Seminar on Taxation ofSeminar on Taxation of … on Taxation ofSeminar on Taxation of Investment Holdinggp Companies Presentation by Inland Revenue Authority of SingaporePresentation

Seminar on Taxation ofSeminar on Taxation of Investment Holding Companiesg p

Presentation by Inland Revenue Authority of SingaporePresentation by Inland Revenue Authority of SingaporeTax seminar held on 25 Aug 2015

/ S SG /

© 2015 Inland Revenue Authority of Singapore. All Rights Reserved. 1

Twitter.com/IRAS_SG Facebook.com/irassgwww.iras.gov.sg

Agenda

1. Corporate Tax Overview

• Basis of Assessment

• Scope of Tax

• Filing Obligations

2. Investment Holding Company

• What is an investment holding company• What is an investment holding company

• Types of income earned by an investment holding company

• Deductible expensesDeductible expenses

• Basis of assessment

• Things to note g

• Common mistakes

3 I D li C3. Investment Dealing Company

• What is an investment dealing company


Agenda

4. Company in the Business of Making Investments

• What is a company in the business of making investments

• S10E Restriction

5. Foreign tax credit5. 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

6 Foreign Tax Credit Pooling System6. Foreign Tax Credit Pooling System

7. Tax Exemption for Foreign-Sourced Income

8. Case Studies


After this seminar, you will:

Understand your annual tax filing obligations (ECI and Form C/ C-S) including the filing due dates

Understand basic taxation of an investment holding company

Be able to prepare a tax computation and File your Form C/ C-S for an investment holding company


Corporate Tax OverviewCorporate Tax Overview

5© 2015 Inland Revenue Authority of Singapore. All Rights Reserved.

Overview of Corporate Tax

Income is assessable on a preceding accounting year basis

Basis of Assessment

Year of Assessment (YA)

Income is assessable on a preceding accounting year basis

year in which income is charged to tax

Current YA is YA 2015

Basis period for a YA

Period of income rele ant to the YAPeriod of income relevant to the YA

E.g. YA 2015

1 J 2014 t 31 D 20141 Jan 2014 to 31 Dec 2014

1 Apr 2013 to 31 Mar 2014

YA 2016YA 2016

1 Apr 2014 to 31 Mar 2015



Taxable Income

Income tax is payable on:

Income recei ed in SingaporeIncome accruing in or derived Income received in Singapore from outside Singapore

(i f i i i d

Income accruing in or derivedfrom Singapore

(i i d i (i.e. foreign income received in Singapore)

(i.e. income sourced in Singapore)

E.g. Rental income from E.g. Interest income from f i b k t idrented properties in

Singaporea foreign bank outside Singapore that is remitted to Singaporeremitted to Singapore



O i f T Fili Obli tiOverview of Tax Filing Obligations

To File ByEstimated Chargeable Income (ECI): 3 months after accounting year endIncome Tax Return : 30 November each year

Illustration:

Accounting year end: 31 Dec 201431 Dec 2014

1 Jan 2014

31 Mar 2015 30 Nov 2015

YA 2015Basis period: 1 Jan 2014

to 31 Dec 2014 File ECI for YA 2015

(3 months after accounting year ended

31 Dec 2014)

File Income Tax Return for YA 2015


31 Dec 2014)

Estimated Chargeable Income (ECI)


Estimated Chargeable Income (ECI)All companies are required to file an estimate of chargeable income(ECI) within 3 months after end of financial period(ECI) within 3 months after end of financial period

E.g. Financial year ended 30 Jun 2015ECI for YA 2015 must be filed by 30 Sep 2015

IRAS will issue ECI reminder letter in last month of financial year

Companies do not need to file ECI if:

Annual revenue is not more than $1 million; and

ECI* is nil

Companies that do not qualify for the above concession must file their ECI within 3 months after end of financial period even if theytheir ECI within 3 months after end of financial period, even if they do not receive the ECI reminder letter

* before deducting exempt amount under the partial tax exemption or tax exemption scheme for new start-up companies



Income Tax Return

File Form CFile Form C-S ORFile Form C and Appendix on Additional Information

I & D d ti

(Simplified Tax Filing for Small Companies)

on Income & Deductions (Form IRIN 301)

For companies that meet qualifying conditions



Preparation of Accounts & Tax Computation

All companies are required to prepare the following:

Audited/ Unaudited Accounts

Detailed Profit and Loss StatementDetailed Profit and Loss Statement

Tax Computation and Supporting Schedules


Income Tax Return


Income Tax Return

All companies, including investment holding companies, arerequired to file the income tax return (Form C S/ C) by the filing duerequired to file the income tax return (Form C-S/ C) by the filing duedate on 30 Nov / 15 Dec (if e-file)

3 different filing packages issued to companies3 different filing packages issued to companies

Group Companies likely to qualify for Form C-S

Companies likely to qualify for Form C

Filing Package to be issued

1. Form C-S e-Filing package*# 2. Form C e-Filing package# or

3. Form C Package

If a company received Form C but meets the qualifying conditions for filing Form C S it can still proceed to e File Form C S (it does not need to return

3. Form C Package

Form C-S, it can still proceed to e-File Form C-S (it does not need to return the Form C to IRAS for cancellation)

If a company received a Form C package, it can still proceed to e-File

* From YA 2014, IRAS will not issue paper copies of Form C-S# If t Fil F C S/ C it d l d th ft f F C S/ C f IRAS b it

If a company received a Form C package, it can still proceed to e File Form C if it so wishes


# If a company cannot e-File Form C-S/ C, it can download the softcopy of Form C-S/ C from IRAS website

Benefits of e-Filing


Benefits of e-Filing

Extended filing deadline of 15 Dec, instead of 30 Nov

On-the-spot guidance as you e-File, with the iHelp facility

In-built formulae to auto-compute certain fieldsp

Save draft until you are ready to submit

Auto-computation of estimated tax payableAuto-computation of estimated tax payable

Receive instant acknowledgement when you have successfully e-Filed


How to Access e-Services including e-Filing Form C-S/C


Company Administrator

How to Access e Services including e Filing Form C S/C

Company Administrator

S i A th i ti

Access Code and SingPass/

IRAS Pin

e-Services Authorisation System (EASY) Authorise

Company Staff/ Tax Agentp y gSingPass/IRAS Pin

Login to mytax.iras.gov.sgSTART!

