SINGAPORE LAW AND PRACTICE Contributed by: Jeffrey Lim, Daniel Lim, Frederick Tay, Genevi Lim, Lakshmanan Anbarazan, Sarah Lai, Stephanie Goh and Tobias Andreas Satria, Joyce A. Tan & Partners LLC
“Tax-preferred” vehicles The following types of vehicles can be considered “tax-preferred” due to their tax benefits: • Variable Capital Companies (VCC) and Family Offices: Tax incentives under s 13O and s 13U of the ITA can apply. A VCC consisting of sub-funds is still considered a single entity for income tax purposes. • Finance and Treasury Centre: Qualifying treasury activities may enjoy an 8% or 10% concessionary tax rate. • Global Trader Programme: Qualifying income may Singapore does not impose special anti-avoidance rules only on certain types of FDI, but rather has imple - mented rules and requirements to deter tax evasion in respect of foreign-related and cross-border struc - tures, a non-exhaustive list of which is set out below: • GAAR; • SAAR; • ITA Provisions on Transfer Pricing (Supplemented by IRAS’ Transfer Pricing Guidelines): (a) Section 34D and Section 34E provide that if a transaction is not made at arm’s length, the Tax Comptroller may adjust income, deductions or losses. (b) Section 34F mandates certain transfer pricing documentation. • Domestic Top-up Tax (DTT) and Multinational Enterprise Top-up Tax (MTT): enjoy a 5% to 15% tax rate. 9.5 Anti-Evasion Regimes (a) As of 1 January 2025, DTT and MTT were implemented to address base erosion and profit shifting (BEPS) issues. (b) DTT allows a jurisdiction to top up the tax collected from multinational enterprise (MNE) groups operating in its jurisdiction to 15%. (c) MTT allows the topping up of the tax rate imposed on a parent of an MNE group in a jurisdiction to 15% if the minimum effective tax rate on its subsidiaries in another jurisdiction is less than 15% – this enables Singapore to tax lower-taxed foreign profits of MNE group parents in Singapore.
(b) exemption schemes are available for qualify - ing newly incorporated companies for their first three consecutive years of assessment (YA) and, subsequent to these three YAs, partial tax exemptions are available for all qualifying companies. 9.4 Tax on Sale or Other Dispositions of FDI Taxable Status of Gains From Sale or Other Disposition of FDI Generally, gains that are capital in nature are not sub - ject to tax, except where otherwise provided by the ITA. Notable instances where gains from sales or disposi - tions of FDI are taxable are where: • the acquisition and/or disposal of assets is con - sidered to constitute the carrying on of a trade or business by a company – gains arising therefrom are considered as income and thus taxable; never - theless, determining the nature of a particular gain is a fact-specific inquiry; and • gains from the sale or disposal of foreign assets by an entity of a relevant group on or after 1 January 2024 are received in Singapore from outside Singa - pore – per s 10L of the ITA, such gains are treated as income chargeable to tax under s 10 (1)(g) of the ITA, unless exceptions apply; s 10L applies only if the aforesaid gains: (a) would not otherwise be considered as income in nature under s 10 (1) of the ITA; or (b) would otherwise be tax-exempt under the ITA. Tax Benefits “Blocker” corporations There is no tax regime in Singapore that specifically targets and benefits “blocker” corporations. However, setting up an offshore or tax-exempt “blocker” corpo - ration may allow a company to achieve several favour - able outcomes, including: • reductions or exemptions on WHT via DTTs; and • exemptions via the foreign-sourced income exemption, wherein foreign branch profits and foreign-sourced dividends or service income remit - ted into Singapore are exempt from tax under s 13 (8) of the ITA
553 CHAMBERS.COM
Powered by FlippingBook