PUBLIC CONSULTATION ON THE DRAFT INCOME TAX (AMENDMENT) BILL 2018

INTRODUCTION

The Ministry of Finance is conducting a public consultation on the draft Income Tax (Amendment) Bill 2018 from 20 June to 11 July 2018, and invites the public to give feedback on the draft Bill.

2. The draft Income Tax (Amendment) Bill 2018 incorporates 36 proposed legislative amendments to the Income Tax Act (“ITA”):

(a) Budget 2018 changes.  There are 17 changes announced by the Minister for Finance, Mr Heng Swee Keat, in the 2018 Budget Statement. The key changes are:

i) Enhancement and extension of the Corporate Income Tax (“CIT”) rebate. To ease business costs and support restructuring, the CIT rebate will be enhanced to 40% of tax payable, with a higher cap of $15,000 for the Year of Assessment (“YA”) 2018. The CIT rebate will also be extended to YA 2019, at 20% of tax payable and capped at $10,000.

ii) Adjustments to the Start-Up Tax Exemption Scheme (“SUTE”) and Partial Tax Exemption Scheme (“PTE”) from YA 2020. The tax exemption under both schemes will be reduced from the first $300,000 to $200,000 of normal chargeable income. Exemption under SUTE will also be lowered from 100% to 75% for the first $100,000 of normal chargeable income.

iii) Enhancement of tax deductions for qualifying research and development (“R&D”) performed locally. To encourage R&D to be done in Singapore, the tax deduction for staff costs and consumables incurred on qualifying R&D projects performed in Singapore will be increased from 150% to 250%. The change will take effect from YA 2019 to YA 2025.

iv) Enhancement of the Double Tax Deduction for Internationalisation (“DTDi”) scheme. To encourage firms to internationalise, the expenditure cap for DTDi claims without prior approval from Enterprise Singapore or the Singapore Tourism Board will be raised from $100,000 to $150,000 per YA from YA 2019.

i) Enhance the Inland Revenue Authority of Singapore’s (“IRAS’”) powers to investigate tax crimes. Syndicates and recalcitrant taxpayers are becoming more active and are employing more sophisticated strategies for tax fraud. When investigated, these suspects may refuse to cooperate with IRAS’ investigation. For instance, they may refuse to hand over potential evidence, attempt to destroy evidence, or may contact other suspects to corroborate statements. Such acts of non-cooperation affect IRAS’ effectiveness in bringing the perpetrators to justice.

The proposed amendments will: 

- enhance IRAS’ enforcement powers for investigation of specified serious tax crimes, or where the suspect attempts to destroy evidence. Specifically, the proposed amendments introduce (i) power of forced entry, (ii) power of arrest without warrant and (iii) power of body search subject to conditions. These powers under the proposed amendments will  be exercised only by trained IRAS investigation officers and where necessary so that investigations are not impeded.  

- expand IRAS’ power to gather all information relevant to its investigations from any person. 

- align penalties imposed under the ITA for persons who obstruct officers acting in discharge of their duty under the ITA with those under the Goods and Services Tax Act.

ii) Sharing of information by IRAS with law enforcement agencies (“LEAs”) to combat serious crimes. The activities of criminals including syndicates are often multi-faceted. For instance, their criminal activity may not be limited to tax evasion only, but other forms of illegal activities such as drug dealing and corruption. A Whole-of-Government approach is needed to better fight such serious crimes.

Currently, IRAS is allowed to provide information to LEAs under limited circumstances (e.g. pursuant to a Court Order). The proposed amendment will allow IRAS to share with LEAs information that IRAS assesses as critical for investigation or prosecution of serious crimes. Serious crimes are offences listed in the First and Second Schedules of the Corruption, Drug Trafficking and Other Serious Crimes (Confiscation of Benefits) Act. Information shared with LEAs is to be disclosed to prescribed officers in the LEAs. Further disclosure of such information which is not for the purpose of investigation or prosecution will be an offence.

iii) Provide for the disposal of documents or things seized under the ITA. Where a matter has not proceeded to prosecution, the amendment will allow the disposal of documents or things seized during investigation if the owner of the seized items fails to collect the items upon the end of investigation.

iv) Allow tax deduction for motor car-related expenses for private hire car (“PHC”) drivers. Unlike taxi drivers, PHC drivers are currently not allowed to claim tax deduction on car-related expenses. We have reviewed this with the Ministry of Transport, as part of our periodic review and arising from feedback from various Members of Parliament and the National Private Hire Vehicles Association (NPHVA). Taxi and PHC drivers now provide similar point-to-point transport services. 

We will allow tax deduction on car-related expenses incurred by PHC drivers, against their driving income. Such expenses include car rental and petrol.

To ease compliance in claiming tax deduction, a PHC driver, subject to conditions, will be allowed to claim tax deduction for:

(a) expenses (other than service fees paid to platform providers) incurred to earn driving income based on a deemed expense ratio prescribed in the Income Tax Aact, set at “40% of all driving income less service fees”; and

(b) service fees paid to platform providers based on the actual amount incurred under normal tax rules.

Alternatively, instead of the treatment at para 2(b)(iv)(a) and 2(b)(iv)(b), the PHC driver may opt to claim tax deduction on the actual amount of running expenses and service fees incurred in earning driving income.

Taxi drivers will similarly be allowed to opt for the treatment at para 2(b)(iv)(a) and 2(b)(iv)(b), to ease their tax compliance. Alternatively, taxi drivers can also choose to continue with their current practice of claiming tax deduction on the actual amount incurred on relevant expenses.