© 2017 Inland Revenue Authority of Singapore. All Rights Reserved. 1
Presentation by Inland Revenue Authority of Singapore
For tax seminar held on 27 Oct 2017
Twitter.com/IRAS_SG Facebook.com/irassgiras.gov.sg
Seminar on Taxation of
Investment Holding Companies
© 2017 Inland Revenue Authority of Singapore. All Rights Reserved. 2
Agenda
Company’s Business Records and Tax Filing Obligations
Investment Holding Company
What is an investment holding company
Types of income earned by an investment holding company
Deductible expenses
Basis of assessment
Things to note
Common mistakes
Investment Dealing Company
What is an investment dealing company
Company in the Business of Making Investments
What is a company in the business of making investments
S10E Restriction
© 2017 Inland Revenue Authority of Singapore. All Rights Reserved. 3
Agenda
Tax Exemption for Foreign-Sourced Income
Foreign tax credit
Double taxation issue
Current tax treatment
What is a double taxation agreement
Examples of double taxation agreement
Calculating the foreign tax credit
Foreign Tax Credit Pooling System
Case Studies
Question & Answer
© 2017 Inland Revenue Authority of Singapore. All Rights Reserved. 4
After this seminar, you will:
Understand basic taxation of investment holding company
Understand a company’s annual tax filing obligations
Be able to prepare a tax computation and e-File your Form C-S/ C for an investment holding company
© 2017 Inland Revenue Authority of Singapore. All Rights Reserved. 5
Company’s Business Records and Tax Filing Obligations
© 2017 Inland Revenue Authority of Singapore. All Rights Reserved. 6
To Start Right: Proper Business Records and Accounts
Companies are required to keep proper records and accounts of business
transactions
Regardless on whether assessment is finalized, records have to be kept
and retained for:
• At least 5 years e.g. Records for period 1 July 2015 to 30 June 2016 (YA
2017) should be kept up to 31 Dec 2021.
Using an accounting software helps business improve record-keeping and
comply with tax obligationsRecommended
IRAS’ Accounting Software Register lists the accounting software that is able to
meet IRAS’ technical requirements
The accounting software is also considered as qualifying equipment under the
PIC scheme
Refer to IRAS’ website at iras.gov.sg
(1) Businesses> Companies> Learning the basics of Corporate Income Tax>
Business Records That Companies Must Keep
(2) Businesses> Companies> Getting it right> IRAS Accounting Software Register
© 2017 Inland Revenue Authority of Singapore. All Rights Reserved. 7
Estimated Chargeable Income (ECI)
Income Tax Return (Form C-S/ C)
When to file e-File# within 3 months after end of financial
year
Waiver of ECI filing: You do not need to file
ECI for a particular financial year if:
a) annual revenue is not more than $5
million*; and
b) ECI is nil
*For company with financial year ending in or
before June 2017, the annual revenue
threshold is $1 million
If you are filing Form C
Submit a complete tax return comprising of the
following:
- Form C and appendix (Form IRIN 301)
- audited/unaudited financial statements and
detailed P/L
- tax computation and supporting schedules
- relevant forms
e-File# Form C by 15 Dec each year
If you are filing Form C-S
e-File# Form C-S by 15 Dec each year
Notification of
filing
requirement
Company will receive a reminder letter to file
the ECI in the last month of the financial year
An e-Filing notification letter will be sent to the
company’s registered address by May of each
year
Company’s Filing Obligations
© 2017 Inland Revenue Authority of Singapore. All Rights Reserved. 8
Estimated Chargeable Income
(ECI)
Income Tax Return
(Form C-S/ C)
Failure to file Estimated assessment may be raised^ Estimated assessment may be raised^
Letter of Composition and/or Summons may
be issued
If you are in a
tax loss
position
A NIL ECI (ECI = 0) is required unless the
company has met the qualifying conditions
for waiver of ECI filing
You are still required to submit an Income Tax
Return (Form C-S/ C)
# Please authorise yourself/third party as an “Approver” for Corporate Tax Matters via the e-Services Authorisation
System (EASY)
^ If you disagree with the estimated tax assessment, please lodge an objection within two months from the date of
the Notice of Assessment with your reasons for not filing on time and grounds of objection
Company’s Filing Obligations
9© 2017 Inland Revenue Authority of Singapore. All Rights Reserved.
Types of Income Tax Return
File Form C
and Appendix on Additional
Information
on Income & Deductions
(Form IRIN 301)
File Form C-S
(Simplified Tax Filing
for Small Companies)
For companies that meet
qualifying conditions
OR
© 2017 Inland Revenue Authority of Singapore. All Rights Reserved. 10
Qualifying Conditions for Filing Form C-S
Company:Does not claim any of
the following:
• Is incorporated in Singapore
• Has an annual revenue* of
$5 million or below
• Derives only income taxable
at 17%
• Carry-back of Current Year
Capital Allowances/Losses
• Group Relief
• Investment Allowance
• Foreign Tax Credit and
Tax Deducted at Source
* For an investment holding company, revenue refers to its investment income (e.g. 1-tier dividend income and interest income). Effective YA 2017, the annual revenue threshold for filing Form C-S is increased from $1 million to $5 million.
Note: Companies that do not meet the conditions have to submit to IRAS a full set of tax return
comprising the Form C, financial statements, detailed profit and loss statement, tax computation and
supporting schedules.
© 2017 Inland Revenue Authority of Singapore. All Rights Reserved. 11
How to Access IRAS’ e-Services?
