On or about 2 Nov 2020, the Inland Revenue Authority of Singapore (IRAS) has published an Income Tax Advance Ruling Summary No. 11/2020 with regards to “Whether the use of unremitted foreign sourced income towards capital reduction constitutes deemed remittance into Singapore”.
The Ruling
The Company’s use of unremitted foreign-sourced interest income from its bank account outside Singapore towards the proposed capital reduction exercise under the Companies Act to its shareholder’s bank account outside Singapore does not constitute a deemed remittance under section 10(25) of the Singapore Income Tax Act, subject to the following conditions:
- The foreign-sourced income indeed constitutes foreign-sourced income of the Company for Singapore income tax purposes;
- The remittance of funds from the Company’s bank account outside Singapore to its shareholder’s bank account outside Singapore is indeed for the purposes of the capital reduction exercise made directly to the shareholder without involving any physical remittance or transmission of funds by the Company into Singapore;
- The foreign-sourced interest income is not in fact amounts:
- applied in or towards satisfaction of any debt incurred in respect of a trade or business carried on in Singapore by the Company;
- applied by the Company to purchase any movable property which is brought into Singapore; or
- constituting foreign-sourced income of the Company, which had already been remitted to, transmitted or brought into Singapore from the time the foreign-sourced income was accrued to the Company to the time it was transmitted to the shareholder’s offshore bank account.
For more information about the ruling, please go to the IRAS website.
Source, IRAS, 4 Nov 2020