Wednesday, September 15, 2021
The Singaporean Government has announced it will amend provisions on transfer pricing adjustments in the draft Income Tax (Amendment) Bill 2021, which includes measures announced in the 2021 Budget, following a consultation.
Under the measure, a requirement is to be introduced for taxpayers to give IRAS a written notice when a foreign tax authority makes a downward adjustment of foreign tax that results in the foreign tax credit previously allowed in Singapore becoming excessive.
As part of the consultation, taxpayers proposed increasing the period to give a written notice from six months to one year, from the date of the downward adjustment of foreign tax, as taxpayers might not be made aware of the downward adjustment in a timely manner, especially where withholding taxes are involved.
The Singaporean Government has accepted the recommendation. It stated: "We recognise that taxpayers may need more time to notify IRAS of a downward adjustment of foreign tax, especially where the foreign tax is a withholding tax paid in a foreign territory. This is because the foreign tax authority is likely to inform the payer of the withholding tax, and not the recipient of the payment, of any downward adjustment. Hence, a taxpayer in Singapore who is the recipient of the payment may not be aware of the downward adjustment immediately."
The Government further announced that it will increase the period for taxpayers to make claims for foreign tax credits and for IRAS to raise additional assessments from two to three years, following a foreign tax adjustment.