Company Administrator
e-Services Authorisation System (EASY)
Company Staff/ Tax Agent
Login to mytax.iras.gov.sg
Access
code* and
SingPass/
IRAS Pin
Perform the SingPass 2-Step Verification (2FA)
START!
Use e-Services
2FA ready?
SingPass/
IRAS Pin
Authorise
*Access Code is a unique password issued and sent to company’s registered address shortly after its
incorporation. Please request a new Access Code if you have misplaced your access code or its existing Access
Code is no longer valid. The request form is available at IRAS website: www.iras.gov.sg > e-Services >
Businesses > Companies > EASY
© 2017 Inland Revenue Authority of Singapore. All Rights Reserved. 12
e-Services Authorisation System (EASY)
Online system that allows organisations to authorise their
employees/ third party to access e-Services on their behalf
All authorisations of staff and directors/ tax agent must be done at
EASY Tax agent firms will also need to authorise their individual staff via EASY
before they can access the e-Services of specific clients.
Log in to EASY using your company’s Access Code
For guidance,
refer to User
Guides on IRAS’
website at
iras.gov.sg
- e-Services >
Others > EASY
>Getting
Started
Access Code application form
13© 2017 Inland Revenue Authority of Singapore. All Rights Reserved.
Preparer
Approver IRAS
• A preparer prepares the application/ form
for submission to an Approver
• The preparer does not have the rights
to submit directly to IRAS
• An approver approves or edits, and
submits the application/ form to IRAS
• The approver can also prepare the
application/ form and submit it to IRAS
(for companies without the Preparer role)
e-Services Authorisation System (EASY)
14© 2017 Inland Revenue Authority of Singapore. All Rights Reserved.
Investment Holding Company
© 2017 Inland Revenue Authority of Singapore. All Rights Reserved. 15
Basis of Assessment
Income is assessable on a preceding financial year basis
Year of Assessment (YA)
year in which income tax is charged
current YA is YA 2017
Basis Period for a YA
the period of income relevant to the YA
e.g. 1 Jan 2016 to 31 Dec 2016 (YA 2017)
1 Apr 2015 to 31 Mar 2016 (YA 2017)
1 Jul 2016 to 30 Jun 2017 (YA 2018)
Investment Holding Company
16© 2017 Inland Revenue Authority of Singapore. All Rights Reserved.
Taxable Income
Income tax is payable on:
Income received in Singapore
from outside Singapore
(i.e. foreign income received
in Singapore)
E.g. Rental income from
rented properties in
Singapore
E.g. Interest income from
a foreign bank outside
Singapore that is
remitted to Singapore
Income accruing in or derived
from Singapore
(i.e. income sourced in
Singapore)
Investment Holding Company
17© 2017 Inland Revenue Authority of Singapore. All Rights Reserved.
Principal activity is the passive holding of investments
Owns investments such as properties and shares for the
long-term
Derives investment income, passive in nature, such as:
• Dividend [S10(1)(d)]
• Interest [S10(1)(d)]
• Rental income [S10(1)(f)]
Investment Holding Company
What is an Investment Holding Company
18© 2017 Inland Revenue Authority of Singapore. All Rights Reserved.
Dividend Income - S10(1)(d)
Singapore-sourced Dividend Income
Current Tax Treatment
Singapore adopts a one-tier corporate tax system
Tax paid by a Singapore company on its chargeable
income is the final tax
Therefore, all dividends paid by a Singapore company are
exempt from tax in the hands of the shareholders
Investment Holding Company
19© 2017 Inland Revenue Authority of Singapore. All Rights Reserved.
Dividend Income - S10(1)(d)
Foreign-sourced Dividend Income
Current Tax Treatment
Foreign-sourced dividend received in Singapore is taxable
at 17% (i.e. current corporate tax rate) unless tax exempt
For Singapore tax residents, double taxation is relieved by:
Double taxation relief under tax treaties or
Unilateral tax relief
Investment Holding Company
20© 2017 Inland Revenue Authority of Singapore. All Rights Reserved.
Tax Exemption for Foreign-sourced Dividend
Granted to all persons resident in Singapore
Provided the following conditions are met:
• Foreign-sourced dividend income has been subjected to
tax in foreign jurisdiction;
• Headline tax rate of foreign jurisdiction is at least 15%; and
• Beneficial for tax exemption
Dividend Income - S10(1)(d)
Investment Holding Company
21© 2017 Inland Revenue Authority of Singapore. All Rights Reserved.
Dividend Income - S10(1)(d)
Concessionary “group” Treatment
Investment Holding Company
All investments in shares and stocks are divided into 4 groups
Group 1 Non-income producing shares (whether local or foreign
shares)
Group 2 Shares which generate tax-exempt dividend income
(e.g. one-tier and foreign-sourced dividend income
remitted to Singapore in the year and exempted from
tax)
Group 3 Income producing shares in overseas companies where
dividend income is remitted to Singapore in the year and
taxable in Singapore.
Group 4 Income producing shares in overseas companies where
dividend income is not remitted to Singapore in the year.
22© 2017 Inland Revenue Authority of Singapore. All Rights Reserved.
Dividend Income - S10(1)(d)
Concessionary “group” Treatment
Group 1
Expenses are not deductible as the expenses incurred on the
shares do not produce dividend income taxable in Singapore.
Group 2
Allows the deficit (expenses in excess of dividend income) arising
within a group from any block of shares for a particular year to
offset the net dividend income for the same year from other blocks
of shares within the same group
Net deficit of any group shall be disregarded and cannot be set-off
against net dividend income of another group or other sources of
income
Investment Holding Company
23© 2017 Inland Revenue Authority of Singapore. All Rights Reserved.
