The Income Tax (Amendment) Bill 2021 was published in Singapore’s Official Gazette on November 16, 2021, following approval earlier by Singapore’s President.
The Bill contains tax measures announced in the 2021 Budget; economy-wide and sector-specific measures announced by the Government in May 2021 and July 2021 in response to the COVID-19 pandemic; tax changes arising from periodic review of Singapore’s income tax system; and technical amendments.
For instance, the bill includes the following measures announced in the Budget:
- The enhancement to the loss carry-back relief scheme to allow for qualifying deductions to be carried back for up to three years (instead of one) will be extended for Year of Assessment 2021;
- The option to accelerate the write-off of the cost of acquiring plant and machinery over two years (instead of three) will be extended to capital expenditure incurred on the acquisition of plant and machinery in the basis period for YA 2022;
- The option to claim renovation and refurbishment deduction in one YA (instead of three) will be extended to qualifying expenditure incurred on renovation and refurbishment in the basis period for YA 2022;
- The Double Tax Deduction for Internationalisation scheme will be enhanced such as to cover additional qualifying expenses (e.g. specific expenses incurred to participate in approved virtual trade fairs); and
- The 250 percent tax deduction for qualifying donations made to Institutions of Public Character (IPCs) and other qualifying recipients will be extended for another two years (that is, to donations made during the period January 1, 2022, to December 31, 2023, inclusive).
The Bill also provides for refinements and proposed amendments of existing tax policies and tax administration arising from periodic review of Singapore’s income tax system.
Notable changes include the introduction of a requirement for taxpayers to give a written notice to the Comptroller when a foreign tax authority makes a downward adjustment of foreign tax which results in the foreign tax credit previously allowed in Singapore on foreign-sourced income becoming excessive.
Singapore’s corporate income tax system taxes foreign-sourced income upon remittance, and provides for a tax credit for foreign taxes paid on the same income. Where foreign tax paid exceeds the Singapore tax due on the foreign-sourced income, no further income tax is payable in Singapore. The amendment will require taxpayers to notify the Comptroller within one year when a foreign tax authority makes a downward adjustment of foreign tax which results in the foreign tax credit previously allowed in Singapore becoming excessive, as IRAS would need to raise additional tax assessments.
The period for IRAS to raise additional tax assessments, in relation to downward adjustment of foreign tax, will also be increased from two years to three years.
Correspondingly, in situations where there are upward adjustment of foreign tax, taxpayers can also make the claim for additional foreign tax credits within three years from the date of the upward adjustment.
Amendments are also included to align the maximum penalty amounts for non-filing and other related offences under the Income Tax Act with those for similar offences under the Goods and Services Tax Act and Property Tax Act.