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Singapore Introduces Anti-Abuse Measures For PIC Scheme

by Mary Swire, Lowtax.net, Hong Kong
07 November, 2014

Within the Income Tax (Amendment) Bill 2014, which has recently been passed in Parliament, are changes arising from the Ministry of Finance's periodic review of Singapore's income tax regime include anti-abuse measures for the Productivity and Innovation Credit (PIC) Scheme.

The changes in Singapore's 2014/15 Budget included a three-year extension for the PIC Scheme until the 2018 year of assessment (YA), and an enhancement to the tax credit to help small and medium-sized enterprises making substantial investments to revamp their businesses. The Government will raise the expenditure cap for each of the qualifying activities from the current SGD400,000 (USD309,000) to SGD600,000 with effect from YA2015.

However, during her speech in Parliament supporting the Bill, Josephine Teo, Senior Minister of State for Finance and Transport, noted that the Inland Revenue Authority of Singapore (IRAS) has "come across abusive arrangements aimed at artificially creating or inflating PIC claims, especially where cash payouts are involved. Additional measures are necessary, and have been included in the Bill."

The measures, which strengthen IRAS's powers to deny PIC benefits arising from PIC abusive arrangements and impose penalties on intermediaries who promote or facilitate PIC claims for such abusive arrangements, tighten the qualifying conditions for PIC cash payouts.

Teo reiterated that "these changes are not expected to affect businesses making bona fide PIC claims, but seek to deter the small minority of businesses which attempt to make artificial or inflated PIC claims. IRAS will also continue to ensure timely disbursements to businesses for their legitimate claims."

Other amendments in the Bill arising out of the Ministry's review include a tax allowance for expenses incurred by a person for the purpose of complying with statutory and regulatory requirements of his business, which will be tax deductible with effect from YA2014, and a further allowance for Supplementary Retirement Scheme (SRS) members who have reached the retirement age to withdraw investments from their SRS accounts without the need to liquidate the investments. Currently, such SRS members can only make withdrawals in the form of cash.

A final amendment will also enable Singapore to ratify the OECD Global Forum's Convention on Mutual Administrative Assistance in Tax Matters, which establishes a new global standard to the regular exchange of information on tax matters. Singapore intends to implement the new standard by 2018.

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