Income Tax on foreign-sourced Capital Gains

On 1 January 2024, the Singapore Income Tax Act (“ITA”) was amended to incorporate a new s10L, amongst other things. Under the new s10L, Singapore will tax capital gains (“foreign sourced capital gains”) from the sale of foreign assets received in Singapore by a Singapore entity or foreign entity with a place of business in Singapore if such entity is a member of a Relevant Group (see definition below) and such Relevant Entity does not have economic substance in Singapore. Exceptions apply.

An entity which is part of a Relevant Group should determine whether the new section 10L is relevant if it holds foreign assets which disposal may trigger tax consequences in Singapore.

When is s10L ITA relevant to your entity?

S10L, ITA may be relevant if

1.Your entity is located in Singapore.
2.Your entity is considered a member of a Relevant Group;
3.Your entity does not have adequate economic substance in Singapore;
4.Your entity owns “foreign assets” held for sale;
5.The disposal of the “foreign asset” occurs on or after 1 January 2024; and
6.The “foreign-sourced capital gains” are received in Singapore.

Please note that this notice does not discuss the application or tax treatment of gains from the disposal of foreign intellectual property rights (“IPRs”) as the tax treatment of such gains are different from that for other foreign assets.

Is your Entity located in Singapore?

Your entity is generally considered as located in Singapore if it is incorporated, registered or established in Singapore. It will also be considered as located in Singapore if it is incorporated, registered or established outside Singapore but has a place of business or is operating in Singapore. A foreign entity which only makes use of banking facilities (i.e. has bank accounts) in Singapore but does not have any operations in Singapore will not be considered as being located in Singapore for purposes of s10L, ITA.

Is your Entity member of a Relevant Group?

A Relevant Group is a group of companies which either has one or more members incorporated, registered or established outside Singapore or with a place of business outside Singapore. The new s10L ITA does not apply to a group of companies whose members or operations are entirely in Singapore.

Your entity is generally considered a member of a Relevant Group if its accounts are being consolidated into the financial statements of its parent company or excluded based on size or materiality grounds or because it is held for sale.

Does your Entity have economic substance in Singapore during the Relevant Period?

Whether the “foreign-sourced capital gains” are chargeable to tax depends on whether the entity has adequate economic substance in Singapore during the year of assessment (“YA”) the sale or disposal took place.

Whether your entity has sufficient economic substance in Singapore depends on whether your entity is a pure equity holding company or not. The definition of a “pure equity holding entity” (“PEHE”) is aligned with that used in the “economic substance” legislation in most other jurisdictions i.e. an entity is considered a “PEHE” if its function is holding shares or equity interests in any other entity and its income is derived solely from the dividends or gains from such investments.

A PEHE is generally considered to have sufficient economic substance if

1.It files a return, statement or account legally required to be filed with a public authority;
2.Its operations are either managed or performed in Singapore either by its employees or outsourced service providers; and
3.It or its outsourced service providers has sufficient human resource and premises to perform those services in Singapore.

For a PEHE, having a Singapore resident director (but not a nominee director) may meet the human resource requirement. On the other hand, a registered office address not used by the PEHE’s employees or outsourced service provider to perform its income generating activities would not meet the “adequate premises” criteria. A special purpose vehicle formed to ring-fence investment risks may be able to rely on its holding company to meet the economic substance requirements.

For a non-pure equity holding entity (“non-PEHE”), whether it has economic substance in Singapore will be determined based on an analysis of its core income generating activities. Besides having its operations being managed or performed in Singapore, the following factors determine whether or not the non-PEHE has economic substance in Singapore:

1. Number of full/part-time employees or other persons performing the operations in Singapore;
2.Qualifications of those persons;
3.The business expenditure incurred in Singapore;
4.Whether key business decisions are made in Singapore.

What assets are considered foreign?

The following are generally considered foreign assets:

1.immovable property situated outside Singapore;
2.equity securities and debt securities registered in a foreign exchange;
3.unlisted shares issued by a company incorporated outside Singapore;
4.loans where the creditor is a resident in a jurisdiction outside Singapore;
5.IPRs where the owner is a resident in a jurisdiction outside Singapore.

