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Second Reading Speech by Mr Lawrence Wong, Second Minister for Finance and Minister for Education, on The Income Tax (Amendment) Bill 2020

03 Nov 2020

Mr Speaker, Sir, I beg to move, "That the Bill be now read a second time."

2. The Income Tax (Amendment) Bill 2020 covers 39 amendments. Of these, 25 arise from the Financial Year (“FY”) 2020 Budgets and the Ministerial Statement by the Deputy Prime Minister, and Minister for Finance, Mr Heng Swee Keat, on 17 August 2020 (“Ministerial Statement”). Another 14 amendments arise from the periodic review to refine or clarify Singapore’s income tax regime.

3. We have sought views from the public on the draft Bill earlier this year. MOF has evaluated the feedback received and incorporated them where they are relevant to the Bill, and, we thank the contributors for their inputs.

4. Let me start with the key amendments that give effect to the announcements made at the FY2020 Budgets and the Ministerial Statement earlier this year.

5. First, to help companies with cash flow, a Corporate Income Tax Rebate of 25% of tax payable, capped at $15,000 per company, is granted for YA  (“Year of Assessment”) 2020. Clause 56 of the Bill provides for this amendment.

6. Second, to help businesses with cash flow, qualifying deductions for YA2020 may be carried back up to three immediate preceding YAs, instead of one immediate preceding YA. This allows businesses to get a refund of up to $17,000 of income tax paid for YA2017 to YA2019, and , clauses 29, 34, 35, 36, and 39 of the Bill provide for this amendment.

7. Third, to continue encouraging our firms to internationalise, the Double Tax Deduction for Internationalisation (“DTDi”) scheme has been extended until 31 December 2025. The scope of the scheme has also been enhanced to cover more qualifying expenses, and, clauses 17, 19, and 20 of the Bill provide for these amendments.

8. Fourth, to continue encouraging companies to consider mergers & acquisitions (“M&A”) for growth and internationalisation, the M&A scheme has been extended to cover qualifying acquisitions made on or before 31 December 2025. Clause 41 of the Bill provides for this amendment.

9. Fifth, prescribed payouts received by individuals, businesses, and employers under certain schemes announced this year, like the Self-Employed Person Income Relief Scheme, COVID Support Grant, and Jobs Support Scheme, will be exempt from income tax. This will allow citizens and business owners to benefit from the full amount of the support measures, without having to pay tax on them. Clauses 16, 22, and 60 of the Bill provide for these exemptions and amendments relating to these exemptions.

10. Next, as highlighted earlier, MOF regularly reviews and refines the income tax regime. So let me now touch on several key amendments amongst those arising from this periodic review of the tax regime which are found in the Bill. 11. First, to further deter tax avoidance arrangements, we will introduce a surcharge equal to 50% of the amount of additional income tax payable as a result of the adjustments by the Comptroller of Income Tax (“Comptroller”) to counteract tax avoidance arrangements.

a.Currently, the tax avoidance rules only allow the Comptroller’s adjustments to restore taxpayers to their initial tax position, as if the tax avoidance arrangement had not been entered into. This is insufficient to deter aggressive taxpayers from taking the risk of later adjustments made by the Comptroller to counteract the tax avoidance arrangement.

b.As a related amendment, we will also amend the Stamp Duties Act to introduce a surcharge equal to 50% of the amount of additional stamp duties payable as a result of adjustments made to counteract the tax avoidance arrangement.

c.Clauses 30, 31, and 63 of the Bill provide for these amendments, and, a similar amendment is proposed for the Goods and Services Tax Bill which we will discuss later. 

12. Second, to encourage taxpayers to enjoy the convenience of digital services, and to allow them to get refunds faster, the Minister for Finance will be allowed to prescribe in subsidiary legislation that tax refunds by the Comptroller of Income Tax to companies are to be made via electronic means.

a. An assessment of the readiness of companies will be made in 2021, and exceptions will be provided where needed.

b. Clause 5 of the Bill provides for this amendment, and a similar amendment is also being proposed for the GST (Amendment) Bill 2020 for refunds of GST by the Comptroller of GST to GST-registered businesses..

13. Third, the ITA is amended to clarify the application of the Section 37B adjustment factor.

a. The Section 37B adjustment factor should be applied when offsetting any unabsorbed capital allowances, losses, and donations in respect of income that is subject to tax at one rate, against income subject to tax at another rate, whether within the same YA or across a different YA.

b. For example, say there is a $1 million loss arising in respect of income taxed at 10%. The tax savings should be $100,000. Without applying the Section 37B adjustment factor, this loss will give rise to $170,000 tax savings if it is offset against income taxed at 17%. But, with the Section 37B adjustment factor, we ensure that the tax savings from this loss remains at $100,000 regardless of the tax rate of the income it is eventually offset against.

c. I shall clarify there is no change in policy intent or even in practice. But this amendment seeks to ensure that the Section 37B adjustment factor applies in all scenarios, and it is consistent with existing practice. We have provided a validation clause to provide certainty that past applications of this adjustment factor were valid, and that unabsorbed capital allowances, losses and donations brought forward from prior years will continue to be preserved at their tax savings value in line with the policy intent, and,clauses 37, 38, 39, 42, and 66 of the Bill provide for these technical amendments.

14. Mr Speaker, I beg to move.