SINGAPORE Law and Practice Contributed by: Yang Shi Yong, Drew & Napier LLC
Act) defines “royalties or technical assistance fees” to include any consideration for the use of, or the right to use, copyright, scientific works, patents, designs, plans, secret processes, formulae, trade marks, licences or other like property or rights. If the royalties are accrued in or derived from Singa - pore, they will be subject to Singapore corporate tax even if the intangibles were used by non-local subsidi - aries. The Act also deems royalties to be derived from Singapore if such payments are borne by a Singapore tax resident or Singapore permanent establishment, or are deductible against any income sourced in Sin - gapore. 6.5 Controlled Foreign Corporation-Type Rules Singapore does not implement any controlled foreign corporation (CFC) rules. 6.6 The Substance of Non-Local Affiliates Singapore does not have any rules relating to the sub - stance of non-local affiliates. 6.7 The Sale of Shares in Non-Local Affiliates Revenue gains on the sale of shares in non-local affili - ates will be taxable. Capital gains will also be taxable in certain circumstances – refer to 5.3 Capital Gains of Non-Residents . Whether the gains are revenue or capital in nature depends on the facts and circum - stances of each case. The “badges of trade” test may also be applied – refer to 2.7 Capital Gains . However, the Act provides certainty on the exemption of tax on gains arising from the disposal of ordinary shares in the non-local affiliate. The conditions are: • the disposal happened between 1 June 2012 and 31 December 2027 (both dates inclusive); and • the divesting local corporation legally and benefi - cially owned at least 20% of the non-local affili - ate for a continuous period of at least 24 months immediately before the disposal. This tax exemption does not apply to certain situa - tions such as where a non-local affiliate is not listed and:
• is in the business of trading immovable properties; • principally carries on the activity of holding immov - able properties; or • has undertaken property development (except where the immovable property is used by the non- local affiliate to carry on its trade or business, and the non-local affiliate did not undertake any proper - ty development for at least 60 consecutive months before the disposal of shares).
7. Anti-Avoidance Provisions 7.1 Overarching Provisions
There are general anti-avoidance provisions in most of Singapore’s tax legislation including the Act, the Goods and Services Tax Act 1993 and the Stamp Duties Act 1929. Generally, the anti-avoidance provi - sion applies to any arrangement where the purpose or effect of such arrangement is: • to alter the incidence of any tax that is payable or would have been payable by any person; • to relieve any person from any liability to pay tax or to make a return; or • to reduce or avoid any liability imposed or which would have been imposed on any person. The Comptroller has the power to disregard or vary the arrangement and make any appropriate adjust - ment to counteract any tax advantage obtained or obtainable by that person under the arrangement. However, the anti-avoidance provision does not apply where an arrangement is carried out for bona fide commercial reasons and does not have as one of its main purposes the avoidance or reduction of tax.
8. Audit Cycles 8.1 Regular Routine Audit Cycle
The Comptroller conducts routine audits according to compliance risk and by randomly selecting taxpayers according to industry sectors. The industries or areas of concern may be announced beforehand and letters highlighting common mistakes made by taxpayers in that industry may be issued to facilitate self-reviews
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