tax

• Income vs Capital Gain

  Fixed capital: assets used in a business to produce income (capital receipt): non-taxable

  Circulating capital: assets that are continuously circulated (revenue receipt): taxable
• How to determine the nature of receipts

  • Revenue in nature: Receipts that are recurrent, Receipts in lieu of trading receipts

  Capital in nature: Sale of business assets/ fixed capital, Destruction of profit-making apparatus, Compensation for destruction of means of producing income

  
• Source of trade income

  Trading in Singapore: sourced in Singapore (taxable)

  Having a permanent establishment in Singapore

  Trading with Singapore: sourced outside Singapore (non-taxable)
• S10(1)(a): Profession or Vocation

  Self-employed: Control over what/where/when/how work is done

  Employed: Consists of a master-servant relationship
• S10(1)(b) Employment Income


  Sourced in Singapore if the employee works in Singapore

  ALL gains and profits derived by an employee in respect of his employment are TAXABLE (including benefits, be it in cash or in kind), unless they are specifically exempt from income tax or are covered by an existing administrative concession
• Cash Income


  • Salary and wages

  Commission

  Director's fees

  Allowances

  Reimbursement

  Bonus

  Other lump sum payments (retirement gratuity, sign-on bonus, awards)
• Non-taxable Benefits-in-kind


  • Staff uniforms

  Coffee/tea/biscuits in pantry

  Staff training

  Benefits for employees to foster goodwill

  Medical and dental benefits

  Gifts for special occasions and festive season (entire amount taxable if more than $200; non-taxable for bereavement)

  Staff discount (entire amount taxable if more than $500)

  Beneficial loans extended by employer to non-director employees
• Taxable Benefits-in-kind


  • Accommodation

  Home leave and relocation passages

  Stock options

  Company cars

  Children's school fees

  Country clubs

  Paid holidays

  Excess CPF contributions
• S10(1)(d) Dividends, Interest, or Discounts


  Dividends: Sourced in Singapore if the company is a Singapore resident. Singapore dividends are tax-exempt, overseas dividends are taxable on remittance.

  Interest Income: Assessable when sourced in Singapore (i.e. where the money is lent). Accrues on the date when the interest becomes due or payable to taxpayer.
• Types of fees


  • Children's school fees
  • Country clubs
  • Entrance fees – taxable at full amount for individual membership
  • Subscription fees – taxable at portion of personal use, business use not taxable
• Paid holidays


  Taxable benefit
• Excess CPF contributions


  Taxable; excess contribution by the employer (e.g. 3% taxable if employer contributes 20% instead of 17%) is deemed to be income of employee
• Dividends


  Sourced in Singapore if the company is a Singapore resident
• Types of Singapore dividends

  • Dividends from a Singapore resident company: tax-exempt
  • Dividends from co-operatives (e.g. NTUC Fairprice Co-operative): taxable
• Types of overseas dividends

  • Individual: not taxable; individuals are not taxed on overseas income
  • Companies: taxable on remittance
• Interest Income


  Assessable when sourced in Singapore (i.e. where the money is lent). Accrues on the date when the interest becomes due or payable to taxpayer
• Interest income taxation


  • Under s10(1)(d) if NOT trading receipt/ business income
  • Under s10(1)(a) if recipient of interest income is a bank or financial institution
• Tax exempt if interest is derived by an individual from deposit with an approved bank or licensed finance company [s13(1)(zd)]
• Pension


  Tax exempt if granted on retirement by government or employer (approved pension scheme). Otherwise, taxable
• Charge


  Payment secured by legal instrument on income of the payer
• Types of charges


  • Child support received by child or parent: not taxable
  • Alimony: tax exempt
• Annuity


  Inheritance, insurance retirement savings plan, or retirement annuity purchased by employer
• Taxable annuities


  • Any annuity purchased by the employer of an individual in lieu of any pension or other benefit payable during his employment or upon his retirement
  • Any annuity purchased under SRS
• Rental Income


  Assessed on an accrual basis (i.e. not when the rent is received, but when it is due)
• Sources of rental income

  • Immovable property (e.g. land, building): where it is located
  • Movable property (e.g. machinery): where it is mostly being used
• If rental income is not classified as trade income, any excess of expenses over income is NOT a trade loss → cannot be carried forward nor be used to offset against any other sources of income (e.g. employment income)
• Rental loss of one property can be used to offset against the taxable rental income of another property in the same YA only if all the rented-out properties have been rented out at market rate (i.e. loss from A can be used to offset taxable income from B and C)
• Options for individuals receiving rental income from residential properties

  • Actual rental expense
  • Deemed rental expense (15% of gross rental income + interest expense)
• In calculation of actual rental expense, new capital items are NOT deductible
• Royalty


  Payment from others for use of your intellectual property (IP)
• Royalty is taxable when it is due and payable
• Concessionary treatment for authors and composers

  Lower of: 10% of gross royalties, OR net royalties. Does not apply to royalties or payment received for any work published in any newspaper or periodical
• Premium


  A once-off payment made by a lessee to a landlord at the time when the lease agreement is entered into, to secure the rental
• Premium is taxable when it is due and payable
• S10(1)(g) Any other income


  "Catch all" section, for things like referral fees, commission received for an occasional introduction of a buyer to a seller in a real property transaction
• Examples of exempt income under S13

  • Profits from operation of Singapore ships
  • Interest income of non-resident companies and individuals (from approved financial institutions)
  • Singapore dividends
  • Death gratuities
  • CPF withdrawals
  • Government pensions
  • Distributions from REITs (individuals only)
  • Distributions from registered business trusts
  • Insurance annuities
  • Overseas income of individuals
• Deductible Expenses


  • The expense is a revenue expenditure, NOT a capital expenditure
  • The expense is wholly and exclusively incurred in the production of income (s14)
  • The expense is not disallowed under s15
  • The expense is not subjected to restrictions under s14
• "Enduring benefit" test


  Does the expenditure bring into existence an asset or an advantage that is enduring? Yes = capital nature, not deductible
• "Period benefit" test


  Does the expenditure provide benefit ONLY for that period? Yes = revenue nature, deductible
• Repairs


  • Repairs to remedy pre-acquisition defects are capital expenses
  • Deferred repairs performed on income-earning asset are revenue expenses