The Income Tax (Amendment) Act 2013 was passed by the Parliament on 21 October 2013 and assented to by the President on 5 November 2013. Some of the key amendments are highlighted as follows:
- Section 10 (Charge of income tax) has been amended to provide that with effect from Year of Assessment 2015, the taxable benefit of any place of residence provided by the employer to his employee is the annual value of that place less the rent paid by the employee.
- Section 10 has further been amended to extend to 31st December 2018 the date by which qualifying debt securities must be issued for income derived from them and distributed to certain unit holders to be deemed as income of such unit holders.
- Section 10C (Excess provident fund contributions, etc., deemed to be income) has been amended to increase the maximum amount of employer contribution to an employee’s medisave account that is not treated as income of the employee, to $1,500 per employer per year beginning with 2013.
- Section 10F (Ascertainment of income from certain PPP arrangement) has been amended to align the tax treatment of income derived by a person from services
provided to the Government or an approved statutory body under a PPP arrangement to which INT FRS 112 (Service Concession Arrangements) and also give a person providing construction or upgrade services under such a PPP arrangement the right to make an irrevocable election for any amount that is treated as income from such
services under INT FRS 112 to be treated as having been derived in the basis period in which those services are completed.
- Section 13J (Exemption of tax on gains or profits from equity remuneration incentive scheme (SMEs)) and Section 13L (Exemption of tax on gains or profits from equity remuneration incentive scheme) have been amended to provide that the partial tax exemption under that section does not apply to any gains or profits (a) derived by a qualifying employee from any stock option, or any right or benefit under any share acquisition scheme, granted on or after 1st January 2014; or (b) derived by a qualifying employee on or after 1st January 2024.
- Section 13M (Exemption of tax on gains or profits from equity remuneration incentive scheme (start-ups)) has been amended to provide that the partial tax exemption under that section does not apply to any gains or profits derived by a qualifying employee on or after 1st January 2024.
- Section 13P (Exemption of income derived from asset securitisation transaction) has been amended to to change the date by which an asset securitisation transaction must be entered into in order for income derived therefrom to be exempt from tax under that section, to 31st December 2018; and applies the provisions of the Act concerning assessments, objections and appeals to an assessment which a Comptroller makes on a company because it appears to him the company is given an exemption to which it is not entitled under the section.
- Section 14 (Deduction allowed) has been amended to increase the maximum deduction allowable to an employer for his contribution to an employee’s medisave account to $1,500 per employee per year beginning with 2013; and increase the maximum deduction allowable to a prescribed person for his voluntary cash contribution to medisave account of a self-employed individual, to $1,500 per individual per year beginning with 2013.
- Section 14V (Deduction for amortisation of intangible assets created under PPP arrangement) has been inserted to provide that where an intangible asset
is created under a PPP arrangement to which INT FRS 112 applies, and amortisation of the asset is recognised in accordance with FRS 38 in financial statements for a basis period for a year of assessment, then the amount of the amortisation that, in accordance with FRS 38, is recognised as an expense is an allowable deduction for that year of assessment.
- Section 14W (Deduction for expenditure on licensing IPR) has been inserted to provide for an enhanced deduction for expenditure in the form of licence fees incurred on licensing by a taxpayer from another person of any intellectual property rights other than trademark or software user rights. More specifically, it provides
(a) for a deduction (in addition to the deduction under section 14 or 14D) of 300% of up to $1,200,000 of such expenditure incurred during the combined basis periods for the years of assessment 2013, 2014 and 2015;
(b)that the combined expenditure for a deduction under the section and section19B(1B) (enhanced writing-down allowance for intellectual property rights for years of assessment 2013 to 2015) must not exceed the expenditure cap of $1,200,000;
(c) that a person who fails to carry on any trade or business during any of those basis periods will have the above expenditure caps correspondingly reduced;
(d) that no deduction may be allowed for expenditure on the licensing of intellectual property rights where such expenditure is not allowable under section 14 or 14D, for expenditure on the licensing of intellectual property rights from a related party carrying on a trade or business in Singapore where the rights were acquired or developed by the related party, and for expenditure subsidised by a grant or subsidy of the Government or a statutory board.
