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October 31, 2023

Singapore's Economic Expansion Incentives (Relief from Income Tax) (Amendment) Bill 2023 proposes changes to the approved royalty incentive

  • A bill introduced in Parliament on 3 October 2023 proposes changes to existing income tax law to help simplify the approved royalty incentive.
  • The Singapore Budget 2022 announced the simplification of the approved royalty incentive to cover classes of royalty agreements predicated on an activity-set-based approach (instead of an agreement-based approach).

Executive summary

On 3 October 2023, the Economic Expansion Incentives (Relief from Income Tax) (Amendment) Bill 2023 (Amendment Bill) was introduced in the Singapore Parliament, proposing changes to Section 40 of the Economic Expansion Incentives (Relief from Income Tax) Act 1967 (EEIA) and consequential amendments to the Income Tax Act 1947 to reflect the changes to the approved royalty incentive (ARI).

The Singapore Budget 2022 had announced the simplification of the ARI to cover classes of royalty agreements predicated on an activity-set-based approach (instead of an agreement-based approach).

Summary of changes proposed

Singapore proposed changes to the EEIA to affect its 2022 Budget announcement, simplifying the existing agreement-based ARI to activity-set-based ARI, which takes effect from 1 April 2023.

The salient amendments include:

  1. Extending ARI approvals until 31 December 2028
  2. Sunsetting the "current ARI" scheme (where the incentive is linked to individual agreements), i.e., agreement-based ARI, effective 31 March 2023
  3. Replacing the current ARI scheme with a "new ARI" based on a set of activities, i.e., activity-based ARI, approved by the Minister of Finance
  4. Allowing companies to apply for a revocation of their existing agreement-based ARI and apply for the new activity-based ARI
  5. Specifying that the activity-based ARI covers royalties, technical assistance fees, contributions to research and development costs payable to nonresident person(s) for purposes of the approved activities
  6. Providing that more than one activity may be covered under the ARI
  7. Providing that the Minister may specify different tax incentives (including different concessionary tax rates) for different classes, categories or descriptions of:
    1. Approved activities
    2. Relevant royalties, fees or contributions for an approved activity
    3. Nonresident persons to whom relevant royalties, fees or contributions for an approved activity are payable
  8. Imposing a prerequisite to the incentive, requiring that the income received by the recipient should be subject to a headline tax rate of more than 0% in the recipient's home country


  • The new activity-based ARI is intended to reduce the administrative burden under the agreement-based ARI of requesting approval for each new agreement as well as any variation to approved agreements.
  • It would be possible for a company to concurrently enjoy both the agreement-based ARI and activity-based ARI.

Considerations for companies enjoying the existing ARI

The Singapore Economic Development Board (EDB) has started to issue updates to companies that are currently enjoying the agreement-based ARI, providing a one-time and irrevocable option to change from the agreement-based ARI to the activity-based ARI by 30 November 2023.

It will be important for companies to assess, based on their actual facts and circumstances, whether a revocation of the existing agreement-based ARI in "exchange" for the application of the new activity-based ARI would be beneficial.

Legislation of proposed changes

The Amendment Bill was introduced in Parliament for first reading on 3 October. Following two more readings, the proposed changes are likely to be passed into law by the end of 2023.


For additional information with respect to this Alert, please contact the following:

Ernst & Young Solutions LLP, International Tax and Transaction Services, Singapore       

Ernst & Young Solutions LLP, Business Incentives Advisory, Singapore      

Ernst & Young LLP (United States), Singapore Desk, New York

Ernst & Young LLP (United States), ASEAN Tax Desk, New York

Ernst & Young LLP (United States), Asia Pacific Business Group, New York

Ernst & Young LLP (United States), Asia Pacific Business Group, Chicago

Published by NTD’s Tax Technical Knowledge Services group; Carolyn Wright, legal editor


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