The 2017 Budget which was released at the end of February contains several tax changes which come in line with international taxation standards imposed by the Organization for Economic Co-operation and Development (OECD). Apart from sustaining Singapore companies, the government also thought about foreign companies operating in the city-state which must comply with various international tax arrangements. Our lawyers in Singapore can offer information about the agreements signed by the city-state.
A few years back, OECD introduced a program called Action 5 which provided for base erosion and profit shifting (BEPS) which was adopted by all major economies in the world. Our attorneys in Singapore can explain what the BEPS project implies.
In order to agree to the terms imposed by the OECD through BEPS, Singapore included several changes into its budget for the current year which imply a safe harbor rule for cost-sharing agreements related to the research and development industry and a special regime related to the taxation of intellectual property creations.
The intellectual property regime is not a new one and it implies taxpayers to benefit from tax rebates or exemptions for the costs related to the expenditure, such as research and development activities, from which an income generated by the intellectual property arises.
The novelty in this year’s budget provides for the safe harbor rule for payments agreed between Singapore and foreign companies cooperating in R&D projects. The so-called cost-sharing agreements (CSA) impose restrictions for certain expenditures related to this type of projects and this what the safe harbor rule plans to change.
The new rule provides for easier tax compliance procedures and taxpayer would be allowed to claim tax deductions in accordance with Section 14D in the Income Tax Law. The last change provided for in the 2017 Budget refers to the increase and extension and of the corporate tax rebate which was raised from 20,000 SGD to 25,000 SGD and which will be available for the years of assessment 2017 and 2018.
For information on the new tax changes covered by the Income Tax Act, please contact our Singapore law firm.
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