On 16 November 2018, the Inland Revenue Authority of Singapore (IRAS) has updated the Second Edition of the e-Tax guide on Tax Treatment Arising from Adoption of FRS 115 or SFRS(I) 15 – Revenue from Contracts with Customers that replaces the First edition published on 12 January 2018.
The adoption of FRS 115 will affect the way entities recognise their revenue and hence have certain income tax implications. In this connection, the Inland Revenue Authority of Singapore (IRAS) had previously issued a public consultation paper in October 2015 to provide guidance on their position regarding such income tax implications, and on 12 January 2018, the First edition of e-Tax guide includes guidance on the tax treatment arising from the adoption of FRS 115 that incorporates the feedback given by the public that was accepted by IRAS.
A new section 34I of the Income Tax Act has also legislated in October 2017 that sets out the tax treatment of transitional adjustments arising from the adoption of FRS 115. It provides for the tax treatment of the transitional gains or losses in the year of assessment (YA) relating to the year in which FRS 115 is first adopted (initial YA) based on the tax rates applicable to the entity for the initial YA.
The updates and amendments are as follows:
- Updated references to FRS 115 in the e-Tax guide (including the title) to also include references to SFRS(I) 15, to clarify that the tax treatment for entities adopting the FRS 115 will also apply to those adopting SFRS(I) 15 for accounting purposes
- Updated Annex 2:
- Updated Examples 3 and 4 to show how “D” and “E” in Section 34I of the ITA are computed (as also shown in the new Example 5)
- Added Example 5 to show the tax treatment for transitional adjustments for an entity with nil chargeable income arising from losses
Section 34I of the Income Tax Act (ITA) and this e-Tax guide apply if one prepares or maintains financial accounts for any basis period for a year of assessment in accordance with FRS 115, or SFRS(I) 15 for the first time.
Source: IRAS website, 20 November 2018