Singapore's Ministry of Finance (MOF) has accepted for implementation 33 out of the 83 suggestions on the draft Income Tax (Amendment) Bill 2010 received during the public consultation exercise held from 28 June to 19 July 2010. These will be incorporated into the revised Income Tax (Amendment) Bill 2010. The remaining 50 suggestions were not accepted for implementation as they are not consistent with the legislative drafting conventions or the policy objectives for the proposed legislative changes.

The draft Income Tax (Amendment) Bill 2010 contains proposed legislation to put into effect the following tax changes announced in Budget 2010, as well as other changes arising from the periodic review of the income tax system. The issues that received the most feedback were:

• Productivity and Innovation Credit (“PIC”) scheme to promote enterprise investment in six activities along the innovation value chain;
• Extension of Development and Expansion Incentive to include international legal services;
• Tax deduction scheme for angel investors to claim deductions for their investments in start-ups; and
• Land Intensification Allowance to support enhanced land productivity among industrial users.

Public Participation in the Consultation Exercise

A summary of the key comments received and MOF’s responses are as follows:

I) Productivity and Innovation Credit

a) Extending qualifying training expenditure to rental of training equipment

Comment: The qualifying training expenditure for PIC should be extended to include rental of training equipment (eg. projectors) or facilities, and such expenses should be made more definitive as qualifying expenditure.

MOF’s response: Accepted for implementation with modification. Rental of training equipment or facilities from external parties are already covered under the definition of “qualifying expenditure” for in-house training under the PIC scheme. Nonetheless, the legislation will make clearer this inclusion. Imputed rental for the use of the taxpayer's own premises and equipment for in-house training, however, will remain non-eligible for further deduction under PIC.

b) Refinement to definition of industrial or product design
Comment: Currently the definition of "industrial or product design" would apply only to work that in fact optimised the functions, value and appearance of a product. The problem with such a definition is that no one can ever tell when a design achieves an "optimal" outcome. Suggest refining the definition of "Industrial or product design".

Proposed definition:-

"Industrial or product design" means the creation and/or development of concepts or specifications that seek to promote, improve or enhance the functions, value or appearance of physical products, taking into account users' needs or desires, marketability and production considerations.

MOF’s response: Accepted for implementation. The terms “improve or enhance” are clearer and more definitive than the term “optimise”.

c) Expansion of automation equipment list

Comment: It is proposed that the examples provided on office system software and information technology software be expanded to give greater clarity on the types of qualifying software. Suggestions include:

1. Software used in the management and operation of hotels, serviced residences and commercial properties including software used for making reservations, customers /tenants billings and collections, customers/tenants profile database and special requests, etc;

2. Human resource and payroll information system and management software;

3. Accounting, assets management and other financial information and business management software; and

4. Personnel business travel request, information and management software.

MOF’s response: Accepted for implementation. The suggested examples on the types of software are in line with the policy intent of encouraging pervasive adoption of IT and investment in equipment that will result in greater productivity.

d) Clarification on the non-taxability of the cash payout under PIC

Comment: Based on the IRAS e-Tax Guide dated 29 June 2010, cash payout under the PIC scheme shall not be taxable. This tax exemption treatment is not mentioned in the draft Income Tax (Amendment) Bill 2010. It is proposed that a provision on the non-taxability of the cash payout under PIC be included.

MOF’s response: Not accepted for implementation. MOF would like to clarify that the cash payout under the PIC scheme is not an income, and hence the issue of its taxability does not arise to begin with.