Dividend Income - S10(1)(d)
Group 3
Allows the deficit (expenses in excess of dividend income) arising
within a group from any block of shares for a particular year to
offset the net dividend income for the same year from other blocks
of shares within the same group
Net deficit of any group shall be disregarded and cannot be set-off
against net dividend income of another group or other sources of
income
Group 4
Expenses are not deductible as the expenses incurred on the
shares do not produce dividend income taxable in Singapore but
may be carried forward*.
Investment Holding Company
* Refer to e-Tax Guide “Liberalised treatment of expenses incurred in Singapore to
derive foreign income” on IRAS’ website. www.iras.gov.sg
Concessionary “group” Treatment
24© 2017 Inland Revenue Authority of Singapore. All Rights Reserved.
Example of the Concessionary “group” Treatment
Shares in
companyNet dividend
income / (deficit)
Without
concession
With
concession
A $1m $1m $1m
B ($2m) Disregarded ($2m)
Net dividend income: $1m NIL*
A company remits the dividend income it receives from foreign companies A and B (i.e. same group).
Dividend Income - S10(1)(d)
* Net deficit is disregarded
Investment Holding Company
25© 2017 Inland Revenue Authority of Singapore. All Rights Reserved.
Interest Income - S10(1)(d)
Current Tax Treatment
Taxable at 17% (i.e. current corporate tax rate) when accrued in or remitted to Singapore
For Singapore tax residents receiving foreign-sourced interest, double taxation is relieved by:
Double taxation relief under tax treaties or
Unilateral tax relief
Investment Holding Company
26© 2017 Inland Revenue Authority of Singapore. All Rights Reserved.
Rental Income - S10(1)(f)
Current Tax Treatment
Taxable at 17% (i.e. current corporate tax rate) when accrued in
or remitted to Singapore
For Singapore tax residents receiving foreign-sourced rental
income, double taxation is relieved by:
Double taxation relief under tax treaties or
Unilateral tax relief
Investment Holding Company
Block Basis Concession
The income producing properties form a single “block”; where netrental loss from one property is deductible against net rentalincome from other properties
This excludes owner-occupied or vacant properties (non-income producing properties)
27© 2017 Inland Revenue Authority of Singapore. All Rights Reserved.
Rental Income - S10(1)(f)
Example of the “Block Basis Concession”
Without
concession
With concession
Property A:
Net rental income of $30,000$30,000 $30,000
Property B:
Net rental loss of $40,000Disregarded ($40,000)
Net rental income $30,000 NIL*
A company rented out its properties A and B.
* Net loss will be disregarded
Investment Holding Company
28© 2017 Inland Revenue Authority of Singapore. All Rights Reserved.
Type of
IncomeTax Treatment
Dividend
All dividends paid by a Singapore resident company are exempt from tax in the hands of the shareholders
Foreign-sourced dividend received in Singapore is taxable at 17% (i.e. current corporate tax rate), with tax exemption or tax relief available subject to qualifying conditions
Dividend income is taxed on a group treatment basis
Interest Interest income is taxed when accrued in or remitted to
Singapore
Rental
Source of rental income is based on where the property is situated
Rental income is taxed on a block basis
Summary of Common Types of Passive Source Income
Investment Holding Company
29© 2017 Inland Revenue Authority of Singapore. All Rights Reserved.
Deductible expensesDirect expenses Statutory and Regulatory
expenses
Indirect expenses
What is it? • Expenses directly
incurred to earn
investment income
• Expenses incurred in
accordance with statutory
and regulatory provisions
• Expenses not directly
incurred to earn
investment income
Deductibility • Deductible against the
respective source of
investment income
• Before YA 2014, allowed
as an administrative
concession
• From YA 2014, deductible
under S14X of the ITA
• Apportion to the
respective source of
investment income
• Generally not deductible
• As a concession, indirect
expenses not exceeding
5% of the total gross
investment income is
deductible
• Apportion to the respective
source of investment
income
Examples • Custodian fees (for
income producing
shares)
• Property tax, insurance,
repairs & maintenance
(for rental properties)
• Interest expense (on
loan taken to acquire
shares / property)
• Accounting fees
• Annual listing fees
• Audit fees
• Bank charges
• Income tax service fees
• Printing and stationery
• Secretarial fees
• Directors' fees
• Office rental
• Office telephone charges
• Office water and light
• Staff salaries
• Transport expenses
(exclude expenses
incurred on S-plated cars
which are not deductible)
Investment Holding Company
30© 2017 Inland Revenue Authority of Singapore. All Rights Reserved.
Example 1 (One source of income)
Investment income $
Rental income 3,000
Expenses $
Property tax 300
Repair of property 500
Audit fee 2,000
Secretarial fee 1,000
Bank charges 500
Staff salaries & CPF 1,000
Direct expenses
Statutory /Regulatory
expenses
Indirect expenses
YA 2017
Investment Holding Company
31© 2017 Inland Revenue Authority of Singapore. All Rights Reserved.
Rental income
Less: Direct expenses
Property tax
Repair of property
Less: Statutory expenses
Audit fee
Secretarial fee
Bank charges
Less: Indirect expenses
Less: Staff salaries & CPF (Lower of actual
expense or 5% of gross rental income)
$
300
500
2,000
1,000
500
$
3,000
800
3,500
150
Net rental income / loss
Chargeable Income before exempt amount
Tax payable @17%
NIL
NIL
NIL
Tax computation (One source of income)
(Net rental loss is disregarded)
Investment Holding Company
32© 2017 Inland Revenue Authority of Singapore. All Rights Reserved.
