, Singapore

Deloitte recommends tax measures for dynamic business landscape

This is one of the company's recommendations for Singapore Budget 2022.

Deloitte Singapore released its recommendations towards Budget 2022, intended for businesses to adapt and thrive in the new normal whilst also keeping up with the recent international tax developments.

The company said its goal is to ensure that Singapore remains relevant for companies seeking to capitalise on new opportunities and achieve new levels of growth in a changing business landscape.

Tax and Legal Leader Low Hee Chua said, "Budget 2021 provided much relief to businesses. Whilst we recognise that the level of support cannot be sustained indefinitely, certain businesses, particularly small and medium-sized businesses, are still struggling despite the improved outlook and may require additional assistance to get through this challenging time."

Here are some of the recommendations from Deloitte:

  • The cost of COVID-19 testing must be fully deductible for tax purposes, rather than being subject to the medical expense restriction, where the costs of COVID-19 testing are not fully covered by a government subsidy.
  • Remove the requirement that the consideration must be fully paid up within six months from the date of share acquisition; or in the case of contingent consideration, within six months from the date on which the contingent consideration becomes payable, presuming that these requirements were put in place to ensure that the acquiring company claiming the mergers and acquisition (M&A) allowance incurred the expenditure, but these additional requirements may sometimes make it difficult for companies to benefit from the M&A scheme.
  • Focus on strengthening the innovation and intellectual property (IP) ecosystems so that they can be leveraged to promote economic development, which includes addressing gaps in Singapore's current research and development (R&D) and IP regime in comparison to competing countries. Also, authorities should consider reassessing their administration of the current R&D definition to benefit a larger group of companies or introduce a hybrid approach of both targeted and broad-based R&D tax incentives.
  • Retain Singapore's tax incentive framework to continue attracting new investors, as well as review current tax incentives to see if they may need to be recalibrated given the impending implementation of the Global Anti-Base Erosion (GloBE) rules, which is part of the BEPS 2.0 initiatives aimed at ensuring multinational enterprises pay a fair share of tax wherever they operate and setting a global minimum tax rate.
  • Broaden the scope of section 13CA of the Income Tax Act to include other types of entities, expand the list of designated investments to include partnerships, other types of foreign vehicles and digital assets, and enhance the deduction for variable capital company promotion costs.
  • Expand the scope of qualifying investment income under the insurance business development scheme and expand the scope of section 34C of the Income Tax Act to cover business transfers under the Insurance Act.
  • Extend current financial industry incentives and withholding tax exemptions that are about to expire to maintain Singapore's attractiveness as a global financial centre. Notably, these financial industry proposals place a renewed emphasis on green finance and ESG initiatives.

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