On 5 May 2018, Singapore has published the Economic Expansion Incentives (Amendment) Act 2018 and the related Commencement Notification and Regulations in the Official Gazette. The Act and Regulations provide for the exclusion of income from intellectual property (IP) rights from the scope of tax relief for pioneer service companies and development and expansion companies. The change is in relation to Singapore’s planned introduction of the Intellectual Property Development Incentive (IDI), which will be in compliance with the modified nexus approach of BEPS Action 5.
The exclusion generally applies in respect of income from IP rights acquired from 1 July 2018, with a grandfathering provision in respect of income from existing IP rights acquired before that date for companies that were already approved as a pioneer service company or a development and expansion company. Where the IP was acquired from a related party, however, the exclusion also applies for IP rights acquired between 17 October 2017 and 30 June 2018 in cases where the main purpose or one of the main purposes of the acquisition was to avoid income tax in Singapore or elsewhere. Further, where a pioneer service company or a development and expansion company is given an extension of its tax relief period on or after 1 July 2018, income from all IP rights owned by the company will be excluded from relief from the first day of the extension, regardless of when the rights were acquired.