Use e-Services



e-Services Authorisation System (EASY)

Online system that allows organisations to authorise their y gemployees/ third party to access e-Services on their behalf

All authorisations of staff and directors/ tax agent must be doneAll authorisations of staff and directors/ tax agent must be doneat EASY

L i t EASY i ’ A C d *Log in to EASY using your company’s Access Code*

*A C d i i d i d d t t ’ i t d dd*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 misplace your access code or its existing Access Code is no longer valid. The request form is

il bl t IRAS b it i S i > B i > C i > EASYavailable at IRAS website iras.gov.sg e-Services > Businesses > Companies > EASY


S i A th i ti S t (EASY)


L i t EASY


Log in to EASY

Access Code application form

Log in using your individual SingPass OR IRAS Pin




Preparer• A preparer prepares the application/ form

for submission to an Approver

• The preparer does not have the rights to submit directly to IRAS

Approver IRAS

• An Approver will approve or edit and• An Approver will approve or edit, and submit the application/ form to IRAS

• The approver can also prepare theThe approver can also prepare the application/ form and submit it to IRAS (for companies without the Preparer role)


Corporate Tax e Services at myTax Portal


Fili f

Corporate Tax e-Services at myTax Portal

Filing of ECI and

Form

C S/ CRequesting for

i f C-S/ CChecking on the status of

returns and/ or assessments

copies of correspondences

or notices

Contact Points with

assessments

Points with IRAS

Applying for Certificate

Applying for Waiver to

of Residence

(COR)

Submit Income Tax Return by

a Dormant CompanyCompany

Lodging of Objections



Qualifying Conditions for Filing Form C-S

D t l i fCompany:

Does not claim any of the following:

• Is incorporated in Singapore • Carry back of Current Year Capital• Is incorporated in Singapore • Has an annual revenue* of

$1 million or below D i l i t bl

• Carry-back of Current Year Capital Allowances/Losses

• Group ReliefI t t All• Derives only income taxable

at 17%• Investment Allowance • Research & Development Tax

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).

Note: Companies that do not meet the conditions have to submit to IRAS a full set of tax returncomprising the Form C, financial accounts, tax computation and supporting schedules.


e Filing of Form C S at m ta iras go sg


Form C-S is a shortened 3-page Income Tax Return for

e-Filing of Form C-S at mytax.iras.gov.sg

p gsmall companies

Not required to submit financial accounts, tax computationq , pand supporting schedules with Form C-S

Must still prepare and submit to IRAS upon request

How to file

e-File Form C-S for YA 2015 via mytax.iras.gov.sg fromy g g2 Jun 2015

R f t IRAS’ b it t iRefer to IRAS’ website at iras.gov.sgBusinesses > Companies > Filing Taxes (Form C-S/ C) > Guidance on Completing Form C-S/ C



Companies that do not meet the conditions for filing Form C-S have to

Filing of Form C

Companies that do not meet the conditions for filing Form C S have to submit Form C

A complete set of Income Tax Return (Form C) consists of:Form CForm IRIN 301Form IRIN 301 (Additional Information on Income & Deductions)Audited/ Unaudited accounts Not required to be submitted if full set of financial accounts has been Not required to be submitted if full set of financial accounts has been

filed with ACRA in XBRL formatDetailed profit and loss statement Tax computation and supporting schedulesRelevant forms (e.g. group relief form, R&D claim form)



e-Filing of Form C at mytax.iras.gov.sgNew!

Implemented 2 modes of filing:

Online Form C (similar to e-Form C-S) Submission of Form C by inputting the data and figures online through

mytax iras gov sgmytax.iras.gov.sg

Offline Form C (Upload) Input of data and figures onto a softcopy of Form C (PDF version) on

your PC/ laptop. Once ready to submit, the softcopy will be converted to a XML format and uploaded through mytax.iras.gov.sgp g y g g


Filing Obligations (Summary)g g ( y)Estimated Chargeable Income

(ECI)Income Tax Return (Form C/Form C-S)

When to file Within 3 months after end of accounting period If you are filing Form Cg p

(e-Filing of ECI via is strongly encouraged)

Waiver of ECI filing: You do not need to file ECI f ti l ti i d if

y gSubmit a complete tax return comprising of the following:- Form C and appendix (Form IRIN 301) - audited/unaudited accounts and detailed P/L

t t tifor a particular accounting period if:• annual revenue is not more than $1 million; and• ECI is nil

- tax computation

e-File Form C by 15 Dec or submit paper Form C by 30 Nov of each year

If you are filing Form C-Se-File Form C-S by 15 Dec or submit paper Form C-S by 30 Nov of each year

Notification of Company will receive a reminder letter to file the A tax return filing package will be sent to theNotification of filing requirement

Company will receive a reminder letter to file the ECI in the last month of the accounting period

A tax return filing package will be sent to the company’s registered address in Apr of each year

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

Submit an Income Tax Return (Form C-S/Form C)loss position company has met the qualifying conditions for

waiver of ECI filing

# Please authorise yourself/third party as an “Approver” for Corporate Tax Matters via the e-Services Authorisation System (EASY)


