Public Consultation on the draft Income Tax Amendment Bill 2018

Ministry of Finance

Consultation Period: 20 Jun 2018 - 11 Jul 2018

Status: Closed

Detailed Description

PUBLIC CONSULTATION ON DRAFT INCOME TAX (AMENDMENT) BILL 2018

INTRODUCTION

The Ministry of Finance is conducting a public consultation on the draft Income Tax (Amendment) Bill 2018 from 20 June to 11 July 2018, and invites the public to give feedback on the draft Bill.

SCOPE OF THE CONSULTATION 

2. The draft Income Tax (Amendment) Bill 2018 incorporates 36 proposed legislative amendments to the Income Tax Act (“ITA”):

(a) Budget 2018 changes. There are 17 changes announced by the Minister for Finance, Mr Heng Swee Keat, in the 2018 Budget Statement. The key changes are:

i) Enhancement and extension of the Corporate Income Tax (“CIT”) rebate. To ease business costs and support restructuring, the CIT rebate will be enhanced to 40% of tax payable, with a higher cap of $15,000 for the Year of Assessment (“YA”) 2018. The CIT rebate will also be extended to YA 2019, at 20% of tax payable and capped at $10,000.

ii) Adjustments to the Start-Up Tax Exemption Scheme (“SUTE”) and Partial Tax Exemption Scheme (“PTE”) from YA 2020. The tax exemption under both schemes will be reduced from the first $300,000 to $200,000 of normal chargeable income. Exemption under SUTE will also be lowered from 100% to 75% for the first $100,000 of normal chargeable income.

iii) Enhancement of tax deductions for qualifying research and development (“R&D”) performed locally. To encourage R&D to be done in Singapore, the tax deduction for staff costs and consumables incurred on qualifying R&D projects performed in Singapore will be increased from 150% to 250%. The change will take effect from YA 2019 to YA 2025.

iv) Enhancement of the Double Tax Deduction for Internationalisation (“DTDi”) scheme. To encourage firms to internationalise, the expenditure cap for DTDi claims without prior approval from Enterprise Singapore or the Singapore Tourism Board will be raised from $100,000 to $150,000 per YA from YA 2019.

(b) Other proposed amendments.  There are eight changes to existing tax policies and administration, arising from the periodic review of Singapore’s income tax system, as well as to strengthen Whole-of-Government law enforcement. The remaining changes are technical amendments. The changes include: 

i) Enhance the Inland Revenue Authority of Singapore’s (“IRAS’”) powers to investigate tax crimes. Syndicates and recalcitrant taxpayers are becoming more active and are employing more sophisticated strategies for tax fraud. When investigated, these suspects may refuse to cooperate with IRAS’ investigation. For instance, they may refuse to hand over potential evidence, attempt to destroy evidence, or may contact other suspects to corroborate statements. Such acts of non-cooperation affect IRAS’ effectiveness in bringing the perpetrators to justice.

The proposed amendments will: 

- enhance IRAS’ enforcement powers for investigation of specified serious tax crimes, or where the suspect attempts to destroy evidence. Specifically, the proposed amendments introduce (i) power of forced entry, (ii) power of arrest without warrant and (iii) power of body search subject to conditions. These powers under the proposed amendments will  be exercised only by trained IRAS investigation officers and where necessary so that investigations are not impeded.  

- expand IRAS’ power to gather all information relevant to its investigations from any person. 

- align penalties imposed under the ITA for persons who obstruct officers acting in discharge of their duty under the ITA with those under the Goods and Services Tax Act.

ii) Sharing of information by IRAS with law enforcement agencies (“LEAs”) to combat serious crimes. The activities of criminals including syndicates are often multi-faceted. For instance, their criminal activity may not be limited to tax evasion only, but other forms of illegal activities such as drug dealing and corruption. A Whole-of-Government approach is needed to better fight such serious crimes.

Currently, IRAS is allowed to provide information to LEAs under limited circumstances (e.g. pursuant to a Court Order). The proposed amendment will allow IRAS to share with LEAs information that IRAS assesses as critical for investigation or prosecution of serious crimes. Serious crimes are offences listed in the First and Second Schedules of the Corruption, Drug Trafficking and Other Serious Crimes (Confiscation of Benefits) Act. Information shared with LEAs is to be disclosed to prescribed officers in the LEAs. Further disclosure of such information which is not for the purpose of investigation or prosecution will be an offence.

iii) Provide for the disposal of documents or things seized under the ITA. Where a matter has not proceeded to prosecution, the amendment will allow the disposal of documents or things seized during investigation if the owner of the seized items fails to collect the items upon the end of investigation.

iv) Allow tax deduction for motor car-related expenses for private hire car (“PHC”) drivers. Unlike taxi drivers, PHC drivers are currently not allowed to claim tax deduction on car-related expenses. We have reviewed this with the Ministry of Transport, as part of our periodic review and arising from feedback from various Members of Parliament and the National Private Hire Vehicles Association (NPHVA). Taxi and PHC drivers now provide similar point-to-point transport services. 

