On or about 30 Jun 2020, the Inland Revenue Authority of Singapore (IRAS) has published an Income Tax Advance Ruling Summary No. 3/2020 with regards to “Expenditure incurred to acquire a new business”.
The Subject was whether:
- Whether company may claim a deduction of the expenses it will incur for the acquisition of the distribution business and headquarter functions for the South Asian region (the “relevant business”) from its immediate holding company (“Company B”) under section 14(1) of the SITA; or
- Whether company may claim writing down allowances, over a period of five years, in respect of the expenses it will incur for the acquisition of the relevant business from Company B.
It was ruled that:
If the company undertake new business activities pursuant to the transfer of the relevant business, then it represents a significant change to the current operational model. The expenses that it will incur in acquiring the relevant business are capital in nature, accordingly, the expenses are not tax deductible as provided under section 15(1)(c) of the SITA.
The expenses that company incur in acquiring the relevant business would not qualify for writing down allowances, as there is no specific provision in the SITA that grants allowances in respect of expenditure incurred for the acquisition of a business.
For more information about the ruling, please go to the IRAS website.
Source, IRAS, 1 Jul 2020