# 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

23

Investment Holding CompanyInvestment Holding Company


Investment Holding Company

What is an Investment Holding Company

Principal activity is the passive holding of investments

Owns investments such as properties and shares for theOwns investments such as properties and shares for thelong-term

Derives investment income, passive in nature, such as:, p ,

Dividend [S10(1)(d)]

I t t [S10(1)(d)] Interest [S10(1)(d)]

Rental income [S10(1)(f)]



Dividend Income - S10(1)(d)

Singapore-sourced Dividend Income

Current Tax TreatmentCurrent 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




Foreign-sourced Dividend Income

C T TCurrent Tax Treatment

Foreign-sourced dividend received in Singapore is taxable1 % (i ) lat 17% (i.e. current corporate tax rate) unless tax exempt

For Singapore tax residents, double taxation is relieved by:

Double taxation relief or

Unilateral tax reliefU ate a ta e e




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 Foreign-sourced dividend income has been subjected to tax in foreign jurisdiction;

Headline tax rate of foreign jurisdiction is at least 15%; and Headline tax rate of foreign jurisdiction is at least 15%; and

Beneficial for tax exemption




( )( )

Concessionary “group” Treatment

All investments in shares and stocks are divided into 4 groups

Group 1 Non-income producing shares (whether local or foreignGroup 1 Non income producing shares (whether local or foreignshares)

Group 2 Shares which generate tax-exempt dividend incomeg(e.g. one-tier and foreign-sourced dividend incomeremitted to Singapore in the year and exempted fromtax)tax)

Group 3 Income producing shares in overseas companies wheredividend income is remitted to Singapore in the year anddividend income is remitted to Singapore in the year andtaxable in Singapore.

Group 4 Income producing shares in overseas companies wherep p g pdividend income is not remitted to Singapore in the year.






Group 1

Expenses are not deductible as the expenses incurred on theExpenses are not deductible as the expenses incurred on theshares do not produce dividend income taxable in Singapore.

Group 2

Allows the deficit (expenses in excess of dividend income)Allows the deficit (expenses in excess of dividend income)arising within a group from any block of shares for a particularyear to offset the net dividend income for the same year fromy yother blocks of shares within the same group

Net deficit of any group shall be disregardedy g p g




( )( )

G 3


Group 3

Allows the deficit (expenses in excess of dividend income)arising within a group from any block of shares for a particulararising within a group from any block of shares for a particularyear to offset the net dividend income for the same year fromother blocks of shares within the same groupother blocks of shares within the same group

Net deficit of any group shall be disregarded

Group 4

Expenses are not deductible as the expenses incurred on theshares do not produce dividend income taxable in Singapore butmay be carried forward*.

* Refer to e-Tax Guide “Liberalised treatment of expenses incurred in Singapore to deriveforeign income” on IRAS’ website iras.gov.sg




Example of the Concessionary “group” Treatment

A company remits the dividend income it receives from foreign

Sh i N t di id d With t With

p y gcompanies A and B (i.e. same group).

Shares in company

Net dividend income / (deficit)

Withoutconcession

Withconcession

A $1m $1m $1m

B ($2m) Disregarded ($2m)

Net dividend income: $1m NIL*Net dividend income: $1m NIL

* Net deficit is disregarded


* Net deficit is disregarded


Interest Income - S10(1)(d)

Current Tax Treatment

Taxable at 17% (i e current corporate tax rate) when accrued inTaxable at 17% (i.e. current corporate tax rate) when accrued in or remitted to Singapore

For Singapore tax residents receiving foreign-sourced interestFor Singapore tax residents receiving foreign sourced interest income, double taxation is relieved by:

Double taxation relief or

Unilateral tax relief



Rental Income - S10(1)(f)


Taxable at 17% (i.e. current corporate tax rate) when accrued in ( p )or remitted to Singapore

For Singapore tax residents receiving foreign-sourced rentalFor Singapore tax residents receiving foreign sourced rental income, double taxation is relieved by:

Double taxation relief orDouble taxation relief or

Unilateral tax relief




Block Basis Concession

The income producing properties form a single “block”;The income producing properties form a single block ;where net rental loss from one property is deductible againstnet rental income from other properties

This excludes owner-occupied or vacant properties




Example of the “Block Basis Concession”

A company rented out its properties A and B.

Without concession

With concession

p y p p

concession

Property A:Net rental income of $30,000

$30,000 $30,000Net rental income of $30,000

Property B: Net rental loss of $40,000

Disregarded ($40,000)

Net rental income $30,000 NIL*

* Net loss will be disregarded


Summary of Common Type of Passive Source Income


Type of I

Tax Treatment

Summary of Common Type of Passive Source Income

Income

All dividends paid by a Singapore company are exemptf t i th h d f th h h ld

Dividend

from tax in the hands of the shareholders

Foreign-sourced dividend received in Singapore is taxableat 17% (i e current corporate tax rate) exemption or taxat 17% (i.e. current corporate tax rate), exemption or taxrelief 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

SingaporeSingapore

Rental

Source of rental income is based on where the property issituated

Rental income is taxed on a block basis


Deductible expensesDirect expenses Statutory and Regulatory Indirect expenses


Direct expenses Statutory and Regulatory expenses

Indirect expenses

What is it? • Expenses directly incurred to earn

• Expenses incurred in accordance with

• Expenses not directly incurred to earnincurred to earn

investment incomeaccordance with statutory and regulatory provisions

incurred to earn investment income

D d tibilit D d tibl i t th B f YA 2014 ll d G ll t d d tiblDeductibility • Deductible against the respective source of investment income

