Overview of Singapore tax system

May 2, 2019 [2019] 105 taxmann.com 4 (Article)

Global competition between countries to attract and retain

multinationals will remain. But the global tax world is changing
rapidly. Singapore's tax system has been effective in supporting
the growth of the economy, and one reason for this is that tax
framework constantly evolves to meet the changing needs of the
country as well as the global economic environment.

Page
S.No. Topics
Nupur Jalan no.
1 Residential status, scope and taxability of income 2-3
2 Capital allowances and deductions 4
Carry-forward and carry back of capital allowances
3 5
and trade losses
4 Returns, assessments and payment of taxes 6
5 Group taxation and assessments 7
6 Structuring of business operations 8
7 Restructuring and Liquidation 9
8 Valuation of inventory 10
9 Investment incentives 11-12
10 Permanent Establishment and Foreign tax credit 13
11 Partnership firm and its taxation 14
12 Trusts, settlements and estates 15

Chapter 1 – Residential status, scope and taxability of income

1. Residence of company –

The incorporation of a company in Singapore does not automatically mean

that it is tax resident in Singapore. They are tax resident in Singapore only
if control and management is exercised in Singapore.

2. Scope of tax system –

Tax system in Singapore operates on territorial basis1. Income tax is

payable if the income accrues to or is derived by a person from
Singapore or from outside Singapore but received in Singapore2.
Hence, if income is sourced outside Singapore and is not
received or deemed to be received in Singapore, the income will
not be assessable to tax in Singapore.

3. Sources of income –

Sources of income3 of companies includes –

a. gains or profits from any trade or business;

b. income from investment such as dividend, interest and rental;
c. royalties, premiums and any other profits from property; and
d. other gains that are revenue in nature

4. Taxable period –

Taxable income is computed by reference to the taxpayer's annual

accounting period, whether calendar year (12 months period
ending on 31 December) or financial year (i.e. 12 months period ending
on any other day other than 31 December, usually the last day of any
month other than December)

5. Applicable tax rates and exemptions –

Companies (both resident and non-resident) are generally taxed at a flat

rate of 17% on the normal chargeable income. Further, all
companies (excluding those that qualify for new start-up exemption
scheme) are eligible for partial tax exemption on the first $300,000 of
their normal chargeable income for each year of assessment, as follows –

♦ Upto first $10,000 of the normal chargeable income, 75% of the income
is exempt from tax

♦ Upto next $290,000 of the normal chargeable income, 50% of the

income is exempt from tax

However, tax exemption shall be following for new start-up

companies –

For new start-up companies, tax exemption is granted on the first

$3,00,000 of the qualifying company's normal chargeable income for the
first three consecutive years of assessment, as follows –

♦ Upto the first $100,000 of normal chargeable income, 100% of

the income is exempt from tax
♦ Upto the next $200,000 of normal chargeable income, 50% of
the income is exempt from tax

6. Withholding taxes –

Withholding are done at corporate tax rates or at reduced rates of 10% to

15%, depending on the nature of payments. Further, lower withholding
taxes may be applicable, if tax treaty provides for such lower rates.
Overview of the applicable tax withholding rates –

Nature of payment Applicable

withholding tax
rates
Interest, commission, fee or any other payment in 15%
connection with any loan or indebtedness
Management fees 17*%
Rental of movable property 15%
Commission income of licensed international 3%
market agent

(*For payments to non-resident individuals, tax is to be withheld at 22% of

the gross amount)

Deadline for payment of withholding taxes –

♦ These are to be deposited with the tax authorities by 15th of the

second month following the date of payment
♦ Withholding tax form needs to be e-filed
♦ If taxes are withheld but no notice is given to the tax authorities
by 15th of the second month following the month in which
payment or deemed payment is made, a penalty of three times of
the amount of tax payable can be imposed together with a
minimum fine of $10,000 or maximum jail of three years

The date of payments is earlier of the following dates –

♦ Date when payment is due and payable based on agreement/

contract. The date of invoice shall be deemed date of payment in
the absence of contract/ agreement
♦ Date when payment is credited to the account of the non-
resident person
♦ Date of actual payment