Example 2 (Multiple sources of income)
Investment income $
Rental income 2,000
Interest income 8,000
Total 10,000
Expenses $
Property tax 300
Repair of property 1,200
Audit fee 2,000
Secretarial fee 1,000
Bank charges 500
Staff salaries & CPF 1,000
Direct
Expenses
Statutory
/Regulatory
expenses
Indirect expenses
YA 2017
Investment Holding Company
33© 2017 Inland Revenue Authority of Singapore. All Rights Reserved.
Common expenses $
Audit fee 2,000
Secretarial fee 1,000
Bank charges 500
Staff salaries & CPF (capped at 5% of total
investment income of $10,000)
500
Total 4,000
Source of
income
Share of common
expenses
$
Rental 4,000 x (2,000 / 10,000) 800
Interest 4,000 x (8,000 / 10,000) 3,200
Apportion common expenses to each source of income:
Tax computation (Multiple sources of income)
Statutory/ Regulatory
expenses
Investment Holding Company
34© 2017 Inland Revenue Authority of Singapore. All Rights Reserved.
Rental income
Less: Direct expenses
Property tax
Repair of property
Less: Share of common expenses
Net rental income
$
300
1,200
$
2,000
1,500
800
NIL*
Tax computation (Multiple sources of income)
Interest income
Less: Direct expenses
Less: Share of common expenses
Net interest income
8,000
NIL
3,200
4,800
* Net rental loss is disregarded.
Investment Holding Company
35© 2017 Inland Revenue Authority of Singapore. All Rights Reserved.
Tax computation (Multiple sources of income)
What is exempt amount?
$
Chargeable income before exempt amount 4,800
Less: Exempt amount ($4,800 @ 75%) 3,600
Chargeable income after exempt amount 1,200
Tax payable @ 17% 204.00
Less: Corporate income tax rebate (50% x $204) 102.00
Net tax payable 102.00
What is CIT rebate?
Investment Holding Company
36© 2017 Inland Revenue Authority of Singapore. All Rights Reserved.
Tax Exemption Scheme for New Start-up Companies
The following companies incorporated after 25 Feb 2013 are
not eligible for the tax exemption scheme:
1) Property development companies
Any company that buys or leases land and arranges for a
building to be built on land in order to lease, manage or
sell the building
2) Investment holding companies
A company whose principal activity is that of investment
holding
Derives investment income such as rental, dividend or
interest income
Companies that do not qualify for this scheme will still be
eligible for partial tax exemption
Investment Holding Company
© 2017 Inland Revenue Authority of Singapore. All Rights Reserved. 37
Partial tax exemption on chargeable income taxed at 17% of up to $300,000:
Maximum Exempt Amount is $152,500 for each YA
Partial Tax Exemption
First $10,000 @ 75% $7,500
Next $290,000 @ 50% $145,000
Total $300,000 $152,500
Investment Holding Company
© 2017 Inland Revenue Authority of Singapore. All Rights Reserved. 38
Corporate Income Tax (CIT) Rate & Tax Rebate
Investment Holding Company
* Budget 2017 Enhancement
All companies will receive a corporate income tax (CIT) rebate of the
following:
50% CIT rebate, capped at $20,000 for YA 2016
50% CIT rebate, capped at $25,000 for YA 2017*
20% CIT rebate, capped at $10,000 for YA 2018*
CIT rebate is computed on the tax payable after deducting tax set-offs
(e.g. foreign tax credit)
Administratively, companies need not factor in the CIT rebate when
filing the Estimated Chargeable Income and Form C-S/ C as IRAS will
compute and allow it automatically.
17%
39© 2017 Inland Revenue Authority of Singapore. All Rights Reserved.
Things to Note
1. Expenses attributable to non-income producing investments are
not deductible
Example:
1. Interest expense incurred to acquire shares that did not yield
dividend
2. Property tax incurred for vacant property not rented out
Investment Holding Company
40© 2017 Inland Revenue Authority of Singapore. All Rights Reserved.
Things to Note
However, an investment holding company can claim current year
loss items transferred to it by a related company under the group
relief system
2. Deficit/loss (expenses in excess of income) from any source of
investment is to be disregarded, and cannot be:
Set-off against the income of another source
Carried forward to offset future income
Transferred out under the group relief system
Carried back to the immediate preceding YA
Investment Holding Company
41© 2017 Inland Revenue Authority of Singapore. All Rights Reserved.
Things to Note
3. Not eligible to claim capital allowances on plant and machinery
purchased (e.g. computers).
4. Not eligible to claim for tax benefits under the Productivity &
Innovation Credit (PIC) scheme.
.Reason: An investment holding company is not carrying on a
trade or business
Investment Holding Company
42© 2017 Inland Revenue Authority of Singapore. All Rights Reserved.
Things to Note
5. Is income distribution from Real Estate Investment Trusts (REITs)
taxable?
Investment Holding Company
The nature, tax treatment and applicable period/Year of assessment of
each REIT distribution are reflected in the Annual Distribution
Statement issued by the Central Depository Pte Ltd (CDP).
A REIT distribution is taxable in the hands of corporate unit holders
unless stated otherwise* in the CDP statement.
The REIT distribution is taxable in the Year of Assessment as reflected
in the CDP Statement.
* E.g. Distribution is tax-exempt, distribution is a return of capital, etc.
43© 2017 Inland Revenue Authority of Singapore. All Rights Reserved.
