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Finance Business Service

Singapore has reviewed income taxation


The legislative body of Singapore has approved a number of amendments and additions to the Income Tax Bill of 2017 (Income Tax Bill 2017). The specified changes involve a substantially changed approach to the policy of income taxation.
It should be noted that during the discussion of this package of changes in the parliament, Minister of State for Finance of Singapore stated that a significant reduction in corporate tax would be achieved by raising the minimum taxable amount from 20,000 Singapore dollars (approximately 14,753 USD) to 25,000 Singapore dollars (approximately 18 441 USD). However, there will be no change in percentage terms, and the relaxation will remain at the level of 50%.
At the same time, starting in 2018, the amount of relaxation will be 20% of the tax payable at an income of 10,000 Singapore dollars (approximately $ 7,376).
Minister of Finance of Singapore also stressed that this package of changes would help companies overcome economic uncertainty and continue their restructuring.
In addition, starting in 2018, a taxpayer will be able to claim a tax deduction for the full amount of payments that were made in accordance with the agreements on the distribution of costs for R & D activities (research and development activities), without obligation to provide a breakdown by cost.

As for individuals (exclusively tax residents), who pay income tax, they will receive a discount of 20% of tax payable in 2017, but not more than 500 Singapore dollars (about $ 369) per taxpayer.

One of the fundamental factors for the adoption of a number of amendments is the periodic review of the current tax regime by the Ministry of Finance.
So, at the moment, enterprises are demanded to maintain the transfer pricing documentation (TPD). The Inland Revenue Authority of Singapore (IRAS) encourages such maintenance and now this requirement is fixed at the legislative level.
However, to limit the tax burden of small businesses, these requirements will apply to the companies with a gross profit of more than 10 million Singapore dollars (7.4 million USD) and only in the context of their significant transactions with related companies. Thus, this amendment will affect no more than five percent of Singaporean companies.
As for transfer pricing, it should be noted that this year the Inland Revenue Authority of Singapore (IRAS) has announced a number of amendments to the current e-Tax Guide on the application of TP rules for tax purposes.
The new version of this document provides for strengthening the requirements related to the application of the arm's length principle, as well as systems of functional analysis and risk analysis.
In addition, the Inland Revenue Authority of Singapore has introduced the changes that profits should be taxed in cases where real economic activity is carried out generating such profits, and the formation of an appropriate cost component takes place.
In addition, the changes have been made for certain groups of companies and economic entities, by which the relevant provisions are adjusted with the further inclusion of the concept of “advance pricing agreements” (APAs), as well as other rules relating taxation.

In conclusion, having analyzed the above, it should be noted that the tax and generally legal system of Singapore does not stand still and continues to develop rapidly, trying to cover all aspects from small to large business and being at a very high level at the same time.

Дмитрий Батраков
Finance Business Service