Public Consultation on Proposed Income Tax (Amendment) Bill 2023

INTRODUCTION

1. The Ministry of Finance is proposing 33 legislative amendments to the Income Tax Act 1947 (“ITA”) to effect: (i) tax measures announced in the 2023 Budget Statement on 14 February 2023 (19 amendments); and (ii) changes arising from international tax developments and MOF’s periodic review of Singapore’s tax system to better reflect policy objectives and to improve tax administration (14 amendments). 

2. The Ministry is seeking public feedback on the draft Income Tax (Amendment) Bill 2023 which provides for these proposed amendments,  from 6 June to 30 June 2023.

SCOPE OF THE CONSULTATION

Budget 2023 amendments

3. There are 19 proposed amendments to effect measures announced by the Deputy Prime Minister and Minister for Finance, Mr Lawrence Wong, in the 2023 Budget Statement. Key amendments include the following:

(a) Enterprise Innovation Scheme (“EIS”). To encourage businesses to engage in research and development (“R&D”), innovation and capability development activities, MOF will introduce the EIS. Under the EIS, MOF will increase existing tax deductions/ allowances for R&D, Intellectual Property (“IP”) registration, IP rights acquisition and licensing, and qualifying training to 400% for the first $400,000 of qualifying expenses incurred for each qualifying activity per Year of Assessment (“YA”). MOF will also introduce a new 400% tax deduction for up to $50,000 of qualifying innovation expenditure incurred on qualifying innovation projects carried out with selected partner institutions per YA. Eligible businesses can, in lieu of tax deductions/ allowances, opt for a non-taxable cash grant at a cash conversion ratio of 20% on up to $100,000 of total qualifying expenditure across all qualifying activities. These new or enhanced tax measures will be effective from YA 2024 to YA 2028.

(b) Philanthropy Tax Incentive Scheme for Family Offices (“FOs”). To strengthen Singapore’s position as a regional philanthropy hub and encourage FOs to anchor their giving operations in Singapore, MOF will introduce a pilot tax incentive scheme for qualifying donors with FOs operating in Singapore. The pilot will be in effect for five years starting from YA 2025, and will be reviewed in 2028. To qualify, the donors must have a fund under MAS’ section 13O or 13U scheme and meet eligibility conditions, such as incremental business spending of $200,000. Under the scheme, qualifying donors will be able to claim 100% tax deduction for overseas donations made through qualifying local intermediaries. The tax deduction will be capped at 40% of the donor’s statutory income.

(c) Change Working Mother’s Child Relief (“WMCR”) from a percentage of earned income to a fixed dollar tax relief for qualifying children born or adopted on or after 1 January 2024. As part of the review of our support measures for Marriage & Parenthood, the WMCR will be changed to a fixed dollar tax relief for qualifying children born or adopted on or after 1 January 2024. Eligible working mothers can claim $8,000, $10,000, and $12,000 for their first, second and subsequent children respectively. There is no change to the WMCR (based on a percentage of earned income) that a mother can claim in respect of qualifying children born or adopted before 1 January 2024.

Other proposed amendments

4. There are 14 proposed amendments arising from international tax developments and MOF’s periodic review of Singapore’s tax system to better reflect policy objectives and to improve tax administration. 

5. Two key proposed amendments include the following:

(a) Tax gains from the sale of foreign assets that are received in Singapore by businesses without economic substance in Singapore. This is to align the tax treatment of gains from the sale of foreign assets to the EU Code of Conduct Group guidance, which aims to address international tax avoidance risks. The change is in line with our focus on anchoring substantive economic activities in Singapore.

(b) Mandate submission of income information by intermediaries for Self-Employed Persons (“SEPs”). This is to facilitate the income tax assessment of SEPs (e.g. commission agents) by transmitting the income directly from the intermediaries to IRAS. This will also facilitate the administration of schemes that cover SEPs such as the Workfare Income Supplement, and allow the government to roll out SEP schemes more quickly and effectively going forward. A phased implementation approach will be adopted based on the readiness of the various industries.

6. The Annexes provide a brief description of the 33 proposed amendments. Please refer to the draft Income Tax (Amendment) Bill 2023 and its accompanying Explanatory Statement for details.

GUIDELINES FOR SUBMISSION

7. Respondents are requested to observe these guidelines:

(a) Please identify yourself and the organisation you represent (if any) so that we can follow up to clarify any comments if needed.

(b) Be clear and concise in your comments, and use the prescribed template provided to organise your feedback.

(c) Focus your comments on how the drafting of the proposed legislative amendments for the tax measures announced at Budget 2023 can be better written to make them clearer and to make compliance easier; or on how the non-Budget changes and drafting can be improved.

(d) As far as possible, explain your points with illustrations, examples, data or alternative formulations of the amendments.

8. This draft legislation is released only for the purpose of consultation and should not be used for individual or business decisions as it does not represent the final legislation.

9. All comments received during the consultation will be reviewed thoroughly and if accepted, will be incorporated in the Bill for introduction in Parliament.

PERIOD OF CONSULTATION

10. The draft Income Tax (Amendment) Bill 2023 is available for public consultation from 6 June to 30 June 2023.

FEEDBACK CHANNEL

11. We request that all interested parties submit your comments using the prescribed template, through email to pc_itabill@mof.gov.sg.

SUMMARY OF RESPONSE

12. We will publish a summary of the main comments received on the Ministry of Finance’s website, together with our responses, in August 2023. Please be assured that the identities of respondents will not be disclosed in the summary.

DOCUMENTS TO DOWNLOAD

13. Please click on the links below to download the relevant documents for this public consultation.

Income Tax (Amendment) Bill 2023
- Entire Bill (word)(pdf)
- Clause 1 to 53 (word)(pdf)
- Explanatory Statement (word)(pdf)

Annexes
- Annex A: Proposed Amendments Announced in the 2023 Budget Statement (word)(pdf)
- Annex B: Proposed Non-Budget Amendments (word)(pdf)
Prescribed Template for Submission of Comments (excel)

Other useful references:

• You may obtain a copy of the ITA at https://sso.agc.gov.sg.
• For more details on the tax changes, you may refer to the circulars on IRAS’s website.