On or about 18 Feb 2022, the Minister for Finance, Mr. Lawrence Wong, delivered his Budget Statement for the Financial Year 2022.
Enhance the Tax Incentive Scheme for Funds Managed by Singapore-based Fund Manager (“Qualifying Funds”)
To continue growing Singapore’s asset management industry, with effect from 19 Feb 2022, the conditions imposed on the investments in physical Investment Precious Metals (“IPMs”) by Singapore-based fund managers will be refined as follows:
- The incidental condition will be removed, i.e. investments in physical IPMs need not be incidental to the trading of derivative IPMs; and
- The cap of trade volume of physical IPMs will be revised to 5% of the total investment portfolio for the taxpayer’s incentive award under sections 13D/13O/13U of the Income Tax Act 1947.
The MAS will provide further details of the changes by 31 May 2022.
Under the ss 13D, 13O and 13U schemes, funds managed by Singapore-based fund managers are granted tax exemption on specified income derived from designated investments, subject to conditions. The designated investments list currently includes physical commodities that are subject to the following conditions:
- the trading of the physical commodity must be incidental to the trading of the derivative commodity, and
- the trade volume of such physical commodity is capped at 15% of the total trade volume of those physical commodities and related commodity derivatives.
Extend and rationalise the WHT exemption for the financial sector
To continue supporting the competitiveness of the financial sector, the withholding tax exemption for the following payments are scheduled to lapse after 31 December 2022 will be extended till 31 December 2026:
- Payments made under cross currency swap transactions by Singapore swap counterparties to issuers of Singapore dollar debt securities;
- Interest payments on margin deposits made under all derivatives contracts by approved exchanges, approved clearing houses, members of approved exchanges and members of approved clearing houses;
- Specified payments made under securities lending or repurchase agreements by specified institutions;
- Payments made under interest rate or currency swap transactions by MAS; and
- Payments made under interest rate or currency swap transactions by financial institutions.
This will cover payments made under a contract or agreement that takes effect on or before 31 December 2026.
To rationalise the WHT exemption for the financial sector, the WHT exemption for payment e) will be allowed to lapse after 31 December 2022. Such payments can be covered under the existing WHT exemption for payments on over-the-counter financial derivatives.
The MAS will provide any consequential details by 31 May 2022.
Extend and Rationalise the Tax Incentives for Project and Infrastructure Finance
The schemes are scheduled to lapse after 31 December 2022.
To continue supporting the development of Singapore as an infrastructure financing hub, the following package of tax incentive schemes for project and infrastructure finance will be extended till 31 December 2025:
- Exemption of qualifying income from qualifying project debt securities (“QPDS”); and
- Exemption of qualifying foreign-sourced income from qualifying offshore infrastructure projects/assets received by approved entities listed on the Singapore Exchange (“SGX”).
As part of the government’s regular review of tax incentives, the concessionary tax rate of 10% on qualifying income derived by an approved Infrastructure Trustee-Manager/Fund Management Company from managing qualifying SGX-listed Business Trusts/Infrastructure funds in relation to qualifying infrastructure projects/assets (“ITMFM scheme”) will be allowed to lapse after 31 December 2022. Existing ITMFM scheme recipients will continue to enjoy the tax benefits for the remaining tenure of their existing awards.
The MAS will provide any consequential details by 31 May 2022.
Change the basis of preparation of tax computations for insurers from financial statements (“FS”) to MAS Statutory Returns
With the adoption of the new Financial Reporting Standard (“FRS”) 117 for the preparation of FS, the MAS Statutory Returns instead of FS will be used as the basis for preparing tax computations for insurers. Related consequential adjustments to existing tax treatments will also be introduced.
This change will take effect from YA2024 (or YA2025 for insurers whose financial year end is not 31 December).
This change is in view of the following:
- Insurers will not be able to prepare their tax computations using the FS prepared in accordance with FRS 117 as the FS will not provide sufficient information necessary to apply the existing tax rules such as those under section 26 of the Income Tax Act 1947.
- Using MAS Statutory Returns as the basis for preparation of tax computations will allow the existing tax rules and tax incentives (if applicable) to continue to apply without adding substantial tax compliance burden on insurers.
The IRAS will provide further details of the changes by 30 September 2022.