Chapter 2- Capital allowances and deductions

1. Capital allowance –

Capital allowances are given in respect of capital expenditure incurred by a

taxpayer on assets that are used in its business. There are two types of
allowances4 –

♦ Initial allowances – These are one time allowances which are

available to a taxpayer who has incurred qualifying capital
expenditure for the purposes of his business. These are usually
claimed in the year of assessment in which the asset is first
acquired and used in the business.
♦ Annual allowances – These are claimed annually on a
straight-line basis provided that the asset is in use at the end of
 the relevant basis periods.

Capital allowances can be claimed in respect of following tangible and

non-tangible assets such as plant and machinery, industrial buildings and
structures, intellectual property rights and approved cost-sharing
agreements for research and development activities.

However, accelerated annual allowances of 33.33% are granted for

qualifying plant and machinery and allowances of 100% are granted for
computers and prescribed equipments.

2. Deductions –

For each source of income, expenses incurred (whether directly or

indirectly) in producing the respective income are deductible subject to
general guidelines. Some of the expenses allowable as deduction are –

♦ Start-up expenses – Most businesses are allowed to deduct

expenses incurred in the 12 months immediately preceding the
accounting year in which the business earned its first dollar of
trading income
♦ Interest expenses – Interest incurred on capital employed in
the production of income, and prescribed borrowing costs that
are incurred as a substitute for interest or to reduce interest
costs, are allowable as tax deduction
♦ Research and development (R&D) expenses – The
following deductions are available for qualifying R&D
expenditure –
♦ For R&D carried out in Singapore – 150% of qualifying R&D
expenditure upto year of assessment 2018 and 250% of
qualifying R&D expenditure upto year of assessment between
2019 to 2025
♦ For R&D carried out overseas – 100% of qualifying R&D
expenditure
♦ Bad debts – Bad debts are deductible to the extent that they
are incurred in the business and previously included as trading
receipts.
♦ Charitable contributions – Donations are deductible only if
they are made in cash or another prescribed form and to an
approved recipient. The deduction allowed for qualifying
donations is generally 250% of the value of the donation.
♦ Fines and penalties – Fines and penalties imposed for
violations of the law are not deductible.
♦ Taxes – Income taxes are generally not deductible in
determining income. However, deduction against irrecoverable
GST is given under certain circumstances.
♦ Others –
♦ Employee share-based remuneration – Generally, a
company is not allowed any tax deduction when it fulfils its
employee stock option and share award obligations via the issue
of new shares as it has not incurred any cost wholly and
exclusively in the production of its income. However, tax
deduction for employee share-based remuneration (stock
 awards or stock option schemes) is allowed, if treasury shares in
the company or its holding company are purchased to fulfil such
obligations. (Treasury shares are shares that are held by the
company in treasury instead of being cancelled)
♦ Payments to foreign affiliates – Payments to non-residents,
including foreign affiliates, are deductible, provided they are fair
and reasonable, are revenue in nature, and can be seen to be
relevant to earning the payer's income.

Chapter 3 – Carry-forward and carry back of capital allowances

and trade losses

1. Carry-forward of unutilised capital allowances –

If, in any year of assessment, there are unabsorbed capital allowances, the
amount can be carried forward to the following year subject to the
taxpayer carrying on the same trade, profession or business. Any brought
forward capital allowances are set off before current capital allowances
and the order of set-off is on the first-in-first-out basis. Certain
conditions for set-off of the capital allowances –

♦ Capital allowances are first set-off against the income from

the carrying of a trade, business, profession or
vocation and then against other income
♦ Comptroller must be satisfied that there is no substantial
change in the shareholders of the company (or its
ultimate holding company) on the relevant dates

Where the continuity requirement applies, the shareholders of the

company must be substantially same:

♦ on the last day of the year in which the allowance arose; and
♦ on the first day of the year of assessment for which the
allowance is available

The shareholders may be considered substantially the same only if, on

both dates –

♦ at least 50% of the paid-up capital of the company is held by, or

on behalf of, the same persons; and
♦ not less than 50% of the nominal value of the allotted shares of
the company is held by or on behalf of the same persons

2. Carry forward of unutilised trade losses –

Trade losses can also be utilised against income from business or other
sources. If unutilised, they can be carried forward for set-off against future
income provided that there is no substantial change in the
shareholders of the company. Also, brought forward capital losses are
set-off before current losses on a first-in-first out basis.

