Extension and Refinement of the Aircraft Leasing Scheme in Singapore

June 15, 2017

The Aircraft Leasing Scheme in Singapore is to be extended for another five years with refinements to encourage the growth of the aircraft leasing sector.

On 20 February 2017, the Minister of Finance, Mr. Heng Swee Keat, announced in his Budget Statement for the Financial Year 2017 that the Aircraft Leasing Scheme will be extended with certain amendments to further encourage the growth of the aircraft leasing sector in Singapore. Although the relevant legislation has yet to be updated and passed, the new scheme incentives are expected to take retrospective effect as of 1 April 2017.

Summary of Amendments

  1. Extension of Scheme

    The Aircraft Leasing Scheme, which was expected to lapse after 31 March 2017, is to be extended until 31 December 2022.

  2. Increase in Scope of Qualifying Ancillary Activities

    From 21 February 2017 onwards, the scope of qualifying ancillary activities for approved aircraft lessors under Section 43Y of the Income Tax Act, Chapter 134 of Singapore (ITA) is expected to include incidental income derived from the provision of financing in the acquisition of aircraft or aircraft engines by any lessee.

  3. Simplification of Concessionary Tax Rate Regime

    From 1 April 2017 onwards, the concessionary tax rate on income derived from leasing of aircraft or aircraft engines and qualifying ancillary activities is expected to be streamlined from the current 5% or 10% to a single rate of 8%.

  4. Extension of Withholding Tax Regime to Qualifying Payments Made on Qualifying Loans

    Subject to certain conditions, an automatic withholding tax exemption is granted under the Aircraft Leasing Scheme on qualifying payments made by approved aircraft lessors to non-tax residents (excluding a permanent establishment in Singapore) in respect of qualifying loans to finance the purchase of aircraft and aircraft engines. This exemption regime is expected to be extended to qualifying payments made on qualifying loans entered into on or before 31 December 2022.

Further Information

The Monetary Authority of Singapore (MAS) is expected to release a circular detailing the changes to the Aircraft Leasing Scheme in the coming weeks.