Things to Note
6. Declaration in e-Form C-S (No IBA/LIA claims)
Items to Declare in e-Form C-S Investment Holding
“Net Profit/Loss before Tax as per Accounts”
( Field 1 of Part B)
To
“Unutilised Losses brought forward”
(Field 14 of Part B)
Enter "0"
“Separate Source Income”
(Part B, Field 15a to 17)
“Revenue” (Field 21 of Part C) and other Fields,
where applicable
Investment Holding Company
44© 2017 Inland Revenue Authority of Singapore. All Rights Reserved.
Things to Note
7. Arm’s length fee for IHC providing routine support services to related companies
Investment Holding Company
All companies, including Investment Holding Companies (IHC) need to charge
arm’s length fee on services provided to their related companies.
To ease administrative and compliance burden, IRAS is prepared to accept a
5% mark-up on costs as a reasonable arm’s length charge for certain routine
support services provided by companies to their related companies, subject to
the conditions:
• the services are those listed in Annex C of the e-Tax Guide on Transfer
Pricing Guidelines;
• the same services are not provided to an unrelated party; and
• all costs (direct and indirect) relating to the services performed are taken
into account in computing the 5% mark-up
For a IHC which provides services to its related companies, 5% mark-up on its
cost base will be accepted as a reasonable arm’s length fees provided it can
satisfy the 3 conditions
The cost base should include:
Direct cost relating to the provision of services;
Common overheads apportioned on reasonable basis to service; and
income and investment income
45© 2017 Inland Revenue Authority of Singapore. All Rights Reserved.
Common Mistakes
Claim for non-deductible expenses:
Capital expenditure
e.g. acquisition costs of investments; stamp duties and legal
fees incurred for purchase of investments; advertising and
commission incurred to secure the first tenant for investment
property
Pre-commencement expenses
e.g. Repairs and maintenance incurred prior to
commencement of the tenancy of investment property
Claim for indirect expenses over and above 5% of the total gross investment income
Indirect expenses are allowed as a concession but capped at 5% of
gross investment income
Investment Holding Company
46© 2017 Inland Revenue Authority of Singapore. All Rights Reserved.
Common MistakesInvestment Holding Company
For a sample of tax computation for investment holding company, you can refer to
IRAS’ website at iras.gov.sg
Businesses > Companies > Working out Corporate Income Taxes > Specific Industries>
Investment Holding Companies
e-Form C
Form C completion
47© 2017 Inland Revenue Authority of Singapore. All Rights Reserved.
Common MistakesUnutilised losses arising from investments is carried forward to
future years of assessment
Unutilised losses arising from investments cannot be carried forward to future years of
assessment.
Investment Holding Company
e-Form C
48© 2017 Inland Revenue Authority of Singapore. All Rights Reserved.
Summary
Items Tax Treatment Method of Claiming
Deductible
expenses
1. Direct expensesDeduct against each source
of income
2. Statutory expenses Apportion to each source of
income3. Indirect expenses capped at 5% of
gross investment income
Losses
Losses cannot offset:
N.A. • Other sources of income
• Future income
Capital
Allowances Not allowable, except IBA
Claim IBA against income
source
Loss Not allowable N.A.
Carry-back
Group Relief
loss items
Cannot transfer out loss items (except
unutilised current year IBA) but can
claim loss items transferred to it
Claim loss items transferred
to it to arrive at CI
49© 2017 Inland Revenue Authority of Singapore. All Rights Reserved.
Investment Dealing Company
Section 10(1)(a) of ITA
50© 2017 Inland Revenue Authority of Singapore. All Rights Reserved.
Principal activity is to carry on a business of investment dealing
Owns investments such as properties and shares as a form oftrading stock
Derive trade income from purchase and sale of investments[S10(1)(a)] e.g. gain on sale of real properties and shares
What is an Investment Dealing Company
Investment Dealing Company
51© 2017 Inland Revenue Authority of Singapore. All Rights Reserved.
Investment Dealing Company
S10(1)(a)
Taxability/ deductibility of
gains/ losses of sale of
investment
Taxable/ deductible
Deductibility of expenses Expenses allowed in accordance with
S14 & S15
Losses Can offset other sources of income/
future income
Capital allowances - Allowable
- Unabsorbed CA can offset other
sources/ future income
Summary
52© 2017 Inland Revenue Authority of Singapore. All Rights Reserved.
Company in the Business of Making
Investments
Section 10(1)(a) subject to
Section 10E of ITA
53© 2017 Inland Revenue Authority of Singapore. All Rights Reserved.
Principal activity is that of carrying on a business of making investments
Owns investments such as properties and shares for the business of making investments; e.g. a business of letting immovable properties or service apartments
To derive investment income as a trade [S10(1)(a)], subject to S10E restriction
What is a Company in the Business of Making Investments
Company in the Business of Making Investments
54© 2017 Inland Revenue Authority of Singapore. All Rights Reserved.
S10E Restriction
a. Any outgoings or expenses incurred in respect of investments
which do not produce any income are not deductible;
b. Any outgoings or expenses incurred in respect of investments
which produce income are only deductible against the income
derived from such investments. The balance of any outgoings and
expenses which cannot be set off in that year shall be disregarded;
c. Capital allowances are only deductible against the income derived
from investments which produce income. The balance of any
allowances which cannot be set off in that year shall be
disregarded
What is a Company in the Business of Making Investments
Company in the Business of Making Investments
Refer to e-Tax Guide on IRAS’ website at iras.gov.sg
Quick links > e-Tax Guides > Search > Ascertainment of Income from
Business of making Investment
55© 2017 Inland Revenue Authority of Singapore. All Rights Reserved.
