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Singapore Launches Consultation On Income Tax Reforms

Friday, July 24, 2020

Singapore's Ministry of Finance has launched a public consultation on proposed corporate tax and income tax breaks.

The Government has proposed amendments to the Income Tax Act to implement a range of measures announced in this year's Budget.

To help companies with cash flow, a corporate income tax rebate of 25 percent of tax payable, capped at CAD15,000 per company, will be granted for the Year of Assessment (YA) 2020. The Government will increase the number of YAs for which the current year unabsorbed capital allowance (CA) and trade losses for a YA – collectively referred to as qualifying deductions – may be carried back. Qualifying deductions for YA2020 may be carried back for up to three immediately preceding YAs, capped at SGD100,000 of qualifying deductions.

The Government will extend the Double Tax Deduction for Internationalization (DTDi) scheme to December 31, 2025, and the scheme will be enhanced to cover more qualifying expenses. The Mergers and Acquisitions scheme will be extended to cover qualifying acquisitions made on or before December 31, 2025.

The Government also intends to introduce a number of temporary tax exemptions as part of its response to the coronavirus pandemic.

It will exempt from income tax the prescribed payments received by individuals in 2020 for YA2021, including the Self-Employed Person Income Relief, the Workfare Special Payment, and the COVID-19 Support Grant. It will exempt from income tax the prescribed payouts received by businesses in 2020 – for YA2021 and/or YA2022, depending on the financial year end of the business – such as Jobs Support Scheme payouts, COVID-19 Quarantine Order Allowance, Leave-of-Absence and Stay-at-Home Notice payouts to affected self-employed persons and employers.

In addition, it will exempt from income tax YA2021 benefits-in-kind and cash allowances received by qualifying employees in 2020 for accommodation, food, transport, and other necessities, subject to conditions and caps.

The legislation will additionally introduce a new surcharge for tax avoidance arrangements. The surcharge will be equal to 50 percent of the amount of additional income tax imposed by the Comptroller as a result of the adjustments made to counteract the tax avoidance arrangement. A similar surcharge will be introduced into the Stamp Duties Act and into GST law.

The consultations is open for comment until August 7, 2020.