3. Carry-back of unutilised capital allowances and trade losses –

Current year unutilised capital allowances and trade losses can be carried
back for set-off against the income of the year immediately proceeding the
year of assessment. The amount of deductions that can be carried
back is capped at $100,000. Conditions of no change in substantial
shareholding applies in these cases as well.

4. Others–

♦ Adjustment of capital allowances, losses or donations

between income subject to tax at different rates –
An adjustment factor will be applied whenever the unabsorbed
losses or capital allowances of a company are taxed at one tax
rate are to be deducted against income subject to tax at another
rate.
♦ Waiver of continuity of ownership requirement –
Where there is substantial change in shareholders but the
taxpayer is able to satisfy the tax authorities that the substantial
change in shareholding was not for the purpose of obtaining any
tax benefit or obtaining any tax advantage, a waiver may be
granted in respect of the continuity of the ownership
requirement.

Chapter 4 – Returns, assessments and payment of taxes

1. Income tax returns for companies –

At the beginning of each assessment, income tax returns are issued to

every person who is known to be chargeable to tax. Companies are
required to file Form C or Form C-S by 30 November (15 December for e-
filing) of each year together with a copy of the audited or non-audited
accounts, whichever is applicable.

2. Assessments –

Assessments are issued by the Inland Revenue Authority of Singapore

(IRAS) based on the income tax returns submitted by the taxpayer or they
can be based on IRAS's estimate. Assessments are usually of following
types –

a. Original Assessments – This is the first assessment to be

issued based on either the taxpayer's submission or the IRAS's
estimate
b. Additional Assessments – This is generally issued when tax
is undercharged, i.e. final tax is more than the tax previously
assessed
c. Amended Assessments – This is generally issued when tax is
overcharged, i.e. final tax is less than the tax previously assessed
d. Advance Assessments – This is generally issued if the source
of income has ceased or going to cease or where IRAS deems fit
that an assessment be made in relation to income derive by the
company from the carrying on of a trade
e. Best Judgment Assessment – IRAS can also raise a 'best
judgment assessment' on the estimated income of the taxpayer,
 where the taxpayer has failed to file a return, or where the return
filed is incorrect or incomplete
f. Protective Assessment – This can be issued to prevent
assessments from being time barred

3. Appeals against assessments –

The deadline to file a Notice of Objection with supporting information is 2

months from the date of service of the Notice of Assessment. If a
taxpayer requires more time to provide the details for the basis of an
objection, IRAS is prepared to extend the 2-month deadline on a
case-by-case basis. A written request must be forwarded to IRAS
within 2 months from the date of service of the Notice of
Assessment. If no objection is made within the prescribed period, the
assessment will become final and conclusive

4. Collection of taxes –

Tax is payable within one month from the date of the issue of the notice of
assessment. If taxes are not paid by due date, a 5% penalty is imposed
and a demand note will be issued. If the tax is still not paid, an
additional penalty of 1% of the unpaid balance per month is
added to the total due up to a maximum of 12%

5. Advance Ruling System –

An application can be made to the IRAS for an advance ruling on the tax
treatment of the proposed business arrangements. A ruling is binding in
two ways:

♦ the ruling will only apply to the applicant and the particular
arrangement that was the subject of the ruling request and,
where applicable, to the year(s) or period(s). The applicant will
not be able to rely on a ruling given for a different arrangement,
even though the circumstances may appear to be similar, nor
can the applicant rely on a ruling given to someone else for a
similar transaction;
♦ the ruling will bind IRAS to apply those statutory provisions in
the manner set out in the ruling that has been issued

