Bill to amend Income Tax Act to implement Budget 2019 changes passed: Allen & Gledhill

30 October 2019

On 7 October 2019, the Income Tax (Amendment) Bill (“Bill”) was passed in Parliament. Changes will be made to the Income Tax Act (“ITA”) to implement the measures announced in the 2019 Budget Statement as well as other changes. The following are some of the upcoming changes:

Lapse of Not Ordinarily Resident (“NOR”) scheme: The Not Ordinarily Resident (“NOR”) Scheme will be phased out. The last consecutive five-year period for which an NOR status may be granted to an individual is the period from the Year of Assessment (“YA”) 2020 to YA 2024. An application for the NOR status must be made before 1 January 2025, and the last year of assessment which an NOR individual may elect for the tax exemption to apply under that section is YA 2024.
Extend tax incentive schemes for funds managed by Singapore-based fund managers (“Qualifying Funds”): The tax concessions relating to Qualifying Funds under sections 13CA, 13R and 13X of the ITA will be extended till 31 December 2024.
Extend income tax concessions for Singapore-listed real estate investment trusts (“S-REITs”) and Singapore-listed REIT exchange-traded funds (“REITs ETFs”): The existing tax concessions for S-REITs and REITs ETFs will be extended till 31 December 2025.
Extend writing down allowance for acquisition of qualifying intellectual property rights: The writing down allowance under section 19B will be extended to cover capital expenditure incurred in respect of qualifying intellectual property rights acquired on or before the last day of the basis period for year of assessment 2025.
Lapse of Approved Unit Trust (“AUT”) scheme: The AUT scheme lapsed after 18 February 2019. No unit trust may be approved under section 10B after 18 February 2019.
Amend definition of qualifying debt securities (“QDS”) to allow alternative set of qualifying conditions for insurance-linked securities (“ILS”): ILS issuers will have the option to fulfil an alternative set of conditions to qualify for the QDS scheme during the period from 20 December 2018 to 31 December 2023. The alternative conditions is where at least 20% of the costs incurred in relation to the issue of the securities are required to be paid to persons or partnerships that carry on any business, trade or profession in Singapore.
Extend tax exemption scheme for sovereign wealth funds: The period in which a foreign government-owned entity may be approved for a tax exemption under section 13Y will be extended for five years till 31 December 2024.
Extend tax exemption schemes for section 13G foreign trust, section 13O foreign account of philanthropic purpose trust, and section 13Q locally administered trust: These schemes will be extended for five years till 31 December 2024 to continue to capture the potential growth in demand for trust services in Asia.
Certain rent or other payments for the use outside Singapore of tangible movable property not to be treated as income deemed to be derived from Singapore: This amendment treats certain rent or other payments for the use outside Singapore of any tangible movable property as not falling within the scope of income deemed to be derived from Singapore under section 12(7)(d). Withholding tax will not apply to these payments made to non-resident persons.
Broaden scope of Business and IPC Partnership Scheme (“BIPS”): Under BIPS, businesses can claim a 250% tax deduction on basic wages and related expenses incurred when their employees volunteer or provide services to institutions of public character (“IPCs”), subject to the IPCs’ agreement. The following changes will be made:
- Where the expenditure is salary expenditure, an entity will be allowed to opt for the expenditure to be computed on a fixed hourly rate to be prescribed in rules rather than the actual wage expenditure incurred;
- Allow an entity to claim such deduction irrespective of the number of working hours per week of the employee who provided the services or who was seconded. This will allow businesses to claim tax deduction for wage expenditures of all employees, including part-time employees who volunteer.