1. The Ministry of Finance is proposing 38 amendments to the Income Tax Act (“ITA”) to (i) effect tax measures announced in Budgets 2020; (ii) enhance the Comptroller of Income Tax (“Comptroller”)’s powers to safeguard public monies; (iii) clarify the tax treatment of measures announced for COVID-19 support to businesses and households; and (iv) improve tax administration and the clarity of existing legislation. The Ministry is seeking public feedback on the draft Income Tax (Amendment) Bill 2020 which provides for these amendments.
2. We invite you to comment on the proposed policy changes and the draft legislation which will give effect to these policy changes. Your views on the drafting will help us improve the clarity of the legislative amendments.
SCOPE OF THE CONSULTATION
3. The draft Income Tax (Amendment) Bill 2020 incorporates 38 proposed legislative amendments to the ITA arising from:
(a) Unity Budget. There are 20 proposed amendments to cater for measures announced by the Deputy Prime Minister and Minister for Finance, Mr Heng Swee Keat, in the Unity Budget Statement on 18 February 2020. Salient amendments include the following:
i) Grant Corporate Income Tax (“CIT”) Rebate. To help companies with cash flow, a CIT Rebate of 25% of tax payable, capped at $15,000 per company, is to be granted for Year of Assessment (“YA”) 2020.
ii) 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. To help businesses with cash flow, qualifying deductions for YA2020 may be carried back up to 3, instead of 1, immediate preceding YAs, capped at $100,000 of qualifying deductions. This allows businesses to get a refund of up to $17,000 corporate tax paid during YA2017 to YA2019.
iii) Extend and enhance the Double Tax Deduction for Internationalisation (“DTDi”) scheme. To continue encouraging internationalisation, the DTDi scheme is to be extended until 31 December 2025. In addition, the scope of the DTDi scheme will be enhanced to cover more qualifying expenses.
iv) Extend the Mergers & Acquisitions (“M&A”) scheme. To continue encouraging companies to consider M&A for growth and internationalisation, the M&A scheme is to be extended to cover qualifying acquisitions made on or before 31 December 2025.
(b) Economy-wide and sector-specific measures announced in response to the COVID-19 pandemic in the Resilience, Solidarity, and Fortitude Budgets. Briefly, 5 proposed amendments provide for the following:
i) Exempt from income tax the prescribed payouts received by individuals in 2020 for YA2021, such as Self-Employed Person (“SEP”) Income Relief, Workfare Special Payment (under the Care and Support Package), and COVID-19 Support Grant;
ii) 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 businesses), such as Jobs Support Scheme (“JSS”) payouts, COVID-19 Quarantine Order Allowance (“QOA”), Leave-of-Absence (“LOA”) and Stay-Home Notice (“SHN”) payouts to affected SEPs and employers;
iii) Exempt from income tax for YA2021 on benefits-in-kind (“BIK”) and cash allowances received by qualifying employees in 2020 for accommodation, food, transport and other necessities, subject to conditions and caps;
iv) Lift the tax deduction cap for provisions for doubtful debts and debt securities for banks and qualifying finance companies for YAs 2021 and 2022; and
v) Amend the secrecy provision to allow disclosure and access to information necessary for the Inland Revenue Authority of Singapore (“IRAS”) to administer public schemes, without requiring the express consent of the person to whom the information relates. The proposed amendment expands the scope of the current provision to allow the Comptroller to provide information to the Chief Executive Officer (“CEO”) of the IRAS or officers authorised by the CEO of IRAS that is necessary for the purpose of administering any public scheme such as the JSS. A similar amendment will be proposed for the draft Goods and Services Tax (Amendment) Bill 2020.
(c) Other proposed amendments. There are 6 proposed amendments relating to existing tax policies and administration, arising from the periodic review of Singapore’s income tax system. These amendments include the following:
i) Introduce a surcharge for tax avoidance arrangements. Currently, the tax adjustments made under the anti-avoidance rules1 only restore taxpayers to their initial tax position, as if the arrangement had not been entered into. To further deter tax avoidance arrangements, the proposed amendment introduces a surcharge equal to 50% of the amount of additional income tax imposed by the Comptroller as a result of the adjustments made to counteract the tax avoidance arrangement. As a related amendment, we are also proposing to introduce in the Stamp Duties Act (“SDA”) a surcharge equal to 50% of the amount of additional stamp duties imposed by the Commissioner as a result of the adjustments made to counteract the tax avoidance arrangement. A similar amendment will be proposed for the draft Goods and Services Tax (Amendment) Bill 2020.
ii) Mandate electronic tax refunds. The proposed amendment mandates that refunds of CIT by the IRAS to companies will be via electronic mode. This change is in line with the Government’s efforts to harness digital technologies to transform public service delivery. A similar amendment will be proposed for the draft Goods and Services Tax (Amendment) Bill 2020 to provide for mandatory electronic refunds of Goods and Services Tax (“GST”) by the IRAS to taxpayers.
(d) Technical amendments. The remaining 7 proposed amendments are technical amendments.
4. The Annexes provide a brief description of the 38 proposed tax changes and explain the proposed amendments of the ITA. Please refer to the draft Income Tax (Amendment) Bill 2020 and its accompanying Explanatory Statement for details.
5. We appreciate your support and participation. 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.
(c) Focus your comments on how the legislative amendments can be better written to make them clearer and to make compliance easier, or on how the non-Budget tax policy changes can be improved.
(d) Use the prescribed template provided to organise your feedback.
(e) As far as possible, explain your points with illustrations, examples, data or alternative formulations of the amendments.
6. This draft legislation is released only for the purpose of consultation and should therefore not be used for individual or business decisions as it does not represent the final legislation.
7. 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
8. The draft Income Tax (Amendment) Bill 2020 is available for public consultation from 20 July to 7 August 2020. We regret that comments received after 7 August 2020 will not be considered.
9. We request that all interested parties submit your comments using the prescribed template, through email to firstname.lastname@example.org.
SUMMARY OF RESPONSE
10. We will publish a summary of the main comments received on the Ministry of Finance’s website, together with our responses, by the end of September 2020. The identity of respondents will not be disclosed in the summary.
DOCUMENTS TO DOWNLOAD
11. For reference, please download the following relevant documents for this public consultation:
Income Tax (Amendment) Bill 2020:
Clause 1 to 64
Annex A: Proposed Amendments Announced in the Unity Budget
Annex B: Proposed Amendments Arising from the COVID-19 Measures Announced in the Resilience, Solidarity and Fortitude Budgets
Annex C: Proposed Non-Budget Amendments
Prescribed Template for Submission of Comments
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’ website.
1 The ITA and Stamp Duties Act (“SDA”) allow the Comptroller and Commissioner of Stamp Duties (“Commissioner”), respectively, to disregard or vary arrangements which are carried out with tax avoidance as one of their main purposes and not for bona fide commercial reasons, and to make relevant tax adjustments to counteract any tax avoidance under that arrangement.