Income Tax (Amendment) Bill – Incorporating the Changes Arising From Budget 2020

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The Income Tax (Amendment) Bill 2020 (“Bill”) was read the first time on 5 October 2020 and passed in Parliament on 3 November 2020.

The Bill covers amendments arising from the Financial Year (“FY”) 2020 Budgets and the Ministerial Statement by the Deputy Prime Minister and Minister for Finance, Mr Heng Swee Keat, on 17 August 2020.

Key Amendments Brought About by the Bill

  1. Corporate Income Tax Rebate: Companies will be granted a 25% rebate of corporate income tax payable for the Year of Assessment (“YA”) 2020, capped at S$15,000 per company.
  2. “Carry-back” of qualifying deductions: This initiative will allow businesses to get a refund of up to S$17,000 of income tax paid for YA2017 to YA 2019. For more information on the “carry-back relief system”, please refer to the IRAS e-tax guide published here.
  3. Extension of Double Tax Deduction for Internationalisation: The DTDI scheme will be extended until 31 December 2025 to encourage companies to internationalise. The scope of the DTDI scheme has been enhanced to cover more qualifying expenses (viz. approved trade fairs, exhibitions, trade missions, overseas investment projects).
  4. Extension of Mergers & Acquisitions Scheme: The M&A scheme will be extended to cover qualifying acquisitions made on or before 31 December 2025. (Under the M&A scheme, an M&A allowance will be granted to a(n) (acquiring) company that acquires the ordinary shares of another (target) company during the period 1 April 2010 to 31 December 2025 (both dates inclusive)).
  5. Exemption of Payments Received in connection with Covid-19 Relief Schemes: Various payments disbursed to companies and individuals in connection with the Covid-19 pandemic (such as the Job Support Scheme (JSS), Self-employed Person Income Relief Scheme (SERS) and Covid Support Grant) are exempt from income tax).
  6. Surcharge to Deter Tax Avoidance Arrangements: The Bill will introduce a surcharge equal to 50% of the amount of additional income tax payable as a result of adjustments by the Comptroller of Income Tax to counteract tax avoidance arrangements. (Note: The Stamp Duties Act will also be amended to introduce a similar 50% surcharge of the amount of additional income tax payable as a result of adjustments by the Comptroller of Income Tax to counteract tax avoidance arrangements. A similar amendment is proposed for the Goods and Services Tax Bill).

(Note: We also note that the enhancements to section 13H of the Income Tax Act and the Fund Management Incentive (FMI) were included in the Bill – brought about by Clause 12 of the Bill) 

Budget 2021 – Ministry of Finance (MOF) Invites Views and Suggestions From the Public

On 2 December 2020, the MOF published a press release for the public to submit views and suggestions to the coming budget over a six-week period (until 8 January 2021). Individuals, households and businesses can provide their suggestions on various themes and questions (including the economy, workforce, smart nation, environmental sustainability, society and community) (click here to access the Budget 2021 themes and questions on the MOF website).

This update is provided to you for general information and should not be relied upon as legal advice.