Chapter 5 – Group taxation and assessments

1. Group taxation mechanism –

♦ No mechanism exists for taxing members of the group of

companies on a consolidated basis
♦ But, there is a group relief system under which current year
unabsorbed losses, capital allowances and donations of one
company is set of against the assessable income of another
company in the same group
♦ No provision exists for inter-corporate dividends, intercorporate
transfers
Group relief is available if the group consists of Singapore incorporated
company and Singapore incorporated group members. Singapore
companies are members of the same group if –

♦ atleast 75% of the ordinary share capital in one company is

beneficially held, directly or indirectly, by the other; or
♦ at least 75% of the ordinary share capital of each of the two
companies is beneficially held, directly or indirectly, by a third
Singapore-incorporated company.

2. Assessment and administration of group –

a. Holding company – The holding company is required to

submit, its statement of account and –
♦ a consolidated statement of account of the group if it
owns more than 50% of the issued capital of its
subsidiaries; or
♦ a report of the state of affairs of the group if it owns less
than 50% of the issued capital of its subsidiaries.
b. Subsidiary company – Subsidiary of a foreign company is
not required to file accounts of its parent company, but the
amount owed to the parent and related companies should
appear in subsidiary's accounts under separate headings.

Chapter 6 – Structuring of business operations

Presence in Singapore can be set up by way of representative office, a

branch or subsidiary

1. Representative office –
♦ Approval of International Enterprise Singapore is
required
♦ Activities are limited to general support and
administration such as promotional, marketing,
information gathering and liaison work undertaken on
behalf of head office
♦ Representative office of a foreign commercial entity may
operate in Singapore for a maximum of three years from
its commencement date, provided the representative
office status is evaluated and renewed
2. Branches and subsidiaries–
♦ Branch shall be non-resident in Singapore as control
and management is with head office
♦ Subsidiary can be either resident or non-resident
depending on whether control and management is
exercised in Singapore

Notes –

♦ Depending on the tax treaty or domestic law of the resident, tax

credit or unilateral credit may be claimed. However, a subsidiary
being the resident in Singapore is entitled for tax treaty and
unilateral relief in all cases
 ♦ The investor should also consider the tax jurisdiction in the
home country i.e. whether branch losses arising in Singapore
can be set-off against head office expenses
♦ Method of profit extraction and repatriation –

Profits can be extracted from Singapore entity in the following ways –

♦ Payment of dividends
♦ Management fees or allocation of head office expenses
♦ Interest, royalty, technical assistance fees etc.
♦ Considerations to be kept in mind –
♦ Availability of tax treaty between Singapore and the
foreign country –
♦ Availability of tax treaty shall provide for lower withholding tax
on certain incomes. Further, in case of dividends, relief for
underlying tax can still be claimed if Singapore company has at
least 25% shareholding in the foreign subsidiary
♦ Whether the form of entity set up will have impact on
profit extraction and repatriation –

The form of extraction can affect the returns to the shareholders in view of
the different rates of tax that can be imposed and the amount of tax relief
that can be claimed

Chapter 7 – Restructuring and Liquidation

1. Merger and division –

Companies –

♦ Tax framework for qualifying corporate amalgamations

was introduced in the Budget for 2009 on 22 January
2009
♦ Qualifying amalgamations will be treated as a continuation of
the existing business of the amalgamating company by
the amalgamated company
♦ Qualifying amalgamation is one where the notice of
amalgamation under section 215F of the Companies Act or
the certificate of approval under section 14A of the
Banking Act is issued on or after 22 January 2009

Treatment of qualifying corporate amalgamations –

♦ All risks and benefits that exist prior to the merger are
transferred and vested in the amalgamated company
♦ Where the amalgamating company held shares in another
amalgamating company and the shares of the second company
were cancelled upon amalgamation, the first company will be
treated as having disposed of the shares for an amount
equal to the cost of shares of first company
♦ Where the amalgamated company intends to continue holding
assets taken over as investment assets, it should maintain a list
of these items as at the date of amalgamation
 ♦ Revenue assets including trading stock are generally to
be recognized at the carrying amounts, as reflected in the
amalgamating companies' books at the point of amalgamation
♦ Availability of unabsorbed capital allowances, losses and
donations (tax loss items) to the amalgamated company will
continue to be governed by the shareholding test
♦ Unabsorbed tax loss items can only be set-off against
the income of the amalgamated company from the
same trade or business as that of the amalgamating
company immediately before the amalgamation

