MOF accepts 31 suggestions on draft income tax Bill 2016

Singapore

THE Ministry of Finance (MOF) has accepted 31 suggestions on the draft Income Tax (Amendment) Bill 2016, following a public consultation exercise held from June 26 to July 24. A total of 70 suggestions were received from 11 organisations and individuals.

The draft Bill contains proposed legislation to effect the tax changes announced at Budget 2015 in late February, as well as other changes arising from the periodic review of the income tax system.

The Income Tax (Amendment) Bill is slated to be introduced in Parliament in early 2016, incorporating the 31 suggestions accepted, MOF said.

The other 39 suggestions were not accepted as "they were inconsistent either with the legislative drafting conventions or the policy objectives of the proposed legislative changes".

The ministry said on Tuesday that most of the feedback it received focused on four areas.

They are: extending and refining the mergers and acquisition (M&A) scheme; enhancing the double tax deduction for internationalisation scheme; introducing the international growth scheme; and extending and enhancing the maritime sector incentive.

One suggestion under the enhancement of the double tax deduction for internationalisation scheme that was accepted was to amend the Act to clarify that a Singapore entity will be treated as having incurred the salary expenditure if it directly incurs that expenditure, or if the overseas establishment incurs the expenditure and is subsequently reimbursed by the Singapore entity.

Another that was accepted was under the introduction of the international growth scheme.

MOF said the definition of "international growth company" will be amended to include a company incorporated and resident in Singapore, which provides services to a person or permanent establishment outside Singapore.

Calls to specify the period of acquisition within which the purchase of ordinary shares in a target company (by the acquiring company or an acquiring subsidiary) will qualify for tax deductions in the proposed paragraph (d) of the M&A scheme, were rejected.

The argument by proposers was that paragraph (d) is unlike the other paragraphs under Section 37L (4A).

But MOF said the purpose of the insertion of paragraph (d) is to specify that any acquisitions made by an acquiring company or its acquiring subsidiaries can qualify for the M&A scheme, so long as the acquisitions are made within the same basis period when the acquiring company and its acquiring subsidiaries own more than 50 per cent of the total number of ordinary shares in the target company.

And as companies have different basis periods, it is not meaningful to specify a date in paragraph (d).

The draft Bill was originally slated to be introduced in Parliament in 2015 but was postponed till next year, following the dissolution of Parliament in August.