Recent Income Tax Updates

by | Mar 9, 2026 | Accounting, Income Tax, Tech News

This technical note summarizes key legislative amendments and administrative updates to Singapore’s corporate tax regime, effective from specified Years of Assessment (YAs), alongside compliance best practices and the prevailing penalty framework.

1. Section 10L: Taxation of Gains from Foreign Asset Disposals

The Income Tax Act has been amended to subject gains from the disposal of foreign assets to tax, addressing international tax avoidance risks where disposal gains are not taxed in the absence of substantive economic activities in Singapore. The amendment is legislated under Section 10L and applies to gains from the sale or disposal of foreign assets occurring on or after 1 January 2024. Such gains are chargeable to tax under Section 10(1)(g).

1.1 Scope of Application

Section 10L applies to gains from the disposal of any movable or immovable property situated outside Singapore, including but not limited to:

  • Immovable property outside Singapore;

  • Equity and debt securities listed on a foreign exchange;

  • Unlisted shares of a company incorporated outside Singapore;

  • Loans where the creditor is resident outside Singapore;

  • Intellectual property rights (IPRs) where the owner is resident outside Singapore.

The gain becomes chargeable to tax only when it is received in Singapore. Receipt includes remittance, transmission, or bringing into Singapore; application to discharge any debt incurred for a trade or business carried on in Singapore; or application to purchase movable property brought into Singapore.

1.2 Relevant Group Definition

Section 10L applies only to entities that are members of a “relevant group.” A group is relevant if:

  • Not all entities in the group are incorporated, registered, or established in Singapore; or

  • Any entity in the group has a place of business outside Singapore.

An entity is a member of a relevant group if its assets, liabilities, income, expenses, and cash flows are included in the consolidated financial statements of the group’s parent entity.

Examples of affected entities include a Singapore company with a foreign branch (which constitutes a place of business outside Singapore) and a group comprising a Singapore company and a foreign-incorporated company.

1.3 Exclusion and Economic Substance Requirement

Section 10L does not apply to gains from the disposal of a foreign asset if:

  • The asset is used by a prescribed financial institution or an entity under specified tax incentives; or

  • The disposing entity meets the Economic Substance Requirement (ESR) in Singapore.

The exclusion does not apply to the disposal of foreign IPR. Gains from the sale of foreign IPR are always within the scope of Section 10L.

Economic Substance Requirement:

  • Assessed at the entity level.

  • Pure Equity Holding Entity: Functions to hold shares and earns only dividend income or incidental income. Must demonstrate operations managed and performed in Singapore (by employees or arm’s length outsourced third parties) and regular tax return filings in its jurisdiction of incorporation.

  • Non-Pure Equity Holding Entity: Must demonstrate operations managed and performed in Singapore.

1.4 Computation and Treatment

  • Non-IPR Foreign Assets: Gains computed as sales proceeds less expenses incurred to acquire, create, or improve the asset (provided such expenses were not previously allowed as deductions or capital allowances). Losses on disposal are deductible.

  • Foreign IPR:

    • Non-Qualifying IPR: Full gain subject to tax upon receipt.

    • Qualifying IPR (patents, patent applications, software copyrights): Modified Nexus Ratio applies to determine the portion of gain not subject to tax, capped at 100 percent.

  • Losses: Deductible only if the corresponding gain would have been subject to tax under Section 10L. Losses may be set off only against foreign source disposal gains chargeable to tax and may be carried forward.

1.5 Administrative Matters

  • The Comptroller may adjust gains where a foreign asset is sold below open market price.

  • Foreign Tax Credit (FTC) may be claimed for foreign taxes paid on such gains.

  • Taxpayers must maintain a schedule in the tax computation showing gain or loss calculations; for IPR, the Modified Nexus Ratio calculation must be included.

  • Advance rulings on ESR compliance may be obtained, valid for up to five YAs.

2. Section 14M: Renovation and Refurbishment Deduction

Effective YA 2025, the deduction framework for qualifying renovation and refurbishment (R&R) expenditure has been enhanced.

  • Expanded Scope: Qualifying expenditure now includes designer fees and professional fees, provided they are not related to structural works requiring approval from the Commissioner of Building Control.

  • Fixed Three-Year Period: The deduction period is fixed as YA 2025 to YA 2027. Businesses whose existing three-year claim period does not align with this fixed window receive a refreshed expenditure cap of $300,000 for YA 2025 to YA 2027.

  • Option to Claim in One Year: Businesses may elect to claim qualifying R&R expenditure in a single YA instead of spreading it over three years. The election is made on a year-by-year basis.

3. Front-End Fees: Tax Deductibility

Effective YA 2023, tax deductions for front-end fees (FEFs)—amounts paid to a lender at the commencement of a borrowing term, equivalent to interest—are allowed based on loan type.

3.1 Bilateral and Club Loans

For loans from a single lender or a small group of lenders on a “take and hold” basis, IRAS is prepared to treat the full FEF amount as deductible, subject to:

  • The loan facility is drawn down by the end of the basis period;

  • The FEF is incurred in the basis period for which deduction is claimed;

  • Loan documents do not indicate an intention to sell down the loan or provide underwriting services;

  • The FEF does not include fees for services.

3.2 Syndicated Loans

For syndicated loans (involving an arranger and underwriting services), IRAS is prepared to allow a deduction of 55 percent of the FEF, subject to the same conditions except the prohibition on sell-down or underwriting. Taxpayers seeking a higher deduction must clearly demonstrate the computation in the tax return using the prescribed formula.

Documentary evidence and loan type details must be maintained in tax computations.

4. Tax Compliance: Best Practices and Penalty Framework

4.1 Best Practices

  • Internal Controls: Maintain distinct accounting codes for capital versus revenue expenses, and for income subject to different tax rates.

  • Staff Knowledge: Ensure personnel are conversant with Singapore income tax requirements.

  • Record Keeping: Retain business records for at least five years from the relevant YA (e.g., for YA 2025, until 31 December 2029).

  • Timely Filing: File Estimated Chargeable Income (ECI) within three months of the accounting period end. File Income Tax Returns by 30 November (or 15 December for companies or tax agents using approved software for YA 2023 to YA 2027).

  • Timely Payment: Settle taxes on time to avoid late payment penalties.

  • Audit Cooperation: Provide complete, accurate, and relevant information within agreed timelines.

4.2 Penalty Framework

  • Section 95(1) (Incorrect return without intent to evade): Penalty upon conviction is 100 percent of tax undercharged.

  • Section 95(2) (Incorrect return with intent to evade): Penalty upon conviction is 200 percent of tax undercharged, with possible fines and/or imprisonment.

  • Composition Offers: IRAS may offer a composition sum in lieu of prosecution, considering the reason for error, taxpayer diligence, compliance history, and cooperation.

4.3 Voluntary Disclosure Program

  • Grace Period: Composition sum waived for inadvertent errors where voluntary disclosure is made within one year of the filing deadline.

  • Post-Grace Period: A 5 percent composition sum on the tax undercharged applies.

  • Wilful Intent: A composition sum of 200 percent of tax undercharged may be offered, subject to self-initiated disclosure, full cooperation, and full payment of taxes and the composition sum.

Detailed guidance, including e-Tax guides, e-learning videos, and user guides, is available on the IRAS website. Structured workshops and seminars are also offered through IRAS, the Singapore Chartered Tax Professionals (SCTP), and the Tax Academy.

Source: SCTP seminar, 9 March 2026