Summary
Business of making investments
S10(1)(a) subject to S10E
Taxability/ deductibility of
gains/ losses of sale of
investment
Not taxable/ not deductible provided that
the facts of the case shows that the gains
are indeed capital in nature
Deductibility of expenses Only expenses incurred on income-
producing investments allowed
Losses Cannot offset other sources of income/
future income
Capital allowances - Allowable
- Unutilised CA cannot offset other
sources/ future income
Company in the Business of Making Investments
56© 2017 Inland Revenue Authority of Singapore. All Rights Reserved.
Tax Exemption For
Foreign-Sourced Income
57© 2017 Inland Revenue Authority of Singapore. All Rights Reserved.
Granted to all persons resident in Singapore on the following
sources of foreign income received in Singapore on or after 1 Jun
2003:
Tax Exemption for Specified Foreign-source income
Foreign-sourced income has been subject to tax in foreign jurisdiction;
Headline tax rate of foreign jurisdiction is at least 15%; and
Beneficial for tax exemption
Qualifying conditions
Tax Exemption for Foreign-Sourced Income
Foreign-sourced dividends
Foreign branch profits
Foreign-sourced service income
(Rendered in the course of person’s trade through a fixed place
of operation in foreign jurisdiction)
58© 2017 Inland Revenue Authority of Singapore. All Rights Reserved.
To complete:
e-Form C
Field 14 of Assessment 1 (Exempt Income / Loss for
Current Year of Assessment )
Additional Information - Part D (Exemption on Foreign
Dividends, Branch Profits and Service Income
Received in Singapore.
e-Form C-S
Field 3 of Part B of (Non-Taxable Income)
No need to submit supporting documents unless called
upon to do so
How to Claim
Refer to e-Tax Guide on IRAS’ website iras.gov.sg
Home > Quick links > e-Tax Guides > Search > Tax Exemption for Foreign-
Sourced Income
Tax Exemption for Foreign-Sourced Income
© 2017 Inland Revenue Authority of Singapore. All Rights Reserved. 59
Foreign Tax Credit (FTC)
© 2017 Inland Revenue Authority of Singapore. All Rights Reserved. 60
When companies derive income from a foreign jurisdiction, their
income may be subjected to tax both in the foreign jurisdiction and
Singapore (i.e. taxed once in the foreign jurisdiction and then in
Singapore)
Example:
Singapore
(2nd Tax)Malaysia
(1st Tax)
Rental income remitted
into Singapore
Country of Source i.e.
where the rental
income arises
Country of Residence
i.e. where the income is received
Double taxation issue
Company A’s property
Company A
Foreign Tax Credit
© 2017 Inland Revenue Authority of Singapore. All Rights Reserved. 61
For Singapore tax residents, double taxation is relieved by:
Double taxation relief (DTR)
Available to foreign-sourced income remitted from jurisdictions
which Singapore has concluded an Avoidance of Double
Taxation Agreement (DTA) with
Unilateral tax relief (UTR)
Available to foreign-sourced income remitted from jurisdictions
which Singapore has not concluded an DTA with
The reliefs are claimed on a source-by-source and country-by-
country basis
Foreign Tax Credit (FTC) System
or
Foreign Tax Credit
© 2017 Inland Revenue Authority of Singapore. All Rights Reserved. 62
A DTA is entered into between two jurisdictions seeking to avoid double taxation
It clarifies & assigns the taxing rights to each jurisdiction
To claim DTR, the following conditions have to be satisfied:
The company must be tax resident in Singapore;
Tax has been paid / payable on the income in the foreign jurisdiction in accordance with the provisions in the DTA, and
The income is subject to tax in Singapore
What is an Avoidance of Double Taxation Agreement (DTA)
Foreign Tax Credit
1. Refer to IRAS’ website at iras.gov.sg> e-Tax Guide “Avoidance of Double Taxation
Agreements (DTAs)
2. For the full list of the DTAs Singapore concluded with other jurisdictions:
IRAS’ website at iras.gov.sg> Home > Quick links > International Tax
© 2017 Inland Revenue Authority of Singapore. All Rights Reserved. 63
FTC is the lower of:
1) The actual amount of foreign tax paid; or
2) The amount of Singapore tax attributable to the foreign-sourced
income (net of expenses)
Foreign-sourced income after expenses and partial exemption
attributable to that income
x
Singapore tax rate
Calculating the Singapore tax payable*:
* FTC is not available in the case of a net foreign loss
Calculating the Foreign Tax Credit (FTC)
Foreign Tax Credit
Refer to IRAS’ website at iras.gov.sg
Home > Businesses > Companies > Working out Corporate Income Taxes >
Claiming Reliefs > Claiming Reliefs> Foreign Tax Credit
© 2017 Inland Revenue Authority of Singapore. All Rights Reserved. 64
Foreign Tax Credit (FTC) Pooling System
© 2017 Inland Revenue Authority of Singapore. All Rights Reserved. 65
Objective
To simplify and reduce taxation of foreign income (FI) particularly
for companies that are globalising and earning a larger share of
their income overseas
Tax Treatment prior to YA 2012
Amount of FTC:
Source-by-source and country-by-country basis
Limited to lower of foreign tax paid and Singapore tax payable
on that FI
Foreign Tax Credit (FTC) Pooling System
Foreign Tax Credit Pooling System
© 2017 Inland Revenue Authority of Singapore. All Rights Reserved. 66
With effect from YA 2012
Introduction of new FTC pooling system
- all foreign taxes paid on qualifying FI pooled together to
compute FTC
- amount of FTC is lower of:
(i) pooled foreign taxes paid on qualifying FI; and
(ii) total Singapore tax payable on qualifying FI
Foreign Tax Credit (FTC) Pooling System
Foreign Tax Credit Pooling System
© 2017 Inland Revenue Authority of Singapore. All Rights Reserved. 67
Qualifying conditions
Foreign income tax is paid on FI in foreign jurisdiction from which FI
is derived;
Headline tax rate of foreign jurisdiction from which FI is derived is at
least 15% at time FI is received in Singapore; and
Entitled to claim FTC and there is Singapore tax payable on that FI
Foreign Tax Credit (FTC) Pooling System
Refer to IRAS’ website at iras.gov.sg
Home > Businesses > Companies > Working out Corporate Income Taxes > Claiming
Reliefs > FTC Pooling System
Foreign Tax Credit Pooling System
Where the above conditions are not met, or where companies choose
not to elect for FTC pooling system, the current FTC rules will apply.
