globaltaxnews.ey.comSign up for tax alert emailsForwardPrintDownload |
28 December 2018 Singapore enacts Income Tax (Amendment) Act 2018 Singapore’s Income Tax (Amendment) Act 2018 (the Amendment Act)1 gives legislative effect to the Budget 2018 tax changes, as well as non-budget changes relating to existing tax policies and administration arising from the periodic review of Singapore’s income tax system. As the Budget 20182 tax changes have largely been enacted as proposed, this Alert highlights some of the key non-budget tax changes. Unless otherwise specified, the amendments are effective as of 12 November 2018. Qualifying intellectual property (IP) income is incentivized under the IP Development Incentive (IDI), effective from 1 July 2018 to 31 December 2023. Key features of the IDI include:
Regulations for the IDI have not yet been released and further details, such as percentage of qualifying IP income subject to the concessionary tax rate and definition of qualifying IP, are not yet available. However, given Singapore’s position to align itself with the OECD3 BEPS4 Action 5, the modified nexus ratio approach will likely be applied, using research and development expenses as a proxy for substance measurement to determine the proportion of income that is qualifying. The re-domiciliation tax framework is expanded to include a re-domiciled company that carried on a trade or business in Singapore before the date of re-domiciliation (known as its registration date). Prior to the enactment of the Amendment Act, this tax framework was applicable only to a re-domiciled company that had never carried out any trade or business in Singapore at any time before its registration date. The expansion of the tax framework will nevertheless only be in respect of its trade or business carried on outside Singapore before its registration date. The existing legislation, which enables the Comptroller of Income Tax (the Comptroller) to obtain a country-by-country report (CbC Report) under the BEPS Action 13 (Transfer Pricing Documentation and Country by Country Reporting) 2015 Final Report under the OECD BEPS Project, has been amended to allow the Comptroller to set out in regulations the conditions for invoking “local filing” by a domestic constituent entity that would otherwise not be required to file a CbC Report with its revenue authority.5 The IRAS’ investigative powers have been increased for investigation of serious tax crimes, or where the suspect attempts to destroy evidence. These include the powers of forced entry and arrest without warrant, as well as body search. However, these powers will be exercised only by trained IRAS investigation officers and where necessary. In addition, the increased investigative powers may not be used by the IRAS to obtain information for the purposes of exchange of information under income tax treaties and exchange of information arrangements, as well as international agreements to improve tax compliance. Similar amendments have been introduced in the Goods and Services Tax (Amendment) Bill 2018, which was passed by Parliament on 19 November 2018 (but not yet gazetted) to increase IRAS’ powers to investigate GST tax crimes. 2. See EY Global Tax Alert, Singapore releases Budget 2018, dated 26 February 2018. 5. Under this mechanism, a domestic constituent entity that would otherwise not be required to file a CbC report with its revenue authority, is required to file an equivalent of that report with that authority in certain circumstances. Ernst & Young Solutions LLP, International Tax Services, Singapore
Ernst & Young LLP, Singapore Tax Desk, New York
Ernst & Young LLP, Asia Pacific Business Group, New York
Document ID: 2018-6577 |
