The Singapore Ministry of Finance (MOF) released the Income Tax (Amendment) Bill 2024 (Amendment Bill) on 10 June 2024. The Amendment Bill proposes legislative amendments to the Income Tax Act 1947 (ITA) to effect tax measures announced in Singapore's 2024 Budget on 16 February 2024 and changes arising from periodic review of Singapore's income tax regime.

Introduced among the 22 legislative amendments is the Refundable Investment Credit (RIC).

Quick recap of Refundable Investment Credit

The RIC¹ was introduced during the Singapore Budget 2024 announcement as a Global Anti-Base Erosion (GloBE) rules-compliant Qualifying Refundable Tax Credit (QRTC) with the aim to encourage sizeable investments that bring substantive economic activities to Singapore in key economic sectors and new growth areas. The RIC will support up to 50% of qualifying expenditures for qualifying activities on an approval basis.

Awarded RIC credits are to be offset against corporate income tax payable, and any unutilized credits will be refunded in cash to the company within four years after it satisfies the conditions for receiving the credits, consistent with the GloBE rules for QRTC. The RIC does not directly reduce the GloBE effective tax rate (unlike tax deductions) and could prove to be more attractive than other tax incentives to companies affected by the GloBE rules.

Key highlights and observations

Based on the proposed Income Tax (Amendment) Bill 2024, the following may be of interest with regard to the RIC:

1. Offsetting of both domestic tax and top-up tax: The RIC may be used to set off corporate income taxes under the ITA or top-up taxes under the proposed Multinational Enterprise (Minimum Tax) bill.²
2. Option to receive as cash payout: An awardee company, subject to the approval of the granting authority at the time the RIC is applied, may elect for the RIC awarded to it to be paid in cash rather than used to offset taxes. This is a welcomed feature, as it could potentially address foreign tax credit (FTC) claim challenges for US Multi-National Enterprises (MNEs).
3. Transferability of RICs in a merger: Subject to approval, RICs may be transferred in the case of merger such that the merging company will step into the shoes of awardee company.
4. Utilization of RICs across companies: Regulations may be drafted to allow RICs to offset the taxes of group companies. Based on the draft legislation, RICs can be set off based on requirements similar to existing group loss relief across group companies.
5. Commencement of RIC: The legislation allows the RIC to be awarded on qualifying expenditures incurred no earlier than 1 July 2024.

Next steps

With Singapore's upcoming implementation of the Income Inclusion Rule and Domestic Top-up Tax in 2025, MNEs may want to consider how the RIC (together with Singapore's suite of tax incentives and cash grants available) could be factored into their tax strategy.

The granting authorities (i.e., the Singapore Economic Development Board and Enterprise Singapore) are expected to release more details on the RIC in the third quarter of 2024.

Although the legislation is currently in proposed form and may be subject to changes depending on public feedback, the RIC can be awarded on qualifying expenditures from 1 July 2024. As such, companies that are considering claiming the RIC and expecting to make incremental investments in Singapore may want to consider initiating discussions with the granting authorities early before these investments are made.