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Source: www.mof.gov.sg |
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SECOND READING SPEECH - THE
INCOME TAX (AMENDMENT) BILL 2006 |
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Mr Speaker, Sir, I beg to move, "That the
Bill now be read a second time". |
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The Income Tax (Amendment) Bill comprises
two groups of amendments to the Income Tax Act. |
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The first provides for the income tax
changes announced in the Budget Statement in February 2006. |
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The second group covers other amendments to
the Income Tax Act arising from ongoing reviews to improve our income
tax framework. |
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The Income Tax (Amendment) Bill was released
for public consultation from June to July 2006. The draft Bill has been
revised to incorporate a number of suggestions from businesses and
members of the public. |
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TAX CHANGES FROM 2006 BUDGET STATEMENT |
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Let me first highlight the key tax policy changes
that were announced in the 2006 Budget Statement. |
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(a) Maritime Finance Incentive (MFI) scheme |
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The Maritime Finance Incentive or MFI scheme
was introduced to nurture the growth of ship financing activity so as to
enhance Singapore's position as a maritime hub. |
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Under this scheme, tax exemption will be granted on
the qualifying incomes of Approved Ship Investment Enterprises, with a
concessionary tax rate of 10% for Approved Ship Investment Managers. The MFI
scheme is introduced by clauses 2, 10, 35, and 44(f) of the Bill. |
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(b) Tax treatment of prescribed
Islamic financing arrangements |
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To promote Islamic finance in
Singapore, the tax treatment of prescribed Shariah-compliant
financing arrangements entered into by a financial institution on
or after 17th February 2006 will be harmonised with conventional
financing arrangements to ensure a level playing field. Clause 21
of the Bill provides for these changes. |
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(c) Writing down allowances for
the cost of acquisition of intellectual property rights |
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To boost Singapore's attractiveness as
an intellectual property hub, writing down allowances will be
extended to companies which have acquired or will be acquiring the
exclusive or substantial economic rights to approved intellectual
properties in the window period running from 17th February 2006 to
31 Oct 2008, subject to conditions. |
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The Income Tax Act will also be
amended to allow companies to claim writing down allowances for
the full cost of acquiring an intellectual property on or before
31st October 2008 even if the payments for the acquisition were
made on a staggered or instalment basis. The enhancements to the
rules for claiming writing down allowances are covered under
Clause 16 of the Bill. |
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(d) Tax deduction for treasury
shares for employee stock option and share award obligations |
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With effect from the year of
assessment 2007, companies will be able to deduct against their
income, the cost incurred in the purchase of treasury shares which
are used to fulfil obligations on employee stock options and share
awards. Clauses 11 and 12 of the Bill provide for these
enhancements. |
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(e) Enhancement of the tax
exemption scheme for foreign-owned funds |
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Currently, the tax exemption scheme
for foreign-owned funds is limited to funds which are not tax
resident in Singapore. |
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To further support the growth in our
asset and wealth management industries, tax exemption will be
extended to foreign-owned funds which are resident in Singapore
and approved during the period from 17th February 2006 to 16th
February 2011. This enhancement is reflected under Clause 10 of
the Bill. |
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OFF-BUDGET TAX CHANGES |
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I shall now deal with the other tax
policy changes which require amendments to the Income Tax Act. Our
existing tax policies and incentive schemes are reviewed regularly
to ensure that they remain relevant. |
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Let me highlight three major changes
to our incentives and policies that arose from these ongoing
reviews. |
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(f) Penalty for failure to file an
income tax return |
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Currently, the penalty for not filing
an income tax return is significantly less severe than the penalty
for under-declaring income. This creates an incentive for
taxpayers to avoid taxation by not submitting their income tax
returns. |
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To discourage this practice, a penalty
of double the amount of tax undercharged will be introduced for
the failure to file a tax return in respect of any year of
assessment within 3 years from the filing deadline. |
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I would like to clarify to Members
that the new penalty will only be imposed on taxpayers who without
any reasonable excuse fail to file their returns in a timely
fashion, and is not targeted at taxpayers with valid reasons for
late filings. The penalty is introduced by Clauses 39, 40, 41, and
42 of the Bill. |
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(g) Enhancement of Parenthood
Tax Rebate (PTR) for parents of legitimized and adopted children |
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The Parenthood Tax Rebate was
introduced as part of the Marriage and Parenthood Package
announced in August 2004 to married parents for their second,
third, or fourth child born to them or legally adopted on or after
1st January 2004. |
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My ministry has reviewed the Rebate
and will be making the following enhancements: |
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Firstly,
to further promote the importance of an intact family, the Rebate
will be extended to the natural parents of an illegitimate child
born on or after 1st January 2004 if they marry before the child
reaches 6 years of age. |
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Secondly,
for parents of an adopted child, the child's qualifying age for
the parents to receive the Rebate will be streamlined from the
current age of 21 years to 6 years with effect 1st January 2006.
This means that parents who adopt a child on or after 1st January
2006 will qualify for PTR if the child is below 6 years old at the
point of adoption. |
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The changes to the Parenthood Tax
Rebate Scheme are reflected under Clause 29 of the Bill. |
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(h) Adoption of the Financial
Reporting Standard 39 for accounting purposes |
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I will be introducing a new section to
institute the tax treatment arising from companies' adoption of
the Financial Reporting Standard 39 which relates to Financial
Instruments: Recognition & Measurement; or FRS 39 for short. |
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With FRS 39, companies will now have
to reflect most of their financial assets and liabilities at
market values in their financial statements. |
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To minimise the tax adjustments
arising from the adoption, the income tax treatment of financial
assets and liabilities has been changed so as to be more in line
with the accounting treatment. This new section is provided by
Clause 21 of the Bill. Members may wish to note that IRAS has
already issued a circular on 30th December 2005 to explain the
changes in detail. |
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Conclusion |
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Finally, 19 other off-Budget changes
have been incorporated in this Bill. As many of them are technical
in nature, or relate to improvements in tax administration, I will
not put Members through the details of the remaining changes. |
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Mr Speaker, Sir, I beg to move. |
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Source: www.mof.gov.sg
Media Release 22 Jan 2007 |
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FrontPage Edition: Sun 4 February 2007
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