Advance Ruling Summary on Remittance rules under s 10(25)

by | Feb 3, 2021 | Income Tax, Tech News

On or about 1 Feb 2021, the Inland Revenue Authority of Singapore (IRAS) has published an Income Tax Advance Ruling Summary No. 2/2021 with regards to “Trigger point on the remittance rules under section 10(25) of the Income Tax Act “.

The subject was whether the use of a company (Company A)’s foreign-sourced dividend income from another company (Company B) to offset a non-trade related inter-company debt owing by Company A to Company B would trigger the remittance rules under section 10(25) of the Income Tax Act (s 10(25).

The Arrangement

  1. Company B declares a dividend to Company A. Company A intends to offset the foreign-sourced dividend income receivable from Company B against the non-trade related inter-company debt payable to Company B.
  2. There is no actual physical receipt / transmission / bringing of cash dividends from Company B to Company A in or into Singapore.
  3. The dividends so declared by Company B to Company A arose from capital gains derived by Company B from the sale of Company D and its subsidiaries.

The Ruling

Company A’s use of its foreign-sourced dividend income from Company B to offset the inter-company debt owing by Company A to Company B does not trigger the remittance rules under section 10(25) of the SITA to the extent that:

  1. Company A’s activities remain as investment-holding company as represented;
  2. The dividends declared by Company B indeed constitutes foreign-sourced income of Company A for Singapore income tax purposes;
  3. The foreign-sourced dividends from Company B are not remitted to, transmitted or brought into Singapore from the time the foreign-sourced dividends accrues to Company A to the time the inter-company debt is repaid to Company B.

The reasons for the ruling was that Company A does not carry on any trade or business in Singapore (but as a passive investment holding company), as such, s 10(25)(b) does not apply to such a passive investment holding company; and that Company A’s proposed use of unremitted foreign-sourced dividend income to offset the non-trade related inter-company debt payable does not come within the provisions of section 10(25) of the Act.

For more information about the ruling, please go to the IRAS website.

Source: IRAS, 3 Feb 2021