© 2017 Inland Revenue Authority of Singapore. All Rights Reserved. 68
Foreign Country
A
(S$)
Foreign Country
B
(S$)
Total
(S$)
Foreign income remitted
Foreign income taxes paid
Example of benefits of FTC pooling system
10,000
500
20,000
5,000
30,000
5,500
Foreign Tax Credit (FTC) Pooling System
Foreign Tax Credit Pooling System
© 2017 Inland Revenue Authority of Singapore. All Rights Reserved. 69
Under current method of FTC computation (assuming no expenses and
partial tax exemption does not apply)
Foreign
Country A
(S$)
Foreign
Country B
(S$)
Total (S$)
Foreign income tax paid 500 5,000 5,500
1,700 3,400 5,100
Singapore tax payable on the FI
(based on prevailing CIT rate of 17% )
FTC available
(capped at the lower of foreign tax paid
and Singapore tax payable on each FI)500 3,400 3,900
1,200
Net Singapore tax payable on the FI after
offsetting FTC ($5,100 – $3,900)
Foreign Tax Credit (FTC) Pooling System
Foreign Tax Credit Pooling System
© 2017 Inland Revenue Authority of Singapore. All Rights Reserved. 70
Total
(S$)
Decrease in net Singapore tax payable on FI ($5,100 – $3,900) 1,200
Under new FTC pooling system
Total foreign income taxes paid in Countries A and B 5,500
Total Singapore tax payable on FI from Countries A and B 5,100
Net Singapore tax payable on the FI after offsetting FTC
($5,100 – $5,100)0
5,100FTC available
(lower of total foreign taxes paid and total Singapore tax payable on FI
from Countries A and B)
Foreign Tax Credit (FTC) Pooling System
Foreign Tax Credit Pooling System
71© 2017 Inland Revenue Authority of Singapore. All Rights Reserved.
Case Study 1
+ Exemption of Foreign-sourced income
+ Foreign Tax Credit
Investment Holding Company
72© 2017 Inland Revenue Authority of Singapore. All Rights Reserved.
Case Study 1
YA 2017 (Basis period: 01/04/2015 to 31/03/2016)
Investment income $
Singapore dividend income (1-tier exempt) 35,000
Dividend income received from a Malaysia company 100,000
Rental income 35,000
Interest income received from Indonesia 24,000
Other income 10,000
Total income 204,000
Investment Holding CompanyCase Studies
73© 2017 Inland Revenue Authority of Singapore. All Rights Reserved.
Case Study 1 (cont’d)
Expenses $
Custodian fee
(for Singapore tax-exempt dividends)
2,400
Interest on term loan
(acquiring property for rental)
45,000
Property tax (property rented out) 1,600
Repair and maintenance (property rented out) 7,000
Auditor’s remuneration 3,000
Bank charges 500
Secretarial and tax services 2,000
Director’s fee 60,000
Depreciation 5,000
Direct
expenses
Statutory/
Regulatory
expenses
Indirect
expense
Non-deductible expense
Investment Holding CompanyCase Studies
74© 2017 Inland Revenue Authority of Singapore. All Rights Reserved.
Case Study 1 (cont’d)
Common expenses $
Auditor’s remuneration 3,000
Bank charges 500
Secretarial and tax services 2,000
Director’s fee (capped at 5% of total income) 10,200
Total common expenses 15,700
5% Restriction on Indirect Expenses $
Director’s fee 60,000
Capped at 5% of $204,000 (total income) 10,200
Indirect expenses allowed 10,200
Investment Holding CompanyCase Studies
75© 2017 Inland Revenue Authority of Singapore. All Rights Reserved.
Tax Computation
$ $ $
Singapore tax-exempt dividend 35,000
Malaysia dividend (foreign-sourced) 100,000
135,000
Less: Direct expenses – custodian fee 2,400
Share of common expenses
(135,000/204,000 x 15,700) 10,389
(12,789)
Net dividend income (subject to tax) NIL
Malaysia dividend income is exempt under Section 13(8).
Qualifying conditions met:
1) Dividend income has been subjected to tax in Malaysia;
2) Headline tax rate in Malaysia is more than 15%; and
3) Beneficial for tax exemption
Case Studies
Investment Holding Company
76© 2017 Inland Revenue Authority of Singapore. All Rights Reserved.
Tax Computation (cont’d)
$ $ $
Rental income 35,000
Less: Direct expenses
Interest on term loan 45,000
Property tax 1,600
Repairs and maintenance 7,000
53,600
Less: Share of common expenses
(35,000/204,000 x 15,700) 2,694
(56,294)
Net rental income NIL*
*Net rental loss is disregarded.
