MOF seeks comments on proposed changes to Income Tax Act to effect tax measures announced in 2021 Budget Statement and other changes

29 June 2021

From 11 June 2021 to 2 July 2021, the Ministry of Finance (“MOF”) is seeking feedback on proposed amendments to the Income Tax Act (“ITA”) provided in a draft Income Tax (Amendment) Bill 2021. Amendments to the ITA are proposed to effect tax measures announced in the 2021 Budget Statement as well as changes arising from a periodic review of the tax system.

Budget 2021 amendments

Key proposed amendments include the following:

  • Extension of measures for another year to continue providing support for businesses:
    •  The enhancement to the carry-back relief scheme to allow qualifying deductions to be carried back up to three (instead of one) immediate preceding Years of Assessment (“YA”) will be extended to YA 2021;
    • The option to accelerate writing off the cost of acquiring plant and machinery (“P&M”) over two years will be extended to capital expenditure incurred on the acquisition of P&M in the basis period for YA 2022 (i.e. Financial Year (“FY”) 2021); and
    • The option to claim renovation and refurbishment (“R&R”) deduction in one YA (i.e. accelerated R&R deduction) will be extended to qualifying expenditure incurred on R&R in the basis period for YA 2022 (i.e. FY 2021).
  • Enhance the Double Tax Deduction for Internationalisation (“DTDi”) scheme: To continue supporting internationalisation efforts of businesses, it is proposed to enhance the scope of the DTDi scheme to cover more expenses (e.g. qualifying expenses incurred to participate in approved virtual trade fairs). The proposed amendments will also allow expenses for more activities to qualify for 200% tax deduction without prior approval from Enterprise Singapore or the Singapore Tourism Board up to the current annual expense cap of S$150,000. 
  • Extend the 250% tax deduction for qualifying donations: The 250% tax deduction for qualifying donations made to Institutions of a Public Character (“IPCs”) and other qualifying recipients will be extended for another two years, i.e. for donations made during the period 1 January 2022 to 31 December 2023 (both dates inclusive). 
  • Extend and refine the double tax deduction (“DTD”) scheme for qualifying upfront cost attributable to retail bonds issued under the Monetary Authority of Singapore’s (MAS) Bond Seasoning and Exempt Bond Issuer Framework: To promote rated retail bond issuances, the proposed amendments seek to extend the DTD scheme for qualifying upfront cost incurred on or after 19 May 2021 that is attributable to rated retail bonds (instead of all retail bonds) issued during the period from 19 May 2021 to 31 December 2026 under MAS’ Seasoning Framework and Exempt Bond Issuer Framework. The proposed changes seek to provide investors with access to rated retail bonds. 
  • Extend withholding tax (“WHT”) exemption for financial sector and on payments for structured products: Amendments are proposed to extend the WHT exemption for the financial sector and on payments for structured products in order to support the competitiveness of the financial sector. 
  • Extend the Business and IPC Partnership Scheme (“BIPS”): The 250% tax deduction on qualifying expenditure incurred by businesses when their staff provide services to IPCs, or are seconded to IPCs under BIPS, will be extended for another two years, i.e. for qualifying expenditure incurred during the period 1 January 2022 to 31 December 2023.

Other proposed amendments

These proposed amendments include the following:

  • Allow persons authorised by the Inland Revenue Authority of Singapore (“IRAS”) to have access to necessary IRAS records and/or documents for the audit of the administration of public schemes specified in the Ninth Schedule of the ITA, e.g. the Jobs Support Scheme and the Wage Credit Scheme.
  • Provide the tax treatment for cases where trading stock is appropriated for non-trade or capital purposes, and where non-trade or capital asset becomes trading stock.
  • Align the maximum penalty amounts for non-filing and other related offences under the ITA with those for similar offences under the Goods and Services Tax Act and the Property Tax Act.

Reference materials

The following materials are available on the Ministry of Finance website www.mof.gov.sg: