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Act updated to allow transfer of tax incentives when firms restructure

Act updated to allow transfer of tax incentives when firms restructure

Source: Straits Times
Article Date: 27 Mar 2020
Author: Aw Cheng Wei

Companies that had been offered tax breaks under a government scheme aimed at encouraging them to operate in Singapore can continue to enjoy the incentives in case of corporate restructuring.

Companies that had been offered tax breaks under a government scheme aimed at encouraging them to operate in Singapore can continue to enjoy the incentives in case of corporate restructuring.

Senior Minister of State for Trade and Industry Chee Hong Tat told Parliament: "As companies amalgamate, merge or undergo corporate restructuring, there may be a need to transfer their existing awards to the new entity."

The clarification was in regards to an update of the Economic Expansion Incentives Act passed yesterday and it will apply to companies that had been given the Pioneer Industry and Pioneer Service awards, as well as the Development and Expansion award.

Singapore has traditionally enticed foreign investment by awarding tax incentives under the Economic Development Board schemes to firms, provided they undertake substantive economic activity here.

The investment allowance scheme, which applied only to companies previously, is now extended to corporate partnerships as well. The allowance encourages companies to carry out projects with economic, technical or other merits.

For example, the Government provided a 100 per cent investment allowance in 2016 as part of an Automation Support Package to encourage firms to raise productivity through technology.

Mr Chee said: "We know that companies increasingly co-own assets with other companies, including through corporate partnerships."

Corporate partnerships will include partnerships, limited liability partnerships and limited partnership comprising only of companies, he added.

Sound business reasons underlie these partnerships, like co-sharing equipment to reduce expenses and optimise usage, said Mr Chee.

Deputy Prime Minister and Finance Minister Heng Swee Keat announced in Budget 2018 that the allowance for productive equipment will be extended to include capital expenditure incurred on newly constructed cable systems landing in Singapore.

Mr Chee said: "This will help strengthen Singapore's position as a leading digital connectivity node."

Nominated MP Anthea Ong asked in Parliament yesterday whether the Government takes into account the carbon emissions of economic activities that Singapore incentivises.

She also wanted to know whether the schemes under the Economic Expansion Incentives Act could encourage activities that help Singapore to reduce greenhouse gas emissions.

Mr Chee said: "The short answer to both questions is yes ... When assessing applications for incentives, including those under the (Act), we will give priority to investments that are aligned to our national objectives.

"Carbon emissions is an important consideration but it is not the only criterion," he added.

Mr Chee said: "We will also evaluate if the investment contributes to Singapore's economy, advances our capabilities and creates good jobs for Singaporeans."

Source: Straits Times © Singapore Press Holdings Ltd. Permission required for reproduction.

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