In October 2024, Singapore has taken several steps to implement tax measures announced in Budget 2024 by:
- Passing the Income Tax (Amendment) Bill (“ITA Bill”) on 15 October 2024. The ITA Bill will effect a number of tax measures, such as allowing the qualifying income of shipping entities to be taxed by reference to net tonnage (net tonnage basis of taxation, or “NTT basis“) for three Maritime Sector Incentive (“MSI“) sub-schemes.
- On 23 October 2024, the Inland Revenue Authority of Singapore (“IRAS“) published guidelines on the alternative NTT basis for shipping enterprises, approved international shipping enterprises, and approved shipping investment enterprises.
- Passing the Economic Expansion Incentives (Relief from Income Tax (Amendment) Bill 2024 (“EEI Bill”) on 11 November 2024. The EEI Bill will provide for an additional Concessionary Tax Rate (“CTR“) tier of 15% for the Development and Expansion Incentive (“DEI“).
We outline these developments below.
Passing of ITA Bill
The ITA Bill comprises two categories of amendments to the Income Tax Act 1947 (“ITA“), namely:
- Amendments to improve tax administration, including clarification on the tax treatment of real estate investment trust (“REIT“) units held by REIT managers as part of their management fees.
- Amendments to effect Budget 2024 measures, such as the introduction of the Refundable Investment Credit (RIC) scheme to support up to 50% of qualifying expenditures for qualifying activities on an approval basis, as well as extending and revising the tax incentive schemes for funds managed by Singapore-based fund managers. For more information on Budget 2024, please see our February 2024 Legal Update titled “Singapore Budget 2024: Building Our Shared Future Together“.
One Budget 2024 measure implemented by the ITA Bill is that the qualifying income of shipping entities will be allowed to be taxed under the NTT basis, to better align Singapore’s tax regime for shipping entities with common international practices. This will apply to three MSI sub-schemes with effect from Year of Assessment (“YA“) 2024:
- MSI-Shipping Enterprise (Singapore Registry of Ship) under section 13A of the ITA;
- MSI-Approved International Shipping Enterprise under section 13E of the ITA; and
- MSI-Maritime Leasing (Ship) under section 13P of the ITA.
Per the guidelines released by IRAS, a qualifying shipping entity that makes an election for the NTT basis will apply the NTT basis to all qualifying ships owned or operated by the entity. The entity’s income tax base for a YA is the total sum of the income for each qualifying ship computed by reference to (i) the net tonnage of that ship; (ii) a deemed daily income per net tonne; and (iii) the number of days that the ship was in operation during the basis period of a YA. Once made, the election is irrevocable.
For entities that do not elect for the NTT basis, the existing tax exemptions under the relevant shipping incentives continue to apply.
On the administrative front, IRAS also set out how a qualifying company may submit an election form to IRAS and the Maritime & Port Authority of Singapore, and the requirement to submit a disclosure in the tax computation for each YA that it elects for the NTT basis.
For a company that wishes to elect for the NTT basis after its income tax return for YA 2024 has already been filed, it must also submit a revised tax computation to IRAS.
For more information on the ITA Bill and the preceding consultation on it, please see our September 2024 Legal Update titled “Bills Introduced in Parliament to Implement BEPS 2.0 Pillar Two, Amend Income Tax Act“.
First Reading of EEI Bill
On 15 October 2024, the EEI Bill was read for the first time in Parliament, and subsequently passed on 11 November 2024. When it comes into force, it will amend the Economic Expansion Incentives (Relief from Income Tax) Act 1967 to provide for an additional CTR tier of 15% for the DEI. Other amendments include:
- allowing extensions of the tax relief periods of relevant DEI recipients to continue to be granted up to 31 December 2028;
- widening the scope of a “relevant development and expansion company”; and
- enabling projects, in relation to which investment allowances may be given, to be prescribed in regulations.
The additional CTR tier for the DEI was announced as part of Budget 2024, alongside other additional CTR tiers for a number of incentives and schemes.
The Second Reading of the EEI Bill took place on 11 November 2024.
Disclaimer
Rajah & Tann Asia is a network of member firms with local legal practices in Cambodia, Indonesia, Lao PDR, Malaysia, Myanmar, the Philippines, Singapore, Thailand and Vietnam. Our Asian network also includes our regional office in China as well as regional desks focused on Brunei, Japan and South Asia. Member firms are independently constituted and regulated in accordance with relevant local requirements.
The contents of this publication are owned by Rajah & Tann Asia together with each of its member firms and are subject to all relevant protection (including but not limited to copyright protection) under the laws of each of the countries where the member firm operates and, through international treaties, other countries. No part of this publication may be reproduced, licensed, sold, published, transmitted, modified, adapted, publicly displayed, broadcast (including storage in any medium by electronic means whether or not transiently for any purpose save as permitted herein) without the prior written permission of Rajah & Tann Asia or its respective member firms.
Please note also that whilst the information in this publication is correct to the best of our knowledge and belief at the time of writing, it is only intended to provide a general guide to the subject matter and should not be treated as legal advice or a substitute for specific professional advice for any particular course of action as such information may not suit your specific business and operational requirements. You should seek legal advice for your specific situation. In addition, the information in this publication does not create any relationship, whether legally binding or otherwise. Rajah & Tann Asia and its member firms do not accept, and fully disclaim, responsibility for any loss or damage which may result from accessing or relying on the information in this publication.