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Singapore proposes increase to corporate income tax rebate, double tax deduction on retail bond costs

Singapore's Ministry of Finance (MoF) has proposed changes to the country's Income Tax Act, including raising the corporate income tax rebate.11 Jul 2016

Under the plans the corporate income tax rebate would rise from 30% of tax payable to 50%, with a cap of a S$20,000 ($14,900) rebate each year.  A double tax deduction for costs associated with issuing retail bonds is also proposed.

The MoF has opened a public consultation on its draft update to the legislation.

The MoF has proposed raising the country's merger and acquisition allowance from S$20 million to S$40 million until 2020 to support M&A activity, and capping total personal income tax relief at S$80,000 per year of assessment.

The draft Income Tax (Amendment) (No. 3) Bill 2016 also includes an amendment to allow country-by-country reporting for multinational corporations.

"This is a widely anticipated move following Singapore joining the BEPS project as a BEPS associate", said Singapore-based tax expert Valerie Wu of Pinsent Masons, the law firm behind Out-Law.com.

The Mof said in June that Singapore will join the international base erosion profit shifting (BEPS) project as a 'BEPS associate' and will adopt the minimum standards under the plan including country-by-country reporting.

BEPS refers to the shifting of profits of multinational groups to low tax jurisdictions and the exploitation of mismatches between different tax systems so that little or no tax is paid. Following international recognition that the international tax system needed to be reformed to prevent BEPS, the G20 asked the Organisation for Economic Cooperation and Development (OECD) to recommend possible solutions. In July 2013, the OECD published a 15 point Action Plan and the final reports were published in October 2015.

The OECD announced the BEPS associate framework in February, allowing any country to join the BEPS project if it agrees to adopt minimum standards and pay an annual fee.

Singapore-headquartered multinational enterprises with global revenues exceeding S$1,125 million (€750 million) will have to submit an annual report containing the income, taxes paid, and other indicators of level of economic activities in every tax jurisdiction where they operate, the MoF said.

A double tax deduction scheme for internationalisation should also be extended for four years to 2020 to support businesses in internationalisation, the MoF said in its proposal.

The consultation will run until 29 July, the MoF said.

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