MOF seeks comments on draft Income Tax (Amendment) Bill 2023 covering Budget 2023 tax measures and other measures

27 June 2023

On 6 June 2023, the Ministry of Finance (“MOF”) launched a public consultation seeking comments on proposed legislative amendments to the Income Tax Act 1947 (“ITA”). The consultation, which closes on 30 June 2023, seeks comments on a draft Income Tax (Amendment) Bill 2023 covering:

  • tax measures announced in the 2023 Budget Statement on 14 February 2023; and
  • changes arising from international tax developments and MOF’s periodic review of Singapore’s tax system to better reflect policy objectives and improve tax administration.

Budget 2023 amendments

The key proposed amendments to effect measures announced in the 2023 Budget Statement include the following:

  • New Enterprise Innovation Scheme (“EIS”): To encourage businesses to engage in research and development (“R&D”), innovation and capability development activities, MOF will introduce the EIS. Under the EIS, MOF will increase existing tax deductions/allowances for R&D, intellectual property (“IP”) registration, IP rights acquisition and licensing, and qualifying training to 400% for the first S$400,000 of qualifying expenses incurred for each qualifying activity per Year of Assessment (“YA”). MOF will also introduce a new 400% tax deduction for up to S$50,000 of qualifying innovation expenditure incurred on qualifying innovation projects carried out with selected partner institutions per YA. Eligible businesses can, in lieu of tax deductions/allowances, opt for a non-taxable cash grant at a cash conversion ratio of 20% on up to S$100,000 of total qualifying expenditure across all qualifying activities. These new or enhanced tax measures will be effective from YA 2024 to YA 2028.
  • Extend and refine the tax incentive scheme for Approved Special Purpose Vehicle (“ASPV”) engaged in asset securitisation transactions (“ASPV scheme”) and introduce a new sub-scheme to support covered bonds: The ASPV scheme grants tax exemption on income derived by an ASPV engaged in asset securitisation transactions. This supports the
    growth of asset securitisation activities in Singapore. The ASPV scheme is scheduled to lapse after 31 December 2023. To continue developing the structured debt market, the ASPV scheme will be extended till 31 December 2028. Further, to support the issuance of covered bonds in Singapore, a new sub-scheme named “ASPV (Covered Bonds)” will be introduced.
    The proposed ASPV (Covered Bonds) scheme will be effective from 15 February 2023 to 31 December 2028.
  • Philanthropy tax incentive scheme for family offices (“FOs”):
    To strengthen Singapore’s position as a regional philanthropy hub and encourage FOs to anchor their giving operations in Singapore, MOF will introduce a pilot tax incentive scheme for qualifying donors with FOs operating in Singapore. The pilot will be in effect for five years starting from YA 2025 and will be reviewed in 2028. To qualify, the donors must have a fund under the Monetary Authority of Singapore’s schemes under section 13O or 13U of the ITA and meet eligibility conditions, such as incremental business spending of S$200,000. Under the new scheme, qualifying donors will be able to claim 100% tax deduction for overseas donations made through qualifying local intermediaries. The tax deduction will be capped at 40% of the donor’s statutory income.

Other proposed amendments

The key proposed amendments arising from international tax developments and MOF’s periodic review of Singapore’s tax system include the following:

  • Taxing gains from the sale of foreign assets that are received in Singapore by businesses without economic substance in Singapore: The proposed tax change is to align the tax treatment of gains from the sale of foreign assets with the EU Code of Conduct Group guidance, which aims to address international tax avoidance risks. The change is in line
    with the focus on anchoring substantive economic activities in Singapore. The proposed tax will apply to gains from the sale of foreign assets that are received in Singapore by entities of multinational groups that do not have economic substance in Singapore. The proposed change will apply to gains from the sale of foreign assets received in Singapore on and after 1 January 2024.
  • Prosecution of Automatic Exchange of Information (“AEOI”) offences by Controller of Income Tax (“Controller”): It is proposed to amend the ITA to empower the Comptroller in addition to the Public Prosecutor, to authorise the commencement of the prosecution of AEOI offences, and to allow the Comptroller to authorise officers to compound AEOI offences that are compoundable.

MOF is expected to publish a summary of the main comments received together with its responses, in August 2023.

Reference materials

The following materials are available on the MOF website www.mof.gov.sg and the REACH consultation portal www.reach.gov.sg: