In a bid to boost the competitiveness of its financial sector, the Singapore government will be tweaking tax treatments for the financial industry. The changes were announced on Monday (23 February 2015) as part of the annual Budget speech.
Firstly, the government will be extending the tax deductions for collective impairment provisions made under the Monetary Authority of Singapore (MAS) notices for financial institutions (FIs). The concessions will be extended till year of assessment (YA) 2019 or 2020, with all other conditions of the scheme remaining the same. This is in recognition that FIs need to maintain adequate levels of impairment provisions under the relevant MAS Notices as they transit to the new International Financial Reporting Standard on Financial Instruments (IFRS 9).
Secondly, tax incentive scheme for insurance businesses will be extended and refined. Under the scheme, approved insurers and reinsurers may enjoy a concessionary tax rate of 10 percent on qualifying income derived from qualifying insurance and reinsurance business conducted from Singapore for a 10-year award tenure. The scheme will be extended to 31 March 2020 as the Insurance Business Development Incentive.
Besides that, a renewal framework will be introduced from 1 April 2015 to encourage existing recipients of the incentive to continue expanding their operations in Singapore. Further details will be released by MAS by May this year.
Thirdly, FIs can expect improved Enhanced-Tier Fund tax incentive scheme, which grants tax exemption to approved fund vehicles on specified income derived from designated investment. Under the original scheme, each approved fund must meet certain economic conditions. However, as a concession, master-feeder fund structures may apply for the scheme and meet the economic conditions on a collective basis. To improve this scheme, the government will soon allow existing master-feeder fund to apply for Special Purpose Vehicles (SPVs) from 1 April 2015 to accommodate master-feeder fund structures that hold their investments via SPVs. MAS will announce further details on the enhanced scheme by May 2015.
Fourthly, the government will be extending the tax concessions for listed Real Estate Investment Trusts (REITS). Currently, REITs listed on SGX enjoy tax transparency if the trustee of a REIT distributes at least 90 percent of its taxable income to unitholders in the same year in which the income is derived by the trustee.
To continue promoting the listing of REITs in Singapore, the package of tax concessions for REITs has been reviewed to ensure that it remains competitive to support the growth of the industry. The package of income tax concession for REITs will be extended to 31 March 2020. With the extension, the tax exemption on qualifying foreign-sourced income will apply as long as the overseas property is acquired by REIT or its wholly-owned Singapore tax resident subsidiary company on or before 31 March 2020.
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