Treatment of non-qualifying corporate amalgamations –

♦ Capital gains or losses arising on the transfer of capital assets

(including shares) would neither be taxable nor deductible
♦ If capital assets transferred pursuant to a merger qualified for
capital allowances for industrial buildings and structures or
allowances for plant and machinery, a balancing allowance
or balancing charge could arise
♦ Trading stock transferred with a trade or business pursuant to a
merger were valued for tax purposes at the actual transfer
value provided the transferee carried on, or intended
to carry on a trade or business in Singapore
♦ Interest incurred on borrowings to acquire either the shares or a
business of a company would be tax deductible

2. Liquidation –

Company –

♦ Liquidator assumes all the functions and duties of an

officer of a company
♦ Liquidator shall distribute assets of the company to its
shareholders only after making full payment of taxes
payable by the company
♦ Any income derived from trading during the liquidation
period shall be treated as business income and
assessable as such
♦ Income from the mere realization of assets is treated as capital
gains and not assessable as such
♦ Legal or professional expenses incurred during the dissolution
are not deductible business expenses

Shareholders –

u Distributions from the realization of assets are tax exempt

Capter 8 – Valuation of inventory

1. Valuation of inventory –

a. Trading stock of continuing business

♦ Basis of valuation of trading stock of a continuing
business is not provided for in the tax laws
 ♦ Generally, valuation is done based on the ordinary
commercial and accountancy principles of stock
valuation
♦ Change in the method of valuation of trading stock may
be made if taxpayer satisfies the tax authorities the
reasons for change in such method
b. Trading stock on discontinuance or transfer of
business
♦ Sale price or value of consideration given for transfer
will be taken for valuation purposes
c. Work in progress
♦ Valuation methodology not provided for in the tax laws
♦ Generally, valuation is done based on the accepted
accounting principles and decided cases
d. Depreciable asset
♦ Valued based at cost for capital allowances purposes
e. Non-depreciable asset
♦ No specific provisions provided for valuation of non-
depreciation asset like land/ goodwill
♦ However, Intellectual property rights that has
commercial value are valued at cost for capital
allowance purposes

Chapter 9 – Investment incentives

1. Investment incentives

There are various types of incentives available under the Act and the type
of incentive appropriate to the taxpayer would depends on the nature of
the business and its circumstances. List of incentives available is
summarized in the table below –

Type Requirements Incentives Relief

period
Pioneer Industry is not being Tax Upto 15
Industries carried on in Singapore on exemptions years
a scale adequate to on qualifying
Singapore's economic profits
needs and there are
prospects of development
Pioneer Companies engaged in Tax Upto 15
Service qualifying activities which exemptions years
Companies include – Any on qualifying
engineering or profits
technical services
including laboratory,
consultancy and research
and development services
Computer-based
information and other
computer related
 services The
development or
production of
industrial design
Trading in art and
antiques by auction
houses and operation
of private museum and
Such other services or
activities as may be
prescribed
Investment Companies proposing to Tax Unutilised
allowance carry out project for exemption investment
manufacturing, on allowance
research and chargeable may be
development, income equal carried
construction to approved forward
operation, improving percentage for set-off
energy efficiencies etc. not against
No minimum investment exceeding chargeable
requirement The assets for 100% of the income
which incentive is given capital
cannot be sold, leased or expenditure
otherwise disposed of incurred on
within the qualifying new plant
period of 2 years thereafter and
without minister's approval machinery,
factory
building or
acquisition
of know-how
or patent
rights
Development Companies engaged in Tax rate as 10 years
and qualifying activities which low as 5% with
expansion include Manufacturing provision
incentive or increased for
manufacturing in an extension
industry of economic not
benefit to Singapore exceeding
Engineering and 5 years at
technical services any one
including laboratory, time, up to
consultancy and research maximum
and development activities of 20 years
Computer based
information and other
computer related
services Development
or production of any
industrial design and
Other prescribed
services or activities
Royalties, Applicant must be a Exemption For the
fees and company and the recipient or reduced duration of
development is a non-resident person withholding the
contributions tax agreement