Date of Disposal of Foreign Assets

S10L, ITA only applies to gains from disposal of foreign assets which takes place on or after 1 January 2024.

When are the “foreign-sourced capital gains” considered received in Singapore?

Under the new s10L ITA, the foreign-sourced disposal gains are chargeable to tax if they are received or deemed received in Singapore. The gains are regarded as received in Singapore if such gains meet the conditions set out in section 10L(9) of the ITA, i.e., they are:

1.remitted to, or transmitted or brought into, Singapore;
2.applied in or towards satisfaction of any debt incurred in respect of a trade or business carried on in Singapore;
3.applied to the purchase of any movable property which is brought into Singapore.

 Exclusions from the application of s10L, ITA

S10L, ITA does not apply to foreign-sourced capital gains received by banks, merchant banks, finance companies and insurers licensed in Singapore and holders of capital markets licences from the Monetary Authority of Singapore. The exclusion is also extended to companies incentivized under certain tax incentive schemes in Singapore.

Conclusion

When an entity determines that s10L ITA may be relevant, it may want to seek specific tax or legal advice if there are plans to dispose of any of its foreign assets. An advance ruling may also be obtained from the Inland Revenue of Singapore on the adequacy of the economic substance of such entity. This ruling may be sought if the proposed sale or disposal is expected to occur within 1 year from the date of application and may be valid for up to 5 YAs (including the YA of sale / disposal) and apply to subsequent sales / disposals within the ruling validity period.

This paper is not meant to be a comprehensive discussion on the application and implications of s10L, ITA. Specific advice should be obtained in respect of your specific circumstances.

Please do not hesitate to contact your relationship manager should you need further assistance.

 

境外資本利得之相關所得稅

2024年1月1日，《新加坡所得稅法》（Singapore Income Tax Act，以下簡稱「所得稅法」）經修訂爰新增若干規定。根據新增之第10L 條款，新加坡境內實體或於新加坡設有據點之境外實體，若在境外出售資產並將其所獲得之資本利得匯回至新加坡（即為「境外資本利得」），則此資本利得將被視為應稅收入。然而，此項條款僅適用於隸屬於「相關集團」（Relevant Group，請參閱下文定義）之實體；且該「相關實體」(Relevant Entity) 在新加坡未具備足夠之經濟實質（惟若干特殊情況除外）。

故此，上述隸屬「相關集團」之實體，需先確認其境外資產之處分是否會構成新加坡本地稅務之影響，再釐清是否適用新增之第10L條款。

適用所得稅法第 10L 條之實體

下列為可能適用第 10L 條規定之情況：

1.實體位於新加坡；
2.實體隸屬於某「相關集團」；
3.實體在新加坡境內未具備足夠之經濟實質；
4.實體持有可出售之境外資產；
5.實體持有境外資產之處分係於2024年1月1日或以後發生；以及
6.境外資本利得業已匯回新加坡。

敬請注意：鑒於境外智慧財產權（Intellectual Property Rights，簡稱「IPRs」）處分收益之相關稅務處理不同於其他境外資產之處分，故本通知涵蓋之範圍，係排除IPRs處分收益之應用以及其相關稅務處理。

實體是否位於新加坡？

無論係於新加坡成立、註冊或設立之實體，或於新加坡境外成立、註冊或設立但在新加坡境內設有營業據點之實體，均被視為位於新加坡境內。相反，按所得稅法第 10L 條規定，持有新加坡銀行帳戶卻未進行實質營業活動之實體，則不被視為位於新加坡。