• Before YA 2014, allowed as an administrative concession

• From YA 2014

• Generally not deductible• As a concession, indirect

expenses not exceeding 5% of the total grossFrom YA 2014,

deductible under S14X of the ITA

• Apportion to the

5% of the total gross investment income is deductible

• Apportion to the respective source of investment income

respective source of investment income

Examples • Custodian fees (for • Accounting fees • Directors' fees,p (income producing shares)

• Property tax, i i &

g• Annual listing fees• Audit fees• Bank charges

I t i f

,• Office rental,• Office telephone charges,• Office water and light,

St ff l iinsurance, repairs & maintenance (for rental properties)

• Interest expense (on

• Income tax service fees• Printing and stationery• Secretarial fees

• Staff salaries, • Transport expenses

(exclude expenses incurred on S-plated cars


• Interest expense (on loan taken to acquire shares / property)

incurred on S-plated cars which are not deductible)

E l 1 (O f i )


Example 1 (One source of income)

YA 2015

Investment income $

Rental income 3 000Rental income 3,000

Expenses $ p $

Property tax 300

Repair of property 500Direct expensesRepair of property 500

Audit fee 2,000

Secretarial fee 1 000

p

Statutory Secretarial fee 1,000

Bank charges 500

Staff salaries & CPF 1 000

expenses

Indirect expenseStaff salaries & CPF 1,000 Indirect expense


Tax computation (One source of income)


Rental income $ $

3,000

Tax computation (One source of income)

Less: Direct expensesProperty tax Repair of property

300500 800Repair of property

Less: Statutory expenses

500 800

Audit fee Secretarial feeBank charges

2,0001,000

500 3,500g

Less: Indirect expensesLess: Staff salaries & CPF (Lower of actual

,

Less: Staff salaries & CPF (Lower of actual expense or 5% of gross rental income) 150

Net rental income / loss NIL*

Chargeable Income before exempt amount NIL


Tax payable @17% NIL * Net rental loss is disregarded.


Example 2 (Multiple sources of income)

YA 2015

Investment income $

Rental income 2,000Rental income 2,000

Interest income 8,000

Total 10 000Total 10,000

Expenses $

Property tax 300

Repair of property 1,200Direct Expenses

Audit fee 2,000

Secretarial fee 1,000Statutory expenses

Bank charges 500

Staff salaries & CPF 1,000

expenses

Indirect expense


, p


Common expenses $

Tax computation (Multiple sources of income)

Common expenses $

Audit fee 2,000

Secretarial fee 1 000Statutory

Secretarial fee 1,000

Bank charges 500

St ff l i & CPF ( d t 5% f t t l 500

expenses

Staff salaries & CPF (capped at 5% of total investment income of $10,000)

500

Total 4 000Total 4,000

Apportion common expenses to each source of income:

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


Interest 4,000 x (8,000 / 10,000) 3,200


Rental income$ $

2 000

Tax computation (Multiple sources of income)

Rental income

Less: Direct expensesP t t 300

2,000

Property tax Repair of property

3001,200 1,500

Less: Share of common expenses

Net rental income

800

NIL*


Less: Direct expenses NIL

Less: Share of common expenses

Net interest income

3,200

4,800


et te est co e ,800

* Net rental loss is disregarded.


Tax computation (Multiple sources of income)$

What is exempt amount?

Chargeable income before exempt amount 4,800

Less: Exempt amount ($4 800 @ 75%) 3 600Less: Exempt amount ($4,800 @ 75%) 3,600

Chargeable income after exempt amount 1,200

Tax payable @ 17% 204.00Less: Corporate income tax rebate (30% x $204) 61 20

What is CIT rebate?

Less: Corporate income tax rebate (30% x $204) 61.20Net tax payable 142.80


T E ti S h f N St t C i


Tax Exemption Scheme for New Start-up Companies

The following companies incorporated after 25 Feb 2013 arenot eligible for the tax exemption scheme:

1) Property development companies) p y p p Any company that buys or leases land and arranges for a

building to be built on land in order to lease, manage orll th b ildisell the building

2) Investment holding companies A company whose principal activity is that of investment

holding Derives investment income such as rental dividend or Derives investment income such as rental, dividend or

interest income

C i th t d t lif f thi h ill till bCompanies that do not qualify for this scheme will still beeligible for partial tax exemption



Partial Tax Exemption

Partial tax exemption on chargeable income taxed at 17% of up to $300,000:

First $10,000 @ 75% $7,500

N t $290 000 @ 50% $145 000Next $290,000 @ 50% $145,000

Total $300,000 $152,500

Maximum Exempt Amount is $152,500 for each YA



Example

Partial Tax Exemption

Example

Chargeable Income (CI) before

(2)(1)

Chargeable Income (CI) before Exempt Amount 120,000320,000

Less: Exempt Amount

1 (75% x 10 000) 7 5001. (75% x 10,000) 7,500

(50% x 290,000) 145,000 152,500

2. (75% x 10,000) 7,500

(50% x 110,000) 55,000 62,500

Net CI after Exempt Amount $167,500 $57,500


Corporate Income Tax (CIT) Rate & Tax Rebate


Corporate Income Tax (CIT) Rate & Tax Rebate

Corporate Tax Rate

17%

Corporate Tax Rate

Applicable for YA 2013 to YA 2017*

Corporate Income Tax Rebate

pp

All companies will receive a 30% CIT rebate, capped at:

$30 000 per YA for YA 2013 to YA 2015 $30,000 per YA for YA 2013 to YA 2015

$20,000 per YA* for YA 2016 and YA 2017

CIT rebate is computed on the tax payable after deducting tax set offsCIT rebate is computed on the tax payable after deducting tax set-offs (e.g. foreign tax credit)

* Budget 2015 Enhancement



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



Things to Note

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 YACarried back to the immediate preceding YA

However, an investment holding company can claim current year loss items transferred to it under the group relief system



Things to Note

3 Not eligible to claim capital allowances on plant and machinery3. 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



Things to Note

5 I d t i l B ildi All (IBA)* i l d d tibl i t th5. Industrial Building Allowance (IBA)* is only deductible against the income derived from investments which produce income.

