Income Tax (Amendment) Bill

The latest Income Tax (Amendment) Bill was published on Singapore Statutes Online, the country’s online platform for publicizing legal texts. Most provisions of the bill are rather irrelevant for financial market participants. However, there are a few provisions relating to the financial market which we would like to point out:
(1) The bill provides for the 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) The bill provides for the 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) The bill provides for an extension of 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.