Income Tax Act amendments implementing changes announced in 2019 Budget in force: Allen & Gledhill

19 December 2019

On 2 December 2019, the Income Tax (Amendment) Act 2019 (“Amendment Act”) was gazetted. With this, the main changes to the Income Tax Act (“ITA”) introduced by the Amendment Act to implement changes announced in the 2019 Budget Statement and other changes have come into force.

The key changes are as follows:

Lapse of Not Ordinary Resident (“NOR”) Scheme: The NOR scheme will be phased out. The last consecutive five-year period for which an NOR status may be granted to an individual is the period from the Year of Assessment (“YA”) 2020 to YA 2024. An application for the NOR status must be made before 1 January 2025, and the last year of assessment which an NOR individual may elect for the tax exemption to apply under section 13N of the ITA is YA 2024.
Extend tax incentive schemes for funds managed by Singapore-based fund managers (“Qualifying Funds”): The tax concessions relating to Qualifying Funds under sections 13CA, 13R and 13X of the ITA have been extended till 31 December 2024.
Extend income tax concessions for Singapore-listed real estate investment trusts (“S-REITs”) and Singapore-listed real estate investment trusts exchange-traded funds (“REITs ETFs”): To continue to promote the listing of REITs and REITs ETFs in Singapore and to strengthen Singapore’s position as a REITs hub in Asia, the existing tax concessions for S-REITs and REITs ETFs have been extended till 31 December 2025.
Extend writing down allowance for acquisition of qualifying intellectual property rights: The writing down allowance under section 19B of the ITA has been extended to cover capital expenditure incurred in respect of qualifying intellectual property rights acquired on or before the last day of the basis period for YA 2025.
Lapse of Approved Unit Trust (“AUT”) scheme: The AUT scheme will lapse after 18 February 2019. Therefore, no unit trust may be approved under section 10B of the ITA after 18 February 2019.
Amend definition of qualifying debt securities (“QDS”) to allow alternative set of qualifying conditions for insurance-linked securities (“ILS”): To continue promoting the development of Singapore’s debt market, ILS issuers will have the option to fulfil an alternative set of conditions to qualify for the QDS scheme, during the period from 20 December 2018 to
31 December 2023. The alternative conditions is where at least 20% of the costs incurred in relation to the issue of the securities are required to be paid to persons or partnerships that carry on any business, trade or profession in Singapore.
Extend tax exemption scheme for sovereign wealth funds: To continue to encourage foreign central banks and other government entities to set up investment offices in Singapore to manage their funds, the period in which a foreign government-owned entity may be approved for a tax exemption under section 13Y of the ITA has been extended for five years till 31 December 2024.
Extend tax exemption schemes for section 13G foreign trust, section 13O foreign account of philanthropic purpose trust and section 13Q locally administered trust: These schemes have been extended for five years till 31 December 2024 to continue to capture the potential growth in demand for trust services in Asia.
Certain rent or other payments for the use outside Singapore of tangible movable property not to be treated as income deemed to be derived from Singapore: This amendment treats certain rent or other payments for the use outside Singapore of any tangible movable property as not falling within the scope of income deemed to be derived from Singapore under section 12(7)(d) of the ITA. As such, withholding tax would not apply to these payments made to non-resident persons.
Broaden scope of the Business and IPC Partnership Scheme (“BIPS”): Under BIPS, businesses can claim a 250% tax deduction on basic wages and related expenses incurred when their employees volunteer or provide services to institutions of public character (“IPCs”), subject to the IPCs’ agreement. The amendments to section 14ZB of the ITA are for the following purposes:
- where the expenditure is salary expenditure, allow an entity to opt for the expenditure to be computed on a fixed hourly rate to be prescribed in rules rather than the actual wage expenditure incurred;
- to allow an entity to claim such deduction irrespective of the number of working hours per week of the employee who provided the services or who was seconded. This will allow businesses to claim tax deduction for wage expenditures of all employees, including part-time employees who volunteer.