IRAS Consults On Changes To Income Tax Act

by Mary Swire, Tax-News.com, Hong Kong

26 June 2009

Singapore's Ministry of Finance has announced that it will be conducting a public consultation on the draft Income Tax (Amendment) Bill 2009 between June 22 and July 14, 2009.

The proposed amendments to the Income Tax Act (ITA) are principally to cater for the tax changes announced in Budget 2009.

The key changes include:

• A cut in the corporate income tax rate from 18% to 17% with effect from Year of Assessment (YA) 2010;
• A package of 'resilience' tax changes, which include:

1. accelerated capital allowances for plant and machinery in the basis periods for YA 2010 and 2011;
2. enhanced loss carryback in the basis periods for YA 2009 and YA 2010; and
3. tax exemption on all foreign-sourced income that is remitted into Singapore during the period of January 22, 2009 to January 21, 2010 (both dates inclusive)

• New Tax framework for facilitating corporate amalgamations taking place on or after January 22, 2009; and
• Enhancements to incentives for promoting fund management in Singapore, for the period of April 1, 2009 to March 31, 2014 (both dates inclusive).

In addition to the tax changes announced in Singapore's 2009 Budget, the amendments also provide for refinements to existing tax policies and tax administration arising from on-going reviews of the country's tax system.

These refinements include the following:

• Provision to disregard, for tax purposes, certain gains and losses arising from disposal of real properties;
• Provision for the "arm's length principle" with regard to transactions between related parties. For the avoidance of doubt, the Controller of Income Tax may make adjustments to taxable profits where in his opinion, a transaction between related parties has been made on terms which differ from those which would be made between independent persons; and
• The removal of Commonwealth Tax Relief. This is part of Singapore's rationalization of the relief for alleviating double taxation for tax residents, following the recent extension of Unilateral Tax Credit for all foreign-sourced income in Budget 2008.

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