On or about 18 Feb 2022, the Minister for Finance, Mr. Lawrence Wong, delivered his Budget Statement for the Financial Year 2022.
Study the introduction of the Minimum Effective Tax Rate (“METR”) Regime
In response to the global minimum effective tax rate under the Pillar 2 Global Anti-Base Erosion (“GloBE”) rules of the BEPS 2.0 project, and based on consultation with industry stakeholders, MOF is exploring a top-up tax called the minimum effective tax rate, or “METR”.
The METR will top up a multinational enterprise (“MNE”) group’s effective tax rate in Singapore to 15%. The METR will apply to MNE groups operating in Singapore that have annual revenues of at least €750 million, as reflected in the consolidated financial statements of the ultimate parent entity. The METR, if introduced eventually, will be aligned with the Pillar 2 GloBE rules as far as possible.
The IRAS will study the METR further and consult industry stakeholders on the design of the METR.
The MOF will continue to closely monitor international developments before making any decisions on the METR.
Under Pillar 2 Global Anti-Base Erosion (GloBE) rules of the BEPS 2.0 project, if an MNE group with annual global revenues of €750 million or more were to have an effective tax rate of less than 15% in Singapore at the group level, other jurisdictions such as its home jurisdiction can collect the difference up to 15%. The METR, if introduced eventually, will be aligned with the Pillar 2 GloBE rules as far as possible.
Extend and enhance the Approved Royalties Incentive (“ARI”)
The Approved Royalties Incentive is scheduled to lapse after 31 December 2023.
To continue encouraging companies to leverage new technologies and knowhow to develop the capabilities of our local workforce and capture new growth opportunities, the ARI will be extended till 31 December 2028.
The ARI will also be simplified to cover classes of royalty agreements based on an activity-set-based approach. EDB will provide further details of the changes by 30 June 2022.
Under the ARI, tax exemption or a concessionary withholding tax rate may be granted on approved royalties, technical assistance fees, or contributions to research and development costs made to a non-resident for providing cutting-edge technology and know-how to a company for the purpose of its substantive activities in Singapore. Approval for the ARI is currently granted on an agreement-based approach.
Extend the Approved Foreign Loan (“AFL”) scheme
The Approved Foreign Loan scheme is scheduled to lapse after 31 December 2023.
To continue encouraging companies to invest in productive equipment for the purpose of conducting substantive activities in Singapore, the AFL scheme will be extended till 31 December 2028.
Under the AFL scheme, tax exemption or a concessionary withholding tax rate may be granted on interest payments made to a non-resident for loans to a company to purchase productive equipment.
Extend the Tax Framework for Facilitating Corporate Amalgamations under section 34C of the ITA to Licensed Insurer
To ensure parity in treatment for all companies, including those that are in the insurance business, the tax framework for facilitating corporate amalgamations will be extended to cover amalgamation of Singapore-incorporated companies involving a scheme of transfer under section 117 of the Insurance Act 1966, where the court order for the confirmation of the scheme referred to under section 118 of the Insurance Act 1966 is made on or after 1 November 2021.
The extension of the framework is subject to conditions, which include the following:
- The amalgamated company takes over all property, rights, privileges, liabilities, and obligations, etc. of the amalgamating company on the date of amalgamation; and
- The amalgamating company becomes dormant (i.e. ceases to conduct any business or any other activities, and does not derive any income) on the date of amalgamation and remains so until it is dissolved or wound up; and
- The amalgamating company is dissolved or wound up before the filing due date of the income tax return for the Year of Assessment (“YA”) related to the basis period in which the scheme of transfer was effected.
The tax treatments under the tax framework will apply with modifications where appropriate.
The IRAS will provide further details of the changes by 31 October 2022.
Facilitate disclosure of company-related information for official duties
To support data-driven policy making, operations, and integrated service delivery, the following changes to the Income Tax Act 1947 and Goods and Services Tax Act 1993 will be made to facilitate the disclosure of information by IRAS for such purposes:
- Where taxpayers have provided consent for their information to be shared, IRAS can disclose such information to a public officer (or any other authorised person outside the public sector who is engaged by the Government or a statutory board) for the performance of his official duties.
- In addition, IRAS can disclose a prescribed list of identifiable information on companies to public sector agencies for the performance of official duties. This sharing of identifiable company-related information within the public sector will be conducted without the need for taxpayer’s consent. Any such information shared will be made less granular by IRAS to preserve the taxpayer’s confidentiality, while remaining useful to public sector agencies. For instance, the prescribed list will include the sales revenue band an identified company belongs to, but not the exact value of its sales revenue. In addition, such information will not be disclosed to any person outside the public sector even if the person is engaged by the Government or a statutory board.
Allow the Integrated Investment Allowance scheme to lapse after 31 December 2022
As part of the Government’s regular review of tax incentives including their relevance, the Integrated Investment Allowance scheme will be allowed to lapse after 31 December 2022.
The IIA scheme grants a qualifying company an additional allowance (on top of capital allowances) on fixed capital expenditure incurred for qualifying productive equipment placed overseas for approved projects.