Navigating in the New Tax Amendments in Singapore: Implication for the Asset Management Industry

On 10 June 2024, Singapore’s Ministry of Finance (MOF) released for public consultation the draft legislative amendments to the Income Tax Act 1947 (ITA), also known as Income Tax (Amendment) Bill 2024.

The draft Income Tax (Amendment) Bill 2024 introduced new changes to the ITA that were not previously announced in the 2024 Budget Statement. These new changes result from MOF’s periodic review of the ITA to better align Singapore’s policy objectives and to improve tax administration.

Among the proposed new changes, the following were particularly relevant for the Asset Management sector:

1. The tax incentive schemes for (i) foreign trusts, (ii) locally administered trusts, and (iii) foreign accounts of philanthropic purpose trusts (i.e., Section 13F, 13L, and 13N) will be extended to 31 December 2027. Additionally, it was clarified that all foreign-sourced income received by a locally administrated trust from the date the changes take effect will be tax exempt.
2. The tax incentive scheme for sovereign funds (i.e., Section 13V) will be extend to 31 December 2029. Additionally, the scope of the scheme will be also enhanced to support funds owned by multiple foreign governments, with retrospective effect from 7 February 2024.
3. Clarification of the tax treatment of REIT units held by REIT managers. In this respect, the proposed changes clarified that when a REIT manager uses the REIT units received as a part of the management fees to compensate employees or directors, the tax deduction amount will be calculated based on the market value of the units on the date they were originally received by the manager. This change will take effect from Year of Assessment (YA) 2026.
4. To reduce taxpayers’ administrative burden, a waiver of the requirement to furnish Estimated Chargeable Income (ECI) for individual sole-proprietors and partnerships (i.e., persons responsible for filling the partnership’s returns) was proposed. The waiver will apply from YA 2026 to 2030.
5. Clarification on the apportion and adjust tax deductions provided under the Philanthropy Tax Incentive Scheme for Family Offices (PTIS) between income subject to different tax rates. Notably, the following amendments have been proposed:
• Tax deductions provided to a company under the PTIS will be apportioned between income taxed at different rates (if applicable) on a basis considered reasonable by the Comptroller of Income Tax; and
• Unabsorbed deductions relating to an income will set off against other income taxed at a different rate, after applying an adjustment factor in accordance with section 37A of the ITA.

For details on the previous amendments to the ITA announced in the 2024 Budget Statement, please refer to our article “Tax highlights from the Singapore 2024 Budget”.

Conclusion

The proposed changes to the ITA demonstrate Singapore’s commitment to remaining competitive in the asset management space amid increased competition from other regional hubs. However, we will need to wait until Q3 2024 to obtain more details from the Monetary Authority of Singapore (MAS) on the revision of the economic criteria (i.e., the minimum spending and fund size) for the Qualifying Funds, as this is crucial for the asset management ecosystem.