Singapore Legislates For IP Tax Concession Reform

Singapore has gazetted a law to repeal the income tax concession for intellectual property income derived by companies benefiting from the Pioneer Service Companies Incentive (PC-S) or the Development and Expansion Incentive (DEI) schemes.

The removal of this tax concession was first announced in Singapore’s 2017 Budget at the same time as a new “Intellectual Property Development Incentive” was unveiled.

The new Intellectual Property Development Incentive will take effect from July 1, 2018, when the IP concessions under the PC-S and DEI will be repealed. Grandfathering provisions will apply where a company has been granted approval under the Pioneer Certificate Incentive or Development and Expansion Incentive before July 1, 2018, and derives income from intellectual property, providing the intention of entering into such is not to avoid tax.

Singapore’s Government says the changes to the taxation of intellectual property are intended to bring the city state’s laws into line with its commitment under Action 5 of the OECD’s base erosion and profit shifting (BEPS) initiative. Following an international agreement on Action 5, countries implementing the OECD’s BEPS recommendations must ensure that any preferential tax regimes for intellectual property income are available only for income that is derived from activities with economic substance in that territory.

Singapore has yet to finalize legislation for the new Intellectual Property Development Incentive regime.