A IBA th t i t f ll tili d i YA i t di d dAny IBA that is not fully utilised in a YA is not disregarded.

U tili d IBA b i d f d t ff t f t iUnutilised IBA can be carried forward to offset future income, subject to the following conditions:

No substantial change in shareholding

Th ti t d i t l i f th The company continues to derive rental income from the industrial building

* IBA has been phased out. The above note is applicable only to companies who had incurredcapital expenditures on the construction or purchase of industrial buildings or structures on andbefore 22/02/2010


before 22/02/2010.


Things to Note

6 Is income distribution from Real Estate Investment Trusts (REITs)6. Is income distribution from Real Estate Investment Trusts (REITs) taxable?

The nature tax treatment and applicable period/Year of assessmentThe nature, tax treatment and applicable period/Year of assessmentof each REIT distribution are reflected in the Annual DistributionStatement issued by the Central Depository Pte Ltd (CDP).

A REIT distribution is taxable in the hands of corporate unit holdersunless stated otherwise* in the CDP statementunless stated otherwise in the CDP statement.

The REIT distribution is taxable in the Year of Assessment asfl t d i th CDP St t treflected in the CDP Statement.

* E.g. Distribution is tax-exempt, distribution is a return of capital, etc.g



Things to Note

7 Declaration in Form C S (No IBA/LIA claims)7. Declaration in Form C-S (No IBA/LIA claims)

Items to Declare in e-Form C-S Investment HoldingItems to Declare in e Form C S Investment Holding

“Net Profit/Loss before Tax as per Accounts” ( Box 1 of Part B)

To“Unutilised Losses brought forward”

(Box 14 of Part B)

Enter "0"

(Box 14 of Part B)

“Separate Source Income” (Part B Boxes 15a to 17)(Part B, Boxes 15a to 17)

“Revenue” (Box 21 of Part B) and other boxes, ( ) ,where applicable


Things to Note


Things to Note

8. Declaration in e-Form C-S (With IBA / LIA claims)

If gross rental income after deductible expenses (before IBA / LIA) is negative, enter “0” in the line item “Net Rental Income”.

Claims for IBA / LIA against rental income should be entered in the line item “Current Year Capital Allowances”line item Current Year Capital Allowances

Includes IBA / LIA claims for YA 2015


Common Mistakes


Common MistakesClaim for non-deductible expenses:

C it l ditCapital expenditure e.g. acquisition costs of investments;stamp duties and legal fees incurred for purchase ofstamp duties and legal fees incurred for purchase of investments; advertising and commission incurred to secure the first tenant f i t t tfor investment property

Pre-commencement expensese.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


Common Mistakes


Tax computation presented in trading company’s format

e Form Ce-Form C

A sample of tax computation for investment holding company, you can refer to IRAS’ website at iras.gov.sg B i > C i > W ki t C t I T > S ifi I d t i >


Businesses > Companies > Working out Corporate Income Taxes > Specific Industries> Investment Holding Companies

Common MistakesInvestment Holding Company

Unutilised losses arising from investments is carried forward to future years of assessment e-Form C

Unutilised losses arising from investments cannot be carried forward to future years ofassessment. To complete “0” for:• Part 2, Box 18 to 24 of e-Form C; or• Part B, Box 11 to 14 of e-Form C-S


SummaryItems Tax Treatment Method of ClaimingItems Tax Treatment Method of Claiming

1. Direct expensesDeduct against each source

of incomeDeductible expenses

2. Statutory expenses Apportion to each source of

income3. Indirect expenses capped at 5% of

i t t igross investment income

Losses

Losses cannot offset:

N A• Other sources of incomeLosses N.A. Other sources of income

• Future income

Capital Not allowable except IBA

Claim IBA against income pAllowances

Not allowable, except IBA g

source Loss

Not allowable N.A.Carry-backCarry-back

Group Relief loss items

Cannot transfer out loss items (except unutilised current year IBA) but can

Claim loss items transferred to it to arri e at CIloss items

y )claim loss items transferred to it

to it to arrive at CI


Investment Dealing CompanyInvestment Dealing Company

Section 10(1)(a) of ITA


Wh t i I t t D li C

Investment Dealing Company

What is an Investment Dealing Company

Principal activity is to carry on a business of investmentdealing

O i t t h ti d h f fOwns investments such as properties and shares as a form oftrading stock

To derive trade income from purchase and sale of investmentsTo derive trade income from purchase and sale of investments[S10(1)(a)] e.g. gain on sale of real properties and shares


Summary

Investment Dealing Company

Summary

g p yS10(1)(a)

Taxability/ deductibility of Taxable/ deductibleTaxability/ 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 incomefuture income

Capital allowances - AllowableUnabsorbed CA can offset other- Unabsorbed CA can offset other

sources/ future income


Company in the Business of p yMaking Investments

S ti 10(1)( ) bj tSection 10(1)(a) subject to Section 10E of ITAto Section 10E of ITA


Company in the Business of Making Investments

What is a Company in the Business of Making Investments

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 i bl ti i t timmovable properties or service apartments

To derive investment income as a trade [S10(1)(a)], subject to S10E t i tiS10E restriction

Refer to e-Tax Guide on IRAS’ website at iras.gov.sgQuick links > e-Tax Guides > Search > Ascertainment of Income from Business ofmaking Investmentmaking Investment


