Bill to amend Income Tax Act introduced to implement Budget changes

29 October 2020

On 5 October 2020, the Income Tax (Amendment) Bill (“Bill”) was introduced for first reading in Parliament. The Income Tax Act (“ITA”) will be amended to implement the tax changes in the 2020 Budget Statements and to make other changes: 

  • Corporate income tax rebate: To help companies with cash flow, a 25% rebate of corporate income tax payable, capped at S$15,000 per company, is to be granted for Year of Assessment (“YA”) 2020. 
  • Carrying back of qualifying deductions: The number of YAs for which the current year unabsorbed capital allowance and trade losses for a YA may be carried back will be increased. Unabsorbed capital allowance and trade losses for YA2020 may be carried back up to three, instead of one, immediate preceding YAs. This initiative seeks to help businesses with cash flow. 
  • Extend Mergers & Acquisitions (M&A) scheme: To continue encouraging companies to consider M&A for growth and internationalisation, the M&A scheme will be extended to cover qualifying acquisitions made on or before 31 December 2025. 
  • Exemption of certain payments received in connection with Covid-19 events: A new provision is introduced to exempt from income tax certain payments that are made in connection with the Covid-19 pandemic. These include payments made in connection with various public schemes established to mitigate the impact of Covid-19 events on persons. 
  • Lift the tax deduction cap for provisions for doubtful debts: The tax deduction cap for provisions for doubtful debts arising from loans and provisions for diminution in the value of investments in securities for banks and qualifying finance companies for YAs 2021 and 2022 will be lifted.  

Background

From 20 July 2020 to 7 August 2020, the Ministry of Finance (“MOF”) conducted a public consultation on a draft version of the Bill. The key feedback received pertained to the introduction of a surcharge for tax avoidance arrangements, the extension and refinement of the upfront certainty of non-taxation of companies’ gains on disposal of ordinary shares, and the general tax treatment of Covid-19 support measures. A summary of responses to the key feedback can be found in the MOF press release available on the MOF website www.mof.gov.sg.