Determining if Foreign-Sourced Disposal Gains Fall Within S10L of ITA

Notes

1. Movable or immovable property is situated outside Singapore if:

(a)    any immovable property, or any right or interest in immovable property, is physically located outside Singapore

(b)    any tangible movable property, or any right or interest in such property, that is not the subject of any paragraph below, is physically located outside Singapore

(c)    ship or aircraft, or any right or interest in a ship or aircraft, is situated outside Singapore if the owner, or the person entitled to the right or interest, is resident in a jurisdiction outside Singapore

(d)    a secured or unsecured debt (other than a judgment debt or securities), or any right or interest in such secured or unsecured debt, is situated outside Singapore if the creditor is resident in a jurisdiction outside Singapore

(e)    a judgment debt, or any right or interest in a judgment debt, is situated outside Singapore if the judgment is recorded outside Singapore

(f)     any shares, equity interests or securities issued by any municipal or governmental authority, or by any body created by such authority, or any right or interest in such shares, equity interests or securities, are situated outside Singapore if the authority is established outside Singapore

(g)    subject to paragraph (f), any shares in or securities issued by a company, or any right or interest in such shares or securities, are situated outside Singapore if the company is incorporated outside Singapore

(h)    subject to paragraph (f), any equity interests in any entity which is not a company, or any right or interest in such equity interests, are situated outside Singapore if the operations of the entity are principally carried on outside Singapore

(i)     subject to paragraph (f) (and despite paragraphs (g) and (h)), any registered shares, equity interests or securities, and any right or interest in any registered shares, equity interests or securities, are situated outside Singapore if they are registered outside Singapore or, if registered in more than one register, if the principal register is situated
outside Singapore

(j)     goodwill relating to a trade, business or profession is situated outside Singapore if the trade, business or profession is principally carried on outside Singapore

(k)    any IPR, or any licence or other right in respect of any IPR, is situated outside Singapore if the owner of the IPR, licence or right is resident in a jurisdiction outside Singapore

(l)      any intangible movable property, or any right or
interest in any intangible movable property, that is not the subject of any
paragraph above, is situated outside Singapore if the ownership rights in
respect of the property, right or interest is primarily enforceable in a
jurisdiction outside Singapore.

2.  An "entity" refers to: 

(a)  any legal person (including a company, limited liability partnership) but not an individual

(b)  a general partnership or limited partnership, or

(c)  a trust.

3.    The time when the foreign asset vests in the buyer or transferee under the law governing the sale or disposal, is treated as the time of the sale or disposal of the foreign asset. 

4.    An entity is a member of a group of entities if its assets, liabilities, income, expenses and cash flows are: 

(a)   included in the consolidated financial statements of the parent entity of the group.

(b)    excluded from the consolidated financial statements of the parent entity of the group solely on size or materiality grounds or on the grounds that the entity is held for sale. 

5. A branch or permanent establishment is considered a place of business outside Singapore. 

6. The economic substance requirement is assessed at the entity level.  

(a)   A pure equity-holding entity is considered to have met the economic substance requirement if it satisfies all the following conditions in the basis period in which the sale or disposal occurs: 

       (i)  the entity submits to a public authority any return, statement or account required under the written law under which it is incorporated or registered, being a return, statement or account which it is required by that law to submit to that authority on a regular basis

       (ii) the operