October 31, 2023
Singapore's Economic Expansion Incentives (Relief from Income Tax) (Amendment) Bill 2023 proposes changes to the approved royalty incentive
On 3 October 2023, the Economic Expansion Incentives (Relief from Income Tax) (Amendment) Bill 2023 (Amendment Bill) was introduced in the Singapore Parliament, proposing changes to Section 40 of the Economic Expansion Incentives (Relief from Income Tax) Act 1967 (EEIA) and consequential amendments to the Income Tax Act 1947 to reflect the changes to the approved royalty incentive (ARI).
The Singapore Budget 2022 had announced the simplification of the ARI to cover classes of royalty agreements predicated on an activity-set-based approach (instead of an agreement-based approach).
Summary of changes proposed
Singapore proposed changes to the EEIA to affect its 2022 Budget announcement, simplifying the existing agreement-based ARI to activity-set-based ARI, which takes effect from 1 April 2023.
The salient amendments include:
Considerations for companies enjoying the existing ARI
The Singapore Economic Development Board (EDB) has started to issue updates to companies that are currently enjoying the agreement-based ARI, providing a one-time and irrevocable option to change from the agreement-based ARI to the activity-based ARI by 30 November 2023.
It will be important for companies to assess, based on their actual facts and circumstances, whether a revocation of the existing agreement-based ARI in "exchange" for the application of the new activity-based ARI would be beneficial.
Legislation of proposed changes
The Amendment Bill was introduced in Parliament for first reading on 3 October. Following two more readings, the proposed changes are likely to be passed into law by the end of 2023.
For additional information with respect to this Alert, please contact the following:
Ernst & Young Solutions LLP, International Tax and Transaction Services, Singapore
Ernst & Young Solutions LLP, Business Incentives Advisory, Singapore
Ernst & Young LLP (United States), Singapore Desk, New York
Ernst & Young LLP (United States), ASEAN Tax Desk, New York
Ernst & Young LLP (United States), Asia Pacific Business Group, New York
Ernst & Young LLP (United States), Asia Pacific Business Group, Chicago
Published by NTD’s Tax Technical Knowledge Services group; Carolyn Wright, legal editor