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Singapore's Budget Should Refine Tax Incentives: Deloitte

by Mary Swire,, Hong Kong

19 January 2016

Deloitte has said Singapore should improve tax incentives to support start-ups and ensure Singapore remains a competitive domicile for multinationals in the upcoming Budget.

Low Hwee Chua, Partner and Head of Tax Services at Deloitte Singapore and Southeast Asia, said: "As start-ups may not be profitable in the initial years, but instead would likely require funding, Deloitte Singapore suggests fine-tuning certain schemes to incentivize start-up investors, allow the continuation of tax losses incurred by start-ups, and enhance the loss carry-back regime. On the technology front, we are proposing tax incentives to support businesses in digitization and automation of their businesses, such as granting enhanced tax deductions for evolutionary innovative activities that strictly may not be considered as R&D, consultancy fees incurred for digitization projects, and software development activities."

Noting the recent focus by tax authorities worldwide on international tax issues, Low said: "With the twin challenges of keeping our tax regime competitive and addressing the implications arising from the BEPS Project, a balance must be achieved between keeping Singapore's tax system simple whilst ensuring that it remains coherent and acceptable in the international tax arena. Singapore should continue to monitor its tax incentives framework to ensure it adheres to the minimum standards that have been established, and may also wish to consider publishing more detailed guidelines on the criteria required to obtain certain tax incentives, as transparency is a key tenet of the BEPS Action 5 recommendations on harmful tax practices."

In addition, Deloitte said: "Singapore will need to ensure the adoption of consistent transfer pricing approaches with its key trading partners and investor countries to reduce the potential risk of increased disputes between tax authorities pursuant to new transfer-pricing approaches put forth in the BEPS proposals."

Deloitte also pointed out increasing competition for multinationals' business. Deloitte said: "Singapore's status as the region's economic and financial hub is hard won and the country is constantly refreshing her value proposition to stay ahead of the curve. Likewise, Singapore needs to ensure that her suite of industry-specific tax incentives evolves in tandem with business developments."

"For instance, both Singapore and Hong Kong are choice locations for multinationals to locate their treasury centers in Asia. Singapore's finance and treasury centre (FTC) incentive has been instrumental in influencing companies to locate their treasury centers in Singapore, but this may be changing with Hong Kong introducing new tax measures in a drive to attract regional treasury centers."

"Likewise, Malaysia and Thailand have introduced tax incentives for treasury centers and headquarter activities and in time may emerge as alternatives to both Singapore and Hong Kong. Deloitte Singapore is not only calling for the FTC incentive to be extended beyond March 31, 2016, but also for improvements to be made to keep the incentive relevant and useful with developments in treasury and financial activities globally," said Michael Velten, Partner and Head of Financial Services Tax at Deloitte Singapore and Southeast Asia.

TAGS: environment | tax | investment | business | tax incentives | law | budget | Singapore | Thailand | fees | enforcement | tax authority | multinationals | legislation | transfer pricing | Hong Kong | Malaysia | tax reform | standards | legislation amendments | trade | business investment | Other | Tax | BEPS

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