Chapter 10 - Permanent Establishment and Foreign tax credit

1. Permanent Establishment –

The definition in the domestic law closely follows that in the OECD Model
Convention. It defines a 'permanent establishment' as a fixed place at, or
through which, a person wholly or partly carries on a business. It
specifically includes the following –

♦ a place of management;
♦ a branch;
♦ an office;
♦ a factory, a warehouse or a workshop;
♦ a farm or a plantation;
♦ a mine, an oil well, a quarry or other place of extraction of
natural resources; and
♦ a building or work site or a construction, installation or
assembly project.

Further, a person will be deemed to have a permanent establishment in

Singapore if:

♦ he carries on supervisory activities in connection with a building

or a work site or a construction, installation or assembly project;
or
♦ he has another person acting on his behalf in Singapore who: –
has and habitually exercises an authority to conclude contracts;
or – maintains a stock of goods or merchandise for the purpose
of delivery on his behalf; or – habitually secures orders wholly
or almost wholly for him or for such other enterprises as are
controlled by him

For the treaty purposes, mostly definition as per OECD Model Convention
are followed

2. Relief mechanism –

A taxpayer may opt for either unilateral or bilateral relief.

♦ Unilateral relief – This are granted in the form of a tax credit

to a company resident in Singapore in respect of foreign taxes
paid in any country with which Singapore has no tax treaty
arrangements, on specified items of foreign income.
♦ Bilateral relief – This are granted on foreign income derived
from a foreign jurisdiction with which Singapore has a tax
treaty.

However, the amount of allowable foreign tax credit is limited to the lower
of Singapore tax or foreign tax payable on the foreign income, after
permissible deductions under the Singapore domestic laws

SETR is determined based basis the below mentioned formula –

SETR = Singapore tax payable before any tax credit or rebates/ chargeable
income before deducting exempt amounts

(Pertinent to note that foreign tax credit is to be made on

source-to-source and country-to-country basis)

3. Foreign tax credit pooling –

Taxpayers may elect to pool the foreign taxes paid on any item of foreign
income if following conditions are met –

♦ income tax was paid in the foreign jurisdiction from which the
foreign income is derived;
♦ the headline tax rate of the foreign jurisdiction is at least 15% at
the time the foreign income was received in Singapore;
♦ Singapore tax is payable on the foreign income; and
♦ the taxpayer is entitled to claim the foreign tax credit under the
tax law

The amount of foreign tax credit granted is the lower of total Singapore tax
payable on the foreign income and the pooled foreign taxes paid on the
foreign income.

Chapter 11 – Partnership firm and its taxation

1. General partnership – A partnership is an unincorporated body of

the following, excluding a Hindu joint family, who have agreed to combine
their skills and labour for the purposes of carrying on a business and
sharing the profits between:

♦ two or more individuals;

♦ one or more individuals and one or more corporations; or
♦ two or more corporation

The maximum number of members of a partnership is 20. Singapore

follows The Partnership Act of 1890 of United Kingdom.

Features –

♦ Partnership is not regarded as a separate entity for legal and tax

purposes
♦ Liability of each of the partners is unlimited
♦ If any partner ceases, or is about to cease, to be a partner, the
partners present in Singapore are obliged to give 1 month's
written notice to the tax authorities before the partner actually
ceases to be a partner

Taxation mechanism –
 ♦ Partnership is not charged to tax as an entity but the adjusted
income is allocated between the partners and directly included
in their taxable income
♦ Return to be filed in Form P of its income for every year of
assessment

2. Limited liability partnership – Limited liability partnership (LLP)

gives its owners the flexibility of operating as a partner while giving them
limited liability. It combines the benefits of a partnership with those of
private limited companies.