實體是否隸屬於「相關集團」？

「相關集團」係指由一間或多間於新加坡境外成立、註冊或設立，或設有境外營業據點之公司所組成之集團。因此，位於新加坡境內之集團不得適用新增之第10L條款。

若實體隸屬其母公司編製合併財務報表之範圍，或因其規模、重大性或待售性質而被視為合併財務報表之表外項目，則該實體通常被視為隸屬於「相關集團」。

實體是否在「相關期間」(Relevant Period) 於新加坡境內具備足夠之經濟實質？

實體之「境外資本利得」是否應被視為應稅收入，取決於該實體於出售或處分境外資產之核課年度（year of assessment，簡稱「YA」）期間，是否在新加坡境內具備足夠之經濟實質。

而上述實體是否具備足夠之經濟實質，則取決於其是否為單純控股公司。所謂「單純控股公司」（Pure Equity Holding Entity，簡稱「PEHE」），與眾多其他司法管轄區對「經濟實質」之定義一致。換言之，所謂單純控股公司，即其主要功能為持有其他實體之股份與權益，且其收入主要來源為投資之股利或收益。

單純控股公司於下列情況通常被視為具備足夠之經濟實質：

1.公司依法向公家機關提交申報表、財務報表或會計帳目；
2.公司之管理或營運，係透過其員工或委外勞務提供者，於新加坡境內進行；以及
3.公司或委外勞務提供者，皆於新加坡境內具備足夠人力與營業處所用以提供服務。

就單純控股公司而言，聘僱新加坡常駐董事（非名義董事）即可滿足前述人力之要求。此外，若單純控股公司之員工或委外勞務提供者，未於其註冊之營業地址進行可產生收益之營業活動，則該處所則不得視為「適當營業處所」。此外，為防範投資風險而成立之特殊目的公司，或可利用其控股公司之情況，用以判斷是否符合具備足夠經濟實質之規定。

非單純控股公司（Non-pure Equity Holding Entity，簡稱「non-PEHE」），於新加坡境內是否具備經濟實質，則取決於其產生收益之主要營業活動之性質。除開於新加坡境內管理或進行營業活動外，下列因素亦可影響非單純控股公司是否於新加坡境內具備足夠經濟實質：

1.執行營業活動之全職及兼職新加坡員工人數；
2.前述員工之專業資歷；
3.於新加坡境內發生之營業相關支出；
4.實體關鍵營運決策之制定是否發生於新加坡境內。

境外資產之定義

符合下列條件之資產通常被視為境外資產：

1.位於新加坡境外之不動產；
2.以外幣註冊之股權及債權憑證；
3.於新加坡境外成立之公司之非公開發行股份；
4.由非新加坡居民所提供之貸款；
5.由非新加坡居民持有之智慧財產權。

境外資產之處分日期

於2024年1月1日或以後處分境外資產之資本利得，均適用所得稅法第10L條。

 「境外資本利得」將於何時被視為已匯回新加坡？

按所得稅法第10L條規定，任何已匯回或視同匯回新加坡之境外資本利得，均被視為應納稅收入。此外，符合下列條件（截錄自第10L條第9節）之收益，均被視為已匯回新加坡：

1.被匯入、轉入或帶入新加坡境內；
2.用以償付新加坡境內交易或業務所產生之債務；
3.用以購買任何進口新加坡之資產（非不動產）。

 排除適用所得稅法第10L條之情況

於新加坡獲得營業許可之銀行、商業銀行、金融與保險公司以及新加坡金融管理局 (Monetary Authority of Singapore) 發放之資本市場許可證之持有者，其境外資本利得均不適用所得稅法第10L條。此外，參與特定新加坡稅收獎勵計畫之公司亦不適用。

總結

若實體認為可能適用所得稅法第10L條，則應於規劃其境外資產之處分前，諮詢相關稅務或法律建議；亦可就該實體經濟實質之充分性，向新加坡稅務局申請稅務預先核釋。前述之預先核釋，可於預計出售或處分資產之前一年內提交申請。該核釋之有效期間係自申請日起後續五個課稅年度（含出售或處分之課稅年度），並適用後續所有於有效期間內出售或處分之交易。

敬請注意，本文僅為所得稅法第10L條應用及影響之概要說明，具體情況應另尋求專業之建議。

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