SINGAPORE Law and Practice Contributed by: Yang Shi Yong, Drew & Napier LLC
jurisdiction. This tax treatment is subject to certain exceptions, and it applies regardless of whether such non-local holding company owns the shares of a local corporation. 5.4 Tax Implications of Change of Control For corporate income tax purposes, Singapore does not have any change of control provisions. However, it is likely that the shareholding test in rela - tion to loss relief (refer to 2.4 Loss Relief ) and the 75% shareholding requirement in relation to group relief (refer to 2.6 Consolidated Tax Grouping ) will not be satisfied upon a change of control. A change of control event may also have additional conveyance duty implications where the company in question is a property holding entity for stamp duty purposes. 5.5 Formula-Based Income Attribution No mandatory formulas are used to determine the income of foreign-owned local affiliates selling goods or providing services. The usual transfer pricing prin - ciples apply. 5.6 Deductibility of Intra-Group Management and Administrative Charges Deduction is generally allowed if the expense is rev - enue in nature, and is incurred wholly and exclusively in the production of income. Local affiliates will not be able to claim a tax deduction on management and administrative expenses incurred by a non-local affili - ate. 5.7 Restraints on Related-Party Borrowing For cross-border loans, the interest rate of a related- party loan has to be based on the arm’s length princi - ple. The arm’s length principle is the interest rate that would be charged if unrelated parties were dealing independently with one another in comparable cir - cumstances. 6. Taxation of Foreign Income of Local Corporations 6.1 Foreign Income Exemptions Foreign income derived from outside Singapore is tax - able if it is:
• remitted to, transmitted or brought into Singapore; • used to repay any debt incurred for a Singapore trade or business; and • used to purchase any movable property which is brought into Singapore. Nonetheless, subject to meeting certain conditions, foreign-sourced dividends, foreign branch profits and foreign-sourced service income are tax exempt. Fur - ther, where the foreign income is taxed in both the foreign jurisdiction and Singapore, tax reduction or exemption may be available under the relevant DTAs. 6.2 Non-Deductible Local Expenses There are generally no deductions allowed against foreign exempt income. 6.3 Dividends From Foreign Subsidiaries Dividends from foreign subsidiaries of Singapore tax- resident corporations are tax exempt where they fulfil the following conditions: • the dividends are subject to tax of a similar char - acter to income tax or qualified domestic minimum top-up tax (but disregarding any excluded top-up tax) under the law of the jurisdiction in which the foreign subsidiaries are incorporated; • at the time the dividends are received in Singa - pore by the Singapore tax-resident corporation, the highest rate of the aforementioned tax (but disregarding any excluded top-up tax or qualified domestic minimum top-up tax) on any gains or any profits from any trade or business carried on by any company in the aforementioned foreign juris - diction is not less than 15%; and • the Comptroller is satisfied that the tax exemption would be beneficial to the Singapore tax-resident corporation. The Minister for Finance also retains the discretion to grant tax exemptions on foreign-sourced income on a case-by-case basis. 6.4 Taxation of Intangibles Developed by Local Corporations Although the Act does not define “royalties”, the Eco - nomic Expansion Incentives (Relief from Income Tax) Act 1967 (which is to be construed as one with the
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