Deduction for car-related expenses to be allowed

We will allow tax deduction on car-related expenses incurred by PHC drivers, against their driving income. Such expenses include car rental and petrol.

To ease compliance in claiming tax deduction, a PHC driver, subject to conditions, will be allowed to claim tax deduction for:

(a) expenses (other than service fees paid to platform providers) incurred to earn driving income based on a deemed expense ratio prescribed in the Income Tax Aact, set at “40% of all driving income less service fees”; and

(b) service fees paid to platform providers based on the actual amount incurred under normal tax rules.

Alternatively, instead of the treatment at para 2(b)(iv)(a) and 2(b)(iv)(b), the PHC driver may opt to claim tax deduction on the actual amount of running expenses and service fees incurred in earning driving income.

Taxi drivers will similarly be allowed to opt for the treatment at para 2(b)(iv)(a) and 2(b)(iv)(b), to ease their tax compliance. Alternatively, taxi drivers can also choose to continue with their current practice of claiming tax deduction on the actual amount incurred on relevant expenses.

No capital allowance for purchase cost of the cars

Capital allowance for the purchase costs of cars will continue to be not allowed for PHC drivers.

As for taxi drivers, currently, almost all do not own their taxis and thus do not claim capital allowance. Only about 80 taxi drivers hold a valid taxi service operator licence first issued to them prior to 1 January 1975, which allow them to own a taxi. These licensees drive yellow-top taxis. For these taxi drivers, their capital allowance will be grandfathered. 

The above changes in tax treatment maintain support for our long-standing policies on car ownership, while updating our tax regime to allow deduction for car-related expenses incurred by PHC drivers.

The amendments will take effect from YA 2019, i.e. income earned in 2018.

v) Introduce the Intellectual Property (“IP”) Development Incentive (“IDI”). To encourage the use of IPs arising from taxpayer’s R&D activities, IP income will be incentivised under the IDI. The IDI incorporates the internationally-agreed tax standard for tax incentives for IP income. The IDI will be effective from 1 July 2018.

3. The summary table provides a brief description of the tax changes and explains the amendments to the ITA. Please refer to the draft Income Tax (Amendment) Bill 2018 and its accompanying Explanatory Statement for details.

GUIDELINES

4. We would appreciate your support and participation to ensure that the consultation is productive and focused. Respondents are requested to observe these guidelines:

(a) We will need you to identify yourself and the organisation you represent (if any) so that we can follow up to clarify any comments if needed.

(b) Be clear and concise in your comments.

(c) Focus your comments on how the legislative amendments can be better written to make them clearer and to make compliance easier, or on how the non-Budget tax policy changes can be improved.

(d) Use the prescribed template provided to organise your feedback.

(e) As far as possible, explain your points with illustrations, examples, data or alternative formulations of the amendments.

5. This draft legislation is released only for the purpose of consultation and should therefore not be used for individual or business decisions as it does not represent the final legislation. 

6. All comments received during the consultation will be reviewed thoroughly and if accepted, will be incorporated in the Bill for introduction in Parliament.

PERIOD OF CONSULTATION

7. The draft Income Tax (Amendment) Bill 2018 is available for public consultation from 20 June to 11 July 2018. We regret that comments received after 11 July 2018 will not be considered, as they will not be in time for incorporation in the Bill.

FEEDBACK CHANNEL

8. We encourage all interested parties to submit your comments using the prescribed template, through:

(a) email to pc_itabill@mof.gov.sg (preferred mode); or

(b) fax to 6337 4134; or

(c) post to: Ministry of Finance

100 High Street, #10-01

The Treasury

Singapore 179434

Attention: Tax Policy Directorate

SUMMARY OF RESPONSE

9. We will publish a summary of the main comments received on the Ministry of Finance’s website, together with our responses, by the end of August 2018. The identity of respondents will not be disclosed in the summary.  

DOCUMENTS TO DOWNLOAD

10. For reference, please find the relevant documents for this public consultation below.

Income Tax (Amendment) Bill 2018

- Entire Bill

- Clause 1 to 50

- Explanatory Statement

Summary Table

- Budget 2018 Changes

- Non-Budget Changes

Press Release

Other useful references:

• You may obtain a copy of the ITA at 

  https://sso.agc.gov.sg

  .

• For more details on the tax changes, you may refer to the circulars on IRAS' website.

Prescribed Template for Submission of Comments [DOCX, 22 KB]