Features –

♦ For tax purposes an LLP will be treated as a partnership and not

as a separate legal entity, i.e. each partner will be liable to tax on
his share of income from an LLP
♦ If the partner is an individual, his share of income from the
partnership will be taxed based on the prevailing individual
income tax rate. If the partner is a company, its share of income
from the partnership will be taxed at the prevailing corporate
income tax rate
♦ LLP is required to report the capital contribution of its partners
in the tax return

(IRAS has issued Circular setting out the income tax treatment of limited
liability partnership, The circular gives guidance on tax treatment related
to reduction in contributed capital of partner, LLP in liquidation, property
sold to or by LLP, LLP that carries on business of making investment etc.)

3. Limited partnership –

An LP is a business structure that allows a business to operate and

function as a partnership without a separate legal personality from the
partners. It must consist of one or more general partners who have
unlimited liability and one or more limited partners who enjoy limited
liability. A partnership is deemed to be a general partnership unless one or
more partners of the partnership are registered as limited partners under
the LP Act. LPs are generally taxed in the same way as LLPs, except in
certain cases.

Chapter 12 – Trusts, Settlements and Estates

1. Trusts –

These are arrangements under which the doner/ settler transfers property
to trustees who is under a duty to deal with such property for the benefit of
the beneficiaries. Generally, trusts are set up for specific purposes.
Different types of trusts structure in Singapore –

♦ Real estate investment trust

♦ Designated unit trusts and CPF approved unit trusts
♦ Approved unit trust
 ♦ Trust funds
♦ Foreign trusts
♦ Philanthropic purpose trusts
♦ Prescribed locally administered trusts
♦ Registered business trusts

Taxation mechanism – Income from trade/ business will be taxable at

the prevailing corporate tax rate at the trust level and any distributions
from such taxed income will not be taxable on the beneficiary.

2. Settlements –

A settlement is normally set up to transfer the income or capital of a

person (the settlor) to another person (the beneficiary). Example –
Transfer of money by parent to his child's account.

The settlor by transferring the amount tries to reduce his/ her tax liability.
Income arising from the following settlement is deemed to be the income
of the setter, thereby negating the tax benefit –

Settlement for minor child, Settlement containing power of revocation or

Settlor or any relative of the settlor or any of his/ her relatives makes use
of any income or accumulated income from the settlement to which he/
she is entitled

3. Estates –

An estate is generally formed on the death of an individual. If there is a

will, the individual is said to have died testate and if no will was made, he/
she is said to have died intestate. An executor is appointed to administer
the estate until the estate is finally distributed to the beneficiaries. In the
year there will thus two basis periods, one for the deceased (from 01
January to the date of death) and another for the estate (from the date of
death to 31 December).

Taxation mechanism – For Income upto the date of death – The

executor must ascertain the income of the deceased and is responsible for
paying the tax due by using the funds from the estate. For Income
accruing during the administration period – The chargeable
income of the estate shall be determined in accordance with the provisions
of the tax laws and will be taxed at prevailing corporate tax.

■■

1. Tax exemption on specified foreign income received by resident persons

–
 General conditions for exemption -
• specified foreign income was subject to tax in foreign jurisdiction
from which income is received
• in the year the specified foreign income is received, the rate of
taxation in foreign jurisdiction is atleast 15% and
• the Comptroller of Income tax is satisfied that the tax exemption
would be beneficial to the person resident in Singapore
However, there are certain exceptions to the above general conditions
of exemptions.
2. Income received from outside Singapore would be any amount derived
from outside Singapore which is –
• remitted to, transmitted or brought into Singapore
• applied towards a debt incurred in respect of a trade or business
carried on in Singapore
• applied to purchase any movable property which is brought into
Singapore
3.Singapore does not have capital gain tax regime.
4.The method and mechanism of computation of capital allowances for
each of the movable and immovable assets may vary.