Other tax changes

Extend the Double Tax Deduction for Internationalisation Scheme

The Double Tax Deduction for Internationalisation (DTDi) scheme serves to encourage businesses to pursue opportunities in international market expansion and investment development activities (with a 200% tax deduction on qualifying expenses). The scheme was originally scheduled to lapse on 31 December 2025 but has now been extended to 31 December 2030.

Lapse of withholding tax concession for non-resident arbitrators and mediators

Currently, non-resident professionals are subject to withholding tax at 15% on gross income or 24% on net income. A concessionary withholding rate of 10% applies on income derived by non-resident arbitrators and mediators from arbitration and mediation work carried out in Singapore. This will be allowed to lapse after 31 December 2027.

Extend the Mergers and Acquisitions scheme

Under the current Mergers and Acquisitions (M&A) scheme, a company that acquires the ordinary shares in a target company during the period from 1 April 2010 to 31 December 2025 can enjoy an M&A allowance on 25% of the qualifying share purchase consideration (capped at $40 million on the value of all qualifying acquisitions per year of assessment). In addition, double tax deduction may be claimed on transaction costs incurred on qualifying share acquisitions, subject to conditions.

The M&A scheme will be extended to cover qualifying share acquisitions up to 31 December 2030. All other conditions and exclusions of the scheme will remain.

Lapse of Venture Capital Fund Incentive and Venture Capital Fund Management Incentive

The current tax incentives for venture capital funds and fund managers provided for under sections 13G and 43V of the Income Tax Act 1947 (the Act) will be allowed to lapse on 31 December 2025. To qualify for the tax exemption under section 13G of the Act, venture capital funds have to meet certain conditions, including investing 30% of invested capital into unlisted Singapore-based companies. The venture capital fund management incentive under section 43V of the Act provides a reduced tax rate of 5% on qualifying fee income derived from managing section 13G venture capital funds.

As most investment funds have a broad investment objective or strategy and will deploy capital depending on the investment opportunities, most funds tend to opt for the section 13O/OA or 13U tax incentives compared to the section 13G scheme. We do not expect the lapse of the above schemes to have any significant impact since venture funds and their fund managers can consider applying for alternative incentives.