- Section 19 (Initial and annual allowances for machinery or
plants) has been amended to disapply the limitation under subsection (3) on the amount of allowances that may be given for capital expenditure incurred on a motor car, to a foreign registered motor car used exclusively outside Singapore which is
acquired in the basis period for the year of assessment 2014 or after.
- Section 21 (Replacement of machinery or plant) has been amended to disapply subsection (5) to a new foreign registered car used exclusively outside Singapore that is acquired in the basis period for the year of assessment 2014 or after. It allows allows a taxpayer to set off a balancing charge from disposing an item of machinery or plant against the cost of a new item, and for this purpose subsection (5) limits the cost of a new foreign registered car used exclusively outside Singapore to $35,000.
- Section 37I (Cash payout under Productivity and Innovation Credit Scheme) has been amended to enable a tax deduction under the new section 14W (deduction for expenditure on licensing intellectual property rights) to be converted at the election of taxpayer into a cash payout under that section. Subsections (16) and (18) (dealing with the manner of recovering a cash payout) are also amended to make them applicable to subsection (11A), which deals with the recovery of any cash payout in relation to expenditure incurred for acquiring intellectual property rights on instalment payment terms.
- Section 37IA (PIC Bonus) has been inserted and this section deals with the payment of a cash amount, known as the PIC bonus, to a person that is based on certain expenditures which improve productivity or help innovation, and which qualify for certain deductions or allowances under the Act. The expenditures must be incurred in the combined basis periods for the years of assessment 2013 to 2015.
The total PIC bonus that may be paid to a person for the combined basis periods is $15,000 (subsection (2)). The maximum amount of PIC bonus to be paid for each year of assessment is $15,000 less payments which have already been made in respect of an earlier or a later basis period. Payments may already have been made in respect of a later basis period in a given case because the document giving rise to the payment may be submitted earlier. To illustrate, a company may claim enhanced deductions for the year of assessment 2013, and may elect for a PIC cash payout for the year of assessment 2014 on a quarterly basis. The company may receive the PIC bonus for the year of assessment 2014 earlier than that for the year of assessment 2013 if the PIC cash payout election forms are submitted before the return of income for the year of assessment 2013.
The total PIC bonus available to an individual is subject to the cap referred to in subsection (2) regardless of the number of firms he carries on his trades or businesses (subsection (6)). Further, the cap referred to in subsection (2) applies at the partnership level, such that the sum of the cash payouts to all partners must not exceed the cap (subsection (7)).
The conditions for the payment of the PIC bonus for each year of assessment are that —
(a) the person must have incurred at least $5,000 qualifying expenditure in the basis period for that year of expenditure;
(b) he has not ceased carrying on a trade or business; and
(c) he has made CPF contributions for at least 3 local employees based on the payroll for the last month of the basis period (subsection (1)).
As an alternative, the Comptroller may give any part of the PIC bonus in advance and before the expiry of the time for submitting the return of income for the year of assessment if the taxpayer has made an election for a PIC cash payout under section 37I and those conditions (modified in their application to the making of an advance payment following an election for cash payout) are satisfied (subsection (3)).
Where advance payments of PIC bonus have been made under subsection (3) for any year of assessment and the person has, on the date of submission of return of income for that year of assessment, yet to be given the full amount of PIC bonus for that year of assessment in respect any qualifying expenditure, he may be given the balance if the conditions in subsection (1) are satisfied (subsection (5)).
In certain circumstances, expenditure incurred by a taxpayer will not qualify for the PIC bonus, e.g. the property for which the expenditure was incurred has been disposed of within a specified period (subsection (8)).
PIC bonus that has been paid out may be recovered in certain circumstances and the amount to be paid out reduced (subsections (9), (11), (12) and (15)).
These circumstances include, among others —
(a) the disposal within a specified period of the property for which the qualifying expenditure was incurred;
(b) the property for which the qualifying expenditure was incurred are intellectual property rights and the taxpayer permanently ceases to carry on the trade or business for which the rights are used; and
(c) the expenditure is subsequently found not to qualify for the relevant deduction or allowance.
