Singapore Proposes Two Corporate Tax Incentive Schemes

Singapore Proposes Two Corporate Tax Incentive Schemes

According to Singapore’s Trade and Industry Minister, the country’s government takes measures to stimulate more economic activities and to keep its tax regime competitive.

Recently the government presented to the parliament two new corporate tax incentive schemes. The proposed legislation includes two corporate income tax changes, originally announced in the 2012 Budget and other amendments for improving tax administration arising from the regular review of the tax incentive regime.

Firstly, it is proposed to replace the Integrated Industrial Capital Allowance (IICA) scheme with an Integrated Investment Allowance (IIA).

The IICA scheme introduced in 2003 and being some kind of recognition that many companies site their operations across boundaries allows a Singapore-based company, which carries out an approved project, to claim a capital allowance for qualifying equipment leased to a wholly-owned subsidiary outside Singapore, provided that the equipment is used solely in connection with the Singapore business.

The IIA scheme that would replace the IICA scheme provides an additional allowance on top of the capital allowance for qualifying equipment. Furthermore, the equipment placed overseas need not be leased to a wholly-owned subsidiary. This provides companies to be more flexible in structuring their overseas operations to support the activities in Singapore.

Secondly, it is proposed to extend the tax relief period of the Development and Expansion Incentive (DEI) in order to encourage companies engaged in high value-added activities to operate in Singapore. This incentive was introduced in 1996 and currently it stipulates a maximum DEI period of 20 years.

To attract companies and investors to Singapore the government is also intends to increase the maximum possible incentive period from 20 to 40 years.

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