Wh t i C i th B i f



S10E Restriction

A t i i d i t f i t ta. Any outgoings or expenses incurred in respect of investmentswhich do not produce any income are not deductible;

b. Any outgoings or expenses incurred in respect of investmentswhich produce income are only deductible against the incomep y gderived from such investments. The balance of any outgoingsand expenses which cannot be set off in that year shall bedisregarded;disregarded;

c. Capital allowances are only deductible against the incomep y gderived from investments which produce income. The balanceof any allowances which cannot be set off in that year shall bedisregarded;


disregarded;

What is a Company in the Business of



S10E Restriction (cont’d)

d. IBA is only deductible against the income derived frominvestments which produce income. But any IBA which cannotbe fully utilised by the entity in a YA is not disregarded

Unutilised IBA can be carried forward to offset future income, subject to the following conditions:

No substantial change in shareholding

The company continues to derive rental income from the The company continues to derive rental income from the industrial building (whether or not it is in the business of letting of investment property)p p y)

* IBA has been phased out. The above note is applicable only to companies who had incurredcapital expenditures on the construction or purchase of industrial buildings or structures on and


capital expenditures on the construction or purchase of industrial buildings or structures on andbefore 22/02/2010.

Summary


yBusiness of making investments S10(1)(a) subject to S10E

Taxability/ deductibility of gains/ losses of sale of

Not taxable/ not deductible

investment

Deductibility of expenses Only expenses incurred on income-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

/ f t isources/ future income


F i T C dit (FTC)Foreign Tax Credit (FTC)


D bl t ti i

Foreign Tax Credit

When companies derive income from a foreign jurisdiction their

Double taxation issue

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:

SingaporeRental income remitted i t Si Company ASingapore

(2nd Tax)Malaysia(1st Tax)

into Singapore Company A

Country of Source i.e. where the rental

Country of Residencei.e. where the income is received

Company A’s property

where the rental income arises


C t F i T C dit (FTC) S t

Foreign Tax Credit

Current Foreign Tax Credit (FTC) System

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 g pTaxation Agreement (DTA) with

Unilateral tax relief (UTR)

or

Unilateral tax relief (UTR)

Available to foreign-sourced income remitted from jurisdictions which Singapore has not concluded an DTA withwhich Singapore has not concluded an DTA with

The reliefs are claimed on a source-by-source and country-by-country basiscountry basis


What is an Avoidance of Double Taxation Agreement (DTA)

Foreign Tax Credit

A DTA is entered into between two jurisdictions seeking to avoid

What is an Avoidance of Double Taxation Agreement (DTA)

A DTA is entered into between two jurisdictions seeking to avoid double taxation

It clarifies & assigns the taxing rights to each jurisdictionIt clarifies & assigns the taxing rights to each jurisdiction

To claim DTR, the following conditions have to be satisfied: , g

The company must be tax resident in Singapore;

T h b id / bl th i i th f i 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 The income is subject to tax in Singapore

Refer to IRAS’ website at iras.gov.sg for the full list of the DTAs Singaporeconcluded with other jurisdictions:Home > Quick links > International Tax


Home > Quick links > International Tax

C l l ti th F i T C dit (FTC)

Foreign Tax Credit

Calculating the Foreign Tax Credit (FTC)

FTC is the lower of:1) Foreign tax paid;

oror2) Singapore tax payable on the foreign-sourced income received

F i d i ft d ti l ti

Calculating the Singapore tax payable*:

Foreign-sourced income after expenses and partial exemption attributable to that income

xxSingapore tax rate

* FTC is not available in the case of a net foreign loss FTC is not available in the case of a net foreign loss


Foreign Tax Credit (FTC)Foreign Tax Credit (FTC) Pooling Systemg y


F i T C dit (FTC) P li S t

Foreign Tax Credit Pooling System

Objective

Foreign Tax Credit (FTC) Pooling System

j

To simplify and reduce taxation of foreign income (FI) particularly f i th t l b li i d i l h ffor companies that are globalising and earning a larger share of their income overseas


A t f FTCAmount of FTC:Source-by-source and country-by-country basisLimited to lower of foreign tax paid and Singapore tax payable g p g p p yon that FI




With effect from YA 2012


Introduction of new FTC pooling system

- all foreign taxes paid on qualifying FI pooled together to compute FTCp

- amount of FTC is lower of: (i) pooled foreign taxes paid on qualifying FI; and ( ) p g p q y g ;(ii) total Singapore tax payable on qualifying FI




Qualifying conditions


y g

Foreign income tax is paid on FI in foreign jurisdiction from which FI is derived;is derived;

Headline tax rate of foreign jurisdiction from which FI is derived is at g jleast 15% at time FI is received in Singapore; and

Entitled to claim FTC and there is Singapore tax payable on that FIEntitled to claim FTC and there is Singapore tax payable on that FI

Refer to IRAS’ website at iras.gov.sgHome > Businesses > Companies > Working out Corporate Income Taxes >Claiming Reliefs >FTC Pooling System




Example of benefits of FTC pooling system


Foreign Country A

Foreign Country B

Total

(S$)A

(S$)

B

(S$)(S$)

Foreign income remitted 10,000 20,000 30,000

Foreign income taxes paid500 5,000 5,500

o e g co e ta es pa d




Under current method of FTC computation (assuming partial tax ti d t l )


exemption does not apply)

Foreign Country A

Foreign Country B

Total (S$)Country A

(S$)Country B

(S$)

Foreign income tax paid 500 5 000 5 500Foreign income tax paid 500 5,000 5,500

1 700 3 400 5 100Singapore tax payable on the FI (based on prevailing CIT rate of 17% ) 1,700 3,400 5,100(based on prevailing CIT rate of 17% )

FTC available (capped at the lower of foreign tax paid

500 3 400 3 900(capped at the lower of foreign tax paid and Singapore tax payable on each FI)

