Second Reading Speech by Mr Lawrence Wong, Minister for Finance on the Income Tax (Amendment) Bill, at The Parliament, 5 October 202105 Oct 2021
1. Mdm Deputy Speaker, I beg to move, “That the Bill be now read a second time.”
2. The Income Tax (Amendment) Bill covers 38 amendments. Of these, 13 amendments arise from the Budget Statement in February 2021, as well as COVID-19 support measures announced earlier this year to help workers and businesses. Another 25 amendments arise from the periodic review of Singapore’s income tax regime.
3. We sought views from the public on the draft Bill earlier this year and have taken into account the feedback received for the Bill. We thank all the contributors for their inputs.
A – Tax changes announced in 2021
4. Let me start with the key amendments that give effect to the Budget 2021 Statement, and the support measures announced earlier this year.
5. First, to help businesses with cash flow, the enhancement to the loss carry-back relief scheme has been extended for another year. Qualifying deductions for the Year of Assessment (“YA”) 2021 may be carried back up to three preceding YAs or Year of Assessments, instead of one. The amount of qualifying deductions that may be carried back is capped at $100,000. This allows businesses to get a refund of up to $17,000 of income tax paid for YA 2018 to YA 2020. Clause 32 of the Bill provides for this amendment.
6. Second, the scope of the Double Tax Deduction for Internationalisation (“DTDi”) scheme has been enhanced to cover additional qualifying expenses, for example, specific expenses incurred to participate in approved virtual trade fairs. Clauses 8 and 11 of the Bill provide for these amendments. This is to help us to encourage our firms to internationalise.
7. Third, the 250% tax deduction for qualifying donations to Institutions of Public Character (“IPCs”) has been extended for another two years to Calendar Year (“CY”) 2023. Likewise, to continue supporting corporate volunteering, the Business and IPC Partnership Scheme (“BIPS”) has been extended for another two years to calendar year 2023. Clauses 14 and 29 of the Bill provide for these amendments. We hope this will continue to encourage Singaporeans to give back to the community.
8. Fourth, mandatory or voluntary monetary support payments that tenants receive from their landlords in 2021 will not be taxed. This will allow tenants to benefit from the full amount of the monetary support payments. Landlords will also be allowed to claim income tax deductions for these monetary support payments they made to tenants in 2021. This is to facilitate the passing on of rental waivers granted to master tenants of qualifying Government-owned commercial properties to their sub-tenants, as well as the making of monetary support payments by landlords to their tenants in 2021. Clauses 7, 16, and 19 of the Bill provide for these amendments.
B - Non-Budget 2021 amendments arising from the periodic review of the income tax regime
9. MOF regularly reviews and refines the income tax regime. I will now touch on 3 key amendments among the 25 amendments in the Bill, arising from this periodic review of the tax regime.
10. First, we will set out the tax treatment for two situations: where trading stock is appropriated, or used, for non-trade or capital purposes, and vice-versa, in other words, where capital assets become trading stock. IRAS’ current tax treatment of such situations is similar to the practice and case law of the UK. The proposed amendments will now codify this current tax treatment into our tax legislation.
a. Trading stock held by taxpayers may be appropriated for non-trade or capital purposes. For example, a property developer may decide to stop trying to sell unsold units, and instead keep them for long-term capital gains.
i. In such cases, we will treat the market value of the trading stock on the date of appropriation, as income at that juncture. Any gain, which is arrived at after deducting expenses, will then be subject to tax, while any loss is allowed as a deduction.
ii. This proposed amendment is necessary to protect our revenues. Without this amendment, there would be revenue loss from deductions claimed by the taxpayer when the asset was held as trading stock, whereas any gain on the subsequent disposal of the asset will be treated as capital in nature and not subject to tax in Singapore. We do not have capital gains tax.
b. Conversely, non-trade or capital assets may become trading stock. For example, a property developer may choose not to hold its investment property and redevelops it for sale.
i. When the redeveloped property is subsequently sold, the gains are computed and subject to income tax. The proposed amendments provide that in computing such gains, the cost of the trading stock is its market value on the date the asset, in this instance the investment property, becomes trading stock.
c. Clauses 3, 20, 21, 27 and 61 of the Bill provide for these amendments that pertain to clarification of our tax rules for the purposes where trading stock is appropriated for non-trade or capital purposes and vice versa.11. Second, we will facilitate IRAS’ effectiveness when it administers public schemes.
a. Over the past two years, we have introduced and enhanced many support measures – including the Jobs Support Scheme and the Jobs Growth Incentive – to help businesses and workers.
b. IRAS has stepped up to support this effort by centralising and taking on the business disbursement functions for 9 such schemes, which will be added to the Ninth Schedule of the Act.
c. As part of the quality assurance process to ensure that public schemes are administered as intended, such as disbursing the correct amount of payments to eligible firms, IRAS needs to work with external auditors to check and audit its scheme allotment.
d. This includes checking against income tax data to verify a company’s eligibility for public schemes, for example, whether it is an SME.
13. Safeguards are provided for in the Bill, to ensure the proper usage of such tax data
a. In particular the Comptroller of Income Tax will be able to restrict the extent of information that needs to be made available to the authorised persons.
b. Authorised persons who are granted access to the protected data will be prohibited from copying or retaining the data, or disclosing the information to other parties.
15. As a related amendment, we will also amend the Goods and Services Tax Act (“GST Act”) to allow access to Goods and Services Tax information to persons authorised by the CEO of IRAS to audit the administration of public schemes.
16. Clauses 2 and 57 of the Bill provide for these amendments.
17. Third, a protection of informers provision will be included, similar to the provision in legislation like the Customs Act and the Cybersecurity Act 2018.
a. This amendment protects informers by prohibiting witnesses in court (who might be the informers themselves) from disclosing information that may lead to the discovery of an informer’s identity and thus encourages informers to step forward with information that will enable more effective tax enforcement.
b. Related amendments will be made to the GST Act, Property Tax Act, Stamp Duties Act, Betting and Sweepstake Duties Act, Private Lotteries Act and Estate Duty Act.
c. Clauses 50, 55 to 60 of the Bill provide for these amendments.