Income Tax (Amendment) Act 2023

The latest Income Tax (Amendment) Act 2023 was published on Singapore Statutes Online, the country’s online platform for publicizing legal texts. Most provisions of the Act are rather irrelevant for financial market participants. However, as already pointed out earlier in connection with the corresponding bill, some do matter for market players, including those briefly described below. It shall be noted in this context that the (Amendment) Act does not diverge in any way from the bill as far as the following relevant provisions are concerned:
(1) Tax treatment for income derived from a cover pool for covered bonds. A new section 10K is being introduced in the Income Tax Act 1947 to provide the tax treatment for income derived by an approved covered bond company from a cover pool for covered bonds issued by a bank incorporated in Singapore or any of its foreign branches. Subject to certain conditions, any income derived by the approved covered bond company from the cover pool is treated as income of the bank that is chargeable to tax.
(2) Tax treatment for gains from the sale or disposal of foreign assets by entities in a multinational group without economic substance in Singapore. A new section 10L is being inserted in the Income Tax Act 1947 to treat gains received in Singapore from the sale or disposal of foreign assets by entities in a multinational group as income chargeable to tax. This section applies if the gains would not otherwise be treated as income or if the gains would otherwise be exempt from tax under the Act. The section does not apply to sales or disposals of foreign assets by entities that only have business operations in Singapore or by prescribed financial institutions or entities under certain tax incentive schemes. The objective of this provision is to prevent profit shifting and the establishment of shell companies.´
(3) Extension of the tax exemption for certain income derived from qualifying debt securities. Thereafter, section 13 of the Income Tax Act 1947 is being amended to extend by 5 years (until December 31, 2028) the last date on which qualifying debt securities must be issued for certain income derived by certain persons from those debt securities to be exempt from tax. The terms „break cost“ and „prepayment fee“ are also being replaced with „early redemption fee“ in section 13. The exemption also applies to any amount derived from a sale or disposal of a foreign asset by an entity that is treated as income under new section 10L and that is assessable as the income of an individual.