500 3,400 3,900

Net Singapore tax payable on the FI after1,200

Net Singapore tax payable on the FI after offsetting FTC ($5,100 – $3,900)




Under new FTC pooling system


Total(S$)

p g y

( )

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

FTC available5,100

FTC available (lower of total foreign taxes suffered and total Singapore tax payable on FI from Countries A and B)

Net Singapore tax payable on the FI after offsetting FTC ($5,100 – $5,100)

0

Decrease in net Singapore tax payable on FI ($5,100 – $3,900) 1,200

( )


T E ti FTax Exemption For

Foreign-Sourced Income


Tax Exemption for Specified Foreign source income

Tax Exemption for Foreign-Sourced Income

Granted to all persons resident in Singapore on the followingsources of foreign income received in Singapore on or after 1 Jun

Tax Exemption for Specified Foreign-source income

sources of foreign income received in Singapore on or after 1 Jun2003:

Foreign-sourced dividendsForeign sourced dividends

Foreign branch profits

Foreign-sourced service income(Rendered in the course of person’s trade through a fixed placeof operation in foreign jurisdiction)

Qualifying conditions

of operation in foreign jurisdiction)

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


How to Claim

Tax Exemption for Foreign-Sourced Income

To complete:

How to Claim

e-Form C Box 15 of Part 1(Exempt Income / Loss for Current

Year of Assessment )Year of Assessment ) Additional Information - Box 20 of Part D (Exemption

on Foreign Dividends, Branch Profits and Service gIncome Received in Singapore.

e Form C Se-Form C-S Box 2 of Part B of (Non-Taxable Income)

No need to submit supporting documents unless calledNo need to submit supporting documents unless called upon to do so

Refer to e-Tax Guide on IRAS’ website iras.gov.sgHome > Quick links > e-Tax Guides > Search > Tax Exemption for Foreign-Sourced Income


C St d 1Case Study 1

+ Foreign Tax CreditInvestment Holding Company

+ Exemption of Foreign-sourced income

+ Foreign Tax Credit


Investment Holding CompanyCase Studies

Case Study 1

YA 2015 (Basis period: 01/04/2013 to 31/03/2014)YA 2015 (Basis period: 01/04/2013 to 31/03/2014)

Investment income $

Singapore dividend income (1-tier exempt) 35,000

Dividend income received from a Malaysia company 100,000y p y ,

Rental income 35,000

Interest income received from Indonesia 24,000

Other income 10,000

Total income 204,000



Case Study 1 (cont’d)

Expenses $Expenses $

Custodian fee (for Singapore tax-exempt dividends)

2,400(for Singapore tax exempt dividends)

Interest on term loan (acquiring property for rental)

45,000 Direct expenses( q g p p y )

Property tax (property rented out) 1,600

Repair and maintenance (property rented out) 7,000

expenses

Repair and maintenance (property rented out) 7,000

Auditor’s remuneration 3,000

Bank charges 500Statutory expensesBank charges 500

Secretarial and tax services 2,000

Director’s fee 60 000

expenses

IndirectDirector s fee 60,000

Depreciation 5,000

Indirect expense

Non-deductible expense


p



5% Restriction on Indirect Expenses $5% Restriction on Indirect Expenses $

Director’s fee 60,000

Capped at 5% of $204 000 (total income) 10 200Capped at 5% of $204,000 (total income) 10,200

Indirect expenses allowed 10,200

Common expenses $

A dit ’ ti 3 000Auditor’s remuneration 3,000

Bank charges 500

S t i l d t i 2 000Secretarial and tax services 2,000

Director’s fee (capped at 5% of total income) 10,200

Total common expenses 15,700


Case Studies

Investment Holding CompanyTax Computation

$ $ $Singapore tax-exempt dividend 35,000 Malaysia dividend (foreign-sourced) 100,000

135 000135,000Less: Direct expenses – custodian fee 2,400

Share of common expenses(135 000/204 000 15 700) 10 389(135,000/204,000 x 15,700) 10,389

(12,789)Net dividend income 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%; and2) Headline tax rate in Malaysia is more than 15%; and3) Beneficial for tax exemption


Case Studies

Investment Holding CompanyTax Computation (cont’d)

$ $ $Rental income 35,000 Less: Direct expenses

Interest on term loan 45 000Interest 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 disregardedNet rental loss is disregarded.


Case Studies

Investment Holding CompanyTax Computation (cont’d)

$ $ $Indonesia Interest income (foreign-sourced) ^ 24 000Indonesia Interest income (foreign-sourced) 24,000Less: Direct expenses NIL

Share of common expenses(24,000/204,000 x 15,700) 1,847

(1,847)( , )22,153

Other income 10,000L Di t NILLess: Direct expenses NIL

Share of common expenses(10,000/204,000 x 15,700) 770(10,000/204,000 x 15,700) 770

(770)9,230

Ch bl i b f t t i 31 383Chargeable income before tax exempt income 31,383

^ The interest income has been subjected to withholding tax of 10% in Indonesia.