Case Studies
Investment Holding Company
77© 2017 Inland Revenue Authority of Singapore. All Rights Reserved.
Tax Computation (cont’d)$ $ $
Indonesia Interest income (foreign-sourced) ^ 24,000
Less: Direct expenses NIL
Share of common expenses
(24,000/204,000 x 15,700) 1,847
(1,847)
22,153
Other income 10,000
Less: Direct expenses NIL
Share of common expenses
(10,000/204,000 x 15,700) 770
(770)
9,230
Chargeable income before tax exempt income 31,383
^ The interest income has been subjected to withholding tax of 10% in Indonesia.
Case Studies
Investment Holding Company
78© 2017 Inland Revenue Authority of Singapore. All Rights Reserved.
Investment Holding Company
$ $
Chargeable income before tax exempt income 31,383
Less: Exempt income
First $10,000 @ 75% (7,500)
Next $21,383 @ 50% (10,692) (18,192)
Chargeable income after tax exempt income 13,191
Tax payable @ 17% 2,242.47
Less: DTR* 1,582.94
Tax payable after DTR 659.53
* DTR is the lower of:
a. $ 2,400 (The actual amount foreign tax paid to Indonesia); or
b. $1,582.94 (The amount of Singapore tax attributable to the foreign-sourced
income (net of expenses) $2,242.47 x [$22,153 / $31,383]
Tax Computation (cont’d)
Case Studies
79© 2017 Inland Revenue Authority of Singapore. All Rights Reserved.
Investment Holding Company
$
Tax payable after DTR 659.53
Tax Computation (cont’d)
Less: Corporate income tax rebate ($659.53 x 50%) 329.77
Net Tax payable 329.76
Case Studies
80© 2017 Inland Revenue Authority of Singapore. All Rights Reserved.
Case Study 2
Trading + Investment Holding Company
81© 2017 Inland Revenue Authority of Singapore. All Rights Reserved.
Trading + Investment Holding Company
Sales 750,000
Less: Cost of goods sold 345,000
Gross Profit 405,000
Other Income
Dividend (1-tier) 35,000
Interest income 24,000
Rental income 40,000
504,000
Less: Expenses
Custodian fees (for S'pore tax-exempt dividends) 2,400
Property tax (for property rented out) 1,600
Repair and maintenance (for property rented out) 7,000
Audit fee 3,000
Director fees 12,000
Depreciation 1,000
Salaries/bonus/allowances and CPF 80,000
Secretarial fees 2,000
109,000
Net Profit Before Taxation 395,000
YA 2017 (Basis period: 01/04/2015 to 31/03/2016)
Case Study 2
Case Studies
82© 2017 Inland Revenue Authority of Singapore. All Rights Reserved.
Additional Information from the Balance Sheet
Fixed assets addition
Computer $1,000
Description
of assetCost
S$
100%
Base CA
S$
300%
Enhanced
CA S$
Total
CA
S$
Tax
written
down
value
S$
Computer* 1,000 1,000 3,000 4,000 Nil
Capital allowances (CA)
* Prescribed in PIC IT and Automation Equipment list.
Trading + Investment Holding Company
Case Study 2 (cont’d)
Case Studies
83© 2017 Inland Revenue Authority of Singapore. All Rights Reserved.
Trading + Investment Holding Company
Tax Computation S$
Net Profit before tax per accounts 395,000
Less: Separate sources of income
Singapore dividends 35,000
Interest income 24,000
Rental income 40,000 99,000
296,000
Add: Disallowable expenses
Depreciation 1,000
Property tax 1,600
Repair and maintenance 7,000
Custodian fees 2,400 12,000
Adjusted profit 308,000
Less: Capital allowances for YA 2017 4,000
Adjusted profit after capital allowances 304,000
Case Studies
84© 2017 Inland Revenue Authority of Singapore. All Rights Reserved.
Tax Computation (cont’d)
Trading + Investment Holding Company
Add: Separate sources of income
Singapore tax exempt (1-tier) dividend 35,000
Less: Custodian fees 2,400 tax exempt
Interest 24,000
Rental 40,000
Less: Property tax 1,600
Repair and maintenance 7,000 31,400
Chargeable income before exempt amount 359,400
Less: Exempt amount
First $10,000 @ 75% 7,500
Next $290,000@ 50% 145,000 152,500
Chargeable income after exempt amount 206,900
Tax payable @ 17% 35,173.00
Less: Corporate income tax rebate [50% x 35,173] (17,586.50)
Net tax payable 17,586.50
Case Study Studies
100
© 2017 Inland Revenue Authority of Singapore. All Rights Reserved. 85
Assistance and Service Channels
• Home > Businesses > Companies > Working out Corporate Income Taxes > Specific industries > Investment Holding Companies
• Home > News & Events > Budget 2017 – Overview of Tax
Changes
• General tax matters: [email protected]
• Payment matters: [email protected]
• For companies: 1800-356-8622
• 8.00am to 5.00pm from Mondays to Fridays• Best time to call: 8.30am – 10.30am• Best day to call: Friday
Website www.iras.gov.sg
Helpline
Social Media Twitter.com/IRAS_SG
Facebook.com/irassg
86© 2017 Inland Revenue Authority of Singapore. All Rights Reserved.
This information aims to provide a better general understanding of IRAS’ practices and is not intended tocomprehensively address all possible tax issues that may arise. This information is correct as at 25 Oct 2017.While every effort has been made to ensure that this information is consistent with existing law and practice,should there be any changes, IRAS reserves the right to vary our position accordingly.