YEAR 2008 : RECENT TAX DEVELOPMENTS

There is a separate tax relief for family top-ups (siblings, spouses, parents and grandparents) capped at another $7,000 per YA. The condition that the receipients of the family top-ups must aged 55 and above is now removed. You will now be able to claim tax relief for voluntary contributions to your own Medisave Account up to a cap of $26,393 (YA 2009) less mandatory contributions.

Wef YA 2009 you can claim tax relief for approved vocational qualifications even if the course is not relevant to your current trade, business, profession, or employment. You can also now make your claim for approved course fees within 2 years of assessment from the YA relating to the year when you complete the course. Taxpayers should claim the tax relief as soon as he has assessable income above $22,000, within the 2 YAs time limit indicated.

Wef YA 2009 you can claim tax relief for approved vocational qualifications even if the course is not relevant to your current trade, business, profession, or employment. You can also now make your claim for approved course fees within 2 years of assessment from the YA relating to the year when you complete the course. Taxpayers should claim the tax relief as soon as he has assessable income above $22,000, within the 2 YAs time limit indicated.

Wef YA 2009 the current administrative concession to treat the gains from the sale of vessels as capital gains and not taxable will be extended for another 5 years from YA2009 to YA2014. This will provide tax certainty to owners of vessels. Conditions apply such as the vessels sold must be Singapore-registered or are owned by AIS companies (Approved International Shipping Enterprises). The administrative concession is also extended to include gains from the sale of vessels which will subsequently be leased back, and to gains from the sale of shares in a Special Purpose Company which owns ships. MPA will release details by May 2008.

Wef YA2009 tax exemption under s.13A or 13F of the Income Tax Act will be granted on all foreign exchange gains and on gains from risk management activities derived by shipping companies. Conditions apply: (i) the vessels must be Singapore-registered or owned by AIS companies; (ii) the gains are in connection with and incidental to the core shipping operations; and (iii) the shipping companies do not engage in activities considered as trading in derivatives. There is currently an administrative concession, valid for 5 years from YA 2006 to YA 2020, to treat gains from risk management activities as "hedging gains relating to shipping operations" and exempt from tax.

Wef 1.4.2008 the current Maritime Finance Incetive (MFI) will be enhanced: (i) Partnerships will now be eligible for the MFI. (ii) Leasing of containers will now be included in the MFI. (iii) A new Approved Container Investment Enterprise (ACIE) tax status will enjoy a tax rate of either 5% or 10% 9 (depending on the local business spending and headcount) on its income from leasing sea containers (whether operating or finance leases) to onshore and offshore leases. (iv) A new Approved Container Investment Management Company tax status will enjoy a 10% tax rate on its management fee income derived from the management of an ACIE.

The new tax incentives will be available 1.4.2008 to 28.2.2011, and once granted, will be for a period not exceeding 10 years. MPA will release details of the new tax incentives by May 2008.

The Financial Sector Incentive (FSI) Scheme will be renewed for another 5 years from 1.1.2009 to 31.12.2013 and will be expanded to include (i) a new Enhanced-Tier Islamic Finance award granting 5% tax rate on qualifying income from qualifying Shariah-compliant activities. Conditions apply. (ii) Trading of Qualifying Debt Securities and Qualifying Project Debt Securities will now be included in the FSI Bond Market Enhanced-Tier award wef 16.2.2008. (iii) Trading of exchange-traded financial derivative will now be included in the FSI derivatives Market Enchanced-Tier award wef 16.2.2008.

A 5% concessionary tax rate will be granted to qualifying insurers on income derived from writing offshore Islamic insurance (takaful) or reinsurance (retakaful) business. Conditions apply. The approved period is 1.4.2008 to 31.3.2013.

The Qualifying Debt Securities (QDS) Incentive is extended for another 5 years from 1.1.2009 to 31.12.2013. Also, from 16.2.2008 to 31.12.2013 the QDS scheme is extended to exempt all investors from tax on qualifying income derived from QDS that has a tenure of at least 10 years; and also QDS in the form of qualifying Islamic bonds (sukuks). Conditions apply.

Tax exemption on income derived by primary dealers from trading in Singapore Government Securities (SGS) is now extended from 28.2.2008 to 31.12.2013. Tax exemption on income derived by an Approved Special Purpose Vehicle (ASPV) will be extended from 1.1.2009 to 31.12.2013. The current condition that all debt securities issued by a ASPV have to be QDS is removed, wef 16.2.2008 (to 31.12.2013).

Tax concessions and tax exemption granted to the project finance industry will be extended from 1.1.2009 to 31.12.2011. Also, a new 10% concessionary tax incentive (for a period of up to 10 years) is granted on income derived by a company from the provision of management services to business trusts and funds that own offshore infrastructure assets and are listed in Singapore. This incentive is valid 1.4.2008 to 31.12.2011.

A new 10% tax incentive, for a period of up to 10 years, is granted on fees and commissions derived from the provision of insurance broking and advisory services by qualifying licensed direct and reinsurance brokers to non Singapore-based clients. This incentive is valid 1.4.2008 to 31.3.2013.

Removal of the "related to the trade or business" requirement under section 14D and 14E of the Income Tax Act. This tax change is subject to the condition that the R&D activities are carried out in Singapore (whether inhouse or outsourced) and is effective YA 2009 to YA 2013. R&D activities conducted outside Singapore are tax deductible under s.14D only if the R&D is related to the taxpayer's trade or business. R&D activities conducted in Singapore (whether inhouse or outsourced) will now qualify for a 150% tax deduction under s.14D, and is effective YA 2009 to YA 2013. R&D activities conducted outside Singapore will continue to qualify for a 100% tax deduction under s.14D. s.14E which grants double tax relief for qualifying approved R&D conducted in Singapore will continue to apply.

A new R&D Tax Allowance which can be used to offset chargeable income for the next 3 YAs following the YA that it is granted, if the taxpayer incurs qualifying R&D costs in excess of a base amount. The maximum R&D tax allowance for each YA is $150,000, wef YA 2009 to YA 2013. Any unutilized R&D tax allowance as at the end of the 3 YAs will be disregarded. Conditions apply.

A new R&D Incentive for Start-up Enterprises (RISE) effective YA 2009 to YA 2013. Under RISE, a qualifying start-up company can convert up to $225,000 of tax losses for each YA into cash computed at a prescribed rate, if it spends at least $150,000 on R&D activities in Singapore in the basis period for the YA of claim. Conditions apply. IRAS will release details by September 2008.