax regime.
13 First, we will delink the income tax relief limit for CPF cash top-ups from the CPF top-up limit from 1 January 2016. The CPF top-up limit to the Retirement Account has been raised from the Full Retirement Sum (“FRS”) to the Enhanced Retirement Sum which is 1.5 times of the FRS, from 1 January 2016. To keep tax benefits focused on supporting basic retirement needs, the limit on tax relief for cash top-ups will be maintained at the FRS. Clause 24 of the Bill provides for the change.
14 Second, we will grant tax deduction of up to 200% for qualifying expenditure incurred on qualifying retail bonds issued from 19 May 2016 to 18 May 2021. Such qualifying expenditure include professional fees, origination, underwriting and distribution fees, as well as advertising and marketing expenses. This will further encourage the issuance of retail bonds and broaden the range of investment options available to retail investors. Clauses 16 and 18 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 Mdm Speaker, I beg to move.