Amendments to Income Tax Act to implement Budget changes effective from various dates: Allen & Gledhill

17 December 2020

The Income Tax Act has been amended to implement the tax changes in the Government’s 2020 Budget Statements and to make certain other amendments to the Act. The amendments take effect from various dates.

The following are some of the 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 granted for the Year of Assessment (“YA”) 2020 (effective 7 December 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 has been increased. Unabsorbed capital allowance and trade losses for YA2020 may be carried back up to three, instead of one, immediate preceding YAs. This initiative helps businesses with cash flow and allows businesses to get a refund of up to S$17,000 of income tax paid for YA2017 to YA2019 (effective 19 February 2020).
Extension of Double Tax Deduction for Internationalisation (“DTDi”) scheme: To continue encouraging firms to internationalise, the DTDi scheme has been extended until 31 December 2025. The scope of the scheme has also been enhanced to cover more qualifying expenses (effective 1 April 2020).
Extend Mergers & Acquisitions (M&A) scheme: To continue encouraging companies to consider M&A for growth and internationalisation, the M&A scheme has been extended to cover qualifying acquisitions made on or before 31 December 2025 (effective 1 April 2020).
Exemption of certain payments received in connection with Covid-19 events: A new provision has been 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, such as the Job Support Scheme. IRAS has provided more information in Income Tax Treatment of Covid-19-Related Payouts to Businesses and Individuals (effective 7 December 2020).
Surcharge to deter tax avoidance arrangements: To further deter tax avoidance arrangements, a surcharge equal to 50% of the amount of additional income tax payable as a result of the adjustments by the Comptroller of Income Tax to counteract tax avoidance arrangements has been introduced. The Stamp Duties Act has also been amended to introduce a surcharge equal to 50% of the amount of additional stamp duties payable as a result of adjustments made to counteract the tax avoidance arrangement (effective 7 December 2020).