$ $

Chargeable income before tax exempt income 31,383

Tax Computation (cont’d)

Chargeable income before tax exempt income 31,383

Less: Exempt income

First $10 000 @ 75% (7 500)First $10,000 @ 75% (7,500)

Next $21,383 @ 50% (10,692) (18,192)

Chargeable income after tax exempt income 13 191Chargeable income after tax exempt income 13,191

Tax payable @ 17% 2 242 47Tax payable @ 17% 2,242.47

Less: DTR * 1,582.94

Tax payable after DTR 659.53Tax payable after DTR 659.53

* DTR is the lower of:$a. $ 2,400 (Foreign tax suffered in Indonesia); or

b. $1,582.94 (Singapore tax payable on foreign interest income received) = {$22,153 – [$22,153/$31,383 x $18,192]} x 17%



Case Studies

g p y

$Tax Computation (cont’d)

$

Tax payable after DTR 659.53

Less: Corporate income tax rebate ($659 53 x 30%) 197 86Less: Corporate income tax rebate ($659.53 x 30%) 197.86

Net Tax payable 461.67


C St d 2Case Study 2

Trading + Investment Holding Company


Trading + Investment Holding CompanyCase Study 2

Case Studies

Sales 750 000

YA 2015 (Basis period: 01/04/2013 to 31/03/2014)

Case Study 2

Sales 750,000 Less: Cost of goods sold 345,000 Gross Profit 405,000

Other IncomeDividend (1-tier) 35,000 Interest income 24 000Interest income 24,000 Rental income 40,000

504,000 Less: ExpensesLess: 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 000Repair and maintenance (for property rented out) 7,000 Audit fee 3,000 Director fees 12,000 Depreciation 1 000Depreciation 1,000 Salaries/bonus/allowances and CPF 80,000 Secretarial fees 2,000

109 000


109,000 Net Profit Before Taxation 395,000

Trading + Investment Holding CompanyCase Study 2 (cont’d)

Case Studies

Additional Information from the Balance Sheet


Fixed assets additionComputer $1,000

Tax

Capital allowances (CA)

Description 100% 300%

Total

CA

Tax

written

downof asset

Cost

S$

100%

Base CA

S$

300%

Enhanced

CA S$

CA

S$

down

value

S$$ $ $ $

Computer* 1,000 1,000 3,000 4,000 Nil

* Prescribed in PIC IT and Automation Equipment list.


Trading + Investment Holding CompanyCase Studies

Tax Computation S$

Net Profit before tax per accounts 395 000Net Profit before tax per accounts 395,000

Less: Separate sources of income

Singapore dividends 35,000 g


Rental income 40,000 99,000

296,000

Add: Disallowable expenses

Depreciation 1 000Depreciation 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 2014 4,000

Adjusted profit after capital allowances 304,000


Trading + Investment Holding CompanyCase Study Studies

Tax Computation (cont’d)

Add: Separate sources of incomeSingapore tax exempt (1-tier) dividend 35,000Less: Custodian fees 2,400 tax exempt

Interest 24,000 Rental 40,000 Less: Property tax 1,600

R i d i t 7 000 31 400Repair and maintenance 7,000 31,400

Chargeable income before exempt amount 359,400

Less: Exempt amountFirst $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 00Tax payable @ 17% 35,173.00 Less: Corporate income tax rebate [30% x 35,173] (10,551.90)Net tax payable 24,621.10


Assistance and Service Channels

W b it• Home > Businesses > Companies > Working out

Websiteiras.gov.sg

Corporate Income Taxes > Specific industries > • Home > News & Events > Budget 2015 – Overview

of Tax Changes

• [email protected] for general tax matters• [email protected] for payment matters

EmailEmail

• For companies: 1800-356-8622• 8.00am to 5.00pm from Mondays to FridaysHelpline


Please complete our Feedback Form after the seminar.

Your feedback will assist us in planning and organising our future seminars.

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 20 August 2015.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.y g , g y p g y


AAnnex

Enhanced SingPass (launched on 5 Jul 2015)


Enhanced SingPass (launched on 5 Jul 2015)

Annex

g

Features of Enhanced Singpass:

• Improved Security• Receive SMS/ email notification for changes made to profileg p• Two-Step Verification (2FA)

• Option to register and activate mobile or OneKey token or both

• Greater Convenience

T j th f t ill d tTo enjoy the new features, users will need to:

• Update their SingPass account by providing and verifying their mobilenumber and email address as well as setting up their security questionsnumber and email address, as well as setting up their security questionsand answers.

• Set up their 2-step verification by registering activating and linking• Set up their 2-step verification by registering, activating and linkingtheir OneKey token or mobile phone to their SingPass account.


Annex

When to set up your 2FA

Public given 1 year to set up their 2FA, i.e. Jul 2015 to Jun 2016

• IRAS’ e-Services, myTax Portal and EASY, are 2FA enabled from 5 Jul 2015from 5 Jul 2015

• 2FA capability is enabled under SingPass login

You can still log in to IRAS’ e-services using just your password (1FA) until Jun 2016 if you have not signed uppassword (1FA) until Jun 2016 if you have not signed up for 2FA yet


2-Factor Authentication (2FA)Annex


New SingPass Login Screen from 5 July 2015Annex


2-Factor Authentication (2FA)Annex


Channels of Help & Support

Annex

Channels of Help & Support

OneKey Token Helpdesk SingPass Helpdesky p

• Hotline:+65 6566 3539 (OKONEKEY)

g p

• Hotline:+65 6643 0555+65 6566 3539 (OKONEKEY)

• Email: [email protected]

65 66 3 0555

• Helpline Operating Hours:Monday – Friday: 8 am to 8 pm

• Care Centre Opening Hours:Monday – Friday: 8 am to 6 pmS t d 8 t 2

Monday Friday: 8 am to 8 pmSaturday: 8 am to 2 pm(Closed on Sunday and PHs)

Saturday: 8 am to 2 pm(Closed on Sunday and PHs) • SingPassEmail:

[email protected]

• OneKeyCustomer Care Centre:International Plaza10 Anson Road #06-19 International Plaza Singapore 079903

For more news and information on Enhanced SingPass, visit www.ida.gov.sg


For more news and information on Enhanced SingPass, visit www.ida.gov.sg

Documents

Seminar on Taxation ofSeminar on Taxation of … on Taxation ofSeminar on Taxation of Investment Holdinggp Companies Presentation by Inland Revenue Authority of SingaporePresentation