Alvin Tan on Economic Expansion Incentives (Relief from Income Tax) (Amendment) Bill
The Approved Royalties Incentive (ARI) scheme, which will be extended by five years until December 31, 2028, has been enhanced. It shifted from an agreement-based approach to an activity-based approach from April this year. Under the old agreement-based approach, companies had to get approval from the Economic Development Board for variation of an agreement in the ARI certificate. However, as the use of intangible assets and intellectual property has become more pervasive, a more flexible approach to respond to companies' investment interests is needed. With the new activity-based approach, the scope of the approved activity is specified in the certificate. Companies will enjoy tax exemptions or concessionary withholding tax rates for royalties, fees or contributions payable under all agreements for the approved activity. Companies need not go through the onerous administrative process of seeking new approvals each time a new agreement is reached or an existing agreement is varied. Minister of State for Trade and Industry Alvin Tan, who outlined the changes in Parliament on Tuesday (Nov 7), said this is not a relaxation of the scheme. “We will still clearly define activities which are supportable under the ARI initiative and companies that make claims under agreements which are not covered by a supportable activity will still have their claims rejected and must pay the full prevailing withholding tax,” he said. The ARI enhancement is among six sets of legislative changes in the Bill, which aims to provide for tax incentive changes which were introduced in Budget 2022 and Budget 2023. Another change relates to the Approved Foreign Loan (AFL) scheme. It will be extended to December 31, 2028, with enhanced powers for the Minister for Trade and Industry and the Minister for Finance for loans where the terms have been contravened. If the approval is revoked, a debt to the Government arises but the Minister for Finance may waive it in whole or in part if the minister is satisfied that the recipient did not knowingly, unfairly and intentionally contravene the law. Mr Tan said this legislative change allows debt liabilities to be imposed in a more targeted manner.
The Approved Royalties Incentive (ARI) scheme, which will be extended by five years until December 31, 2028, has been enhanced. It shifted from an agreement-based approach to an activity-based approach from April this year. Under the old agreement-based approach, companies had to get approval from the Economic Development Board for variation of an agreement in the ARI certificate. However, as the use of intangible assets and intellectual property has become more pervasive, a more flexible approach to respond to companies' investment interests is needed. With the new activity-based approach, the scope of the approved activity is specified in the certificate. Companies will enjoy tax exemptions or concessionary withholding tax rates for royalties, fees or contributions payable under all agreements for the approved activity. Companies need not go through the onerous administrative process of seeking new approvals each time a new agreement is reached or an existing agreement is varied. Minister of State for Trade and Industry Alvin Tan, who outlined the changes in Parliament on Tuesday (Nov 7), said this is not a relaxation of the scheme. “We will still clearly define activities which are supportable under the ARI initiative and companies that make claims under agreements which are not covered by a supportable activity will still have their claims rejected and must pay the full prevailing withholding tax,” he said. The ARI enhancement is among six sets of legislative changes in the Bill, which aims to provide for tax incentive changes which were introduced in Budget 2022 and Budget 2023. Another change relates to the Approved Foreign Loan (AFL) scheme. It will be extended to December 31, 2028, with enhanced powers for the Minister for Trade and Industry and the Minister for Finance for loans where the terms have been contravened. If the approval is revoked, a debt to the Government arises but the Minister for Finance may waive it in whole or in part if the minister is satisfied that the recipient did not knowingly, unfairly and intentionally contravene the law. Mr Tan said this legislative change allows debt liabilities to be imposed in a more targeted manner.
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