Outstanding taxes, duties, interest or penalties under the Act and certain other Acts owing by a person may be recovered from the PIC bonus due to him (subsections (13) and (14)).
- Section 37IB (Modification of Sections 37I and 37IA in their application to partnership) clarifies how sections 37I and 37IA are to apply if the person qualifying for the cash payout or PIC bonus is a partnership. All references to a qualifying person or eligible person under those sections is to the partnership itself, except that payment of the payout or bonus is to be made to the partners, and recovery of any payment is to be made from each of the partners.
- Section 37J (Penalties for false information, etc., under section 37I) has been amended to extend the scope of that section (which currently applies to information given when electing for a PIC cash payout under section 37I) to —
(a) the giving of false information or the omission of information in relation to such election which results or could have resulted in the wrongful payment of a PIC bonus under the new section 37IA; and
(b) the falsification of books and the employment of any fraud, art or contrivance in connection with such election in order to obtain the PIC bonus.
- Section 37M (Treatment of unabsorbed donations attributable to exempt income) has been amended to clarify that the donation that is to be given the tax treatment referred to in that section is the amount of the donation that remains after determining the amount of exempt income for the year of assessment 2012.
- Section 43 (Rate of tax upon companies and others) has been amended
(a) to change the period in section 43(5) within which a non-resident individual or firm must elect for his net professional or vocational income to be taxed at the rate of 20% (instead of the gross amount of such income being taxed at the rate of 15%), from the current 45 days to a period which corresponds to that within which withholding tax must be paid by the payer of the income to the Comptroller under section 45F; and
(b) to provide that section 43(6A), which provides for a tax exemption for a part of the normal income of a newly incorporated company in its first 3 years of assessment, does not apply to a company incorporated on or after 26th February 2013 if it undertakes property development in the basis period in question, or if its only activity in that basis period is investment holding. Subsection (6A) will also not apply to a
company which is a partner of a partnership which undertakes property development in the basis period, or whose only activity in the basis period is investment holding.
- Section 92D (Remission of tax of companies for years of assessment 2013, 2014 and 2015) has been inserted to provide for a remission on tax payable by companies for these YAs. The rebate is 30% of the tax payable (excluding final withholding tax levied on income under section 43(3), (3A) and (3B)), subject to a cap of $30,000 per year of
- Section 93A (Relief in respect of error or mistake) has been amended to allow
relief in the form of an amendment to an assessment, to be given by the Comptroller to a taxpayer for a mistake made in his return which has resulted in an amount of loss, allowance or donation stated in the assessment, to be lower than what it ought to be. This may be detrimental to the taxpayer because a smaller amount will be available for deduction for the following year of assessment.
- Section 95 (penalty for incorrect return, etc.), section 96 (tax evasion), and section 96A (serious fraudulent tax evasion) have been amended to extend these sections to an act described that resulted in or could have resulted
The EOI regime has been amended to
(a) Extend EOI assistance to all Singapore’s existing tax agreement partners without having to individually update the tax agreements.
(b) Allow IRAS to directly obtain information protected under the Banking Act and Trust Companies Act for EOI purposes without having to seek a court order. This is aimed at streamlining EOI administration.
(c) give legal effect to the Singapore-US Foreign Account Tax Compliance Act (“FATCA“) Intergrovemental Agreement (“IGA“). As explained in the Second Reading, FATCA is a US law that aims to prevent US persons from using offshore bank accounts to evade US taxes by requiring Foreign Financial Institutions (“FFIs“) worldwide to report the information on bank accounts maintained by US persons to US IRS. Non complying FFIs will be subject to a 30% withholding tax on payments received from the US such as US-sourced dividends and interest. Singapore has decided to enter into a FATCA IGA with the US in response to the feedback from Singapore financial institutions that doing so will help them meet their FATCA obligations. The amendments provide IRAS with the necessary information-gathering powers to fulfil Singapore’s role in facilitating FATCA-compliance under the IGA. These powers include the routine collection and transmission of relevant information, and enforcement powers to sanction non-compliance.
We trust that the above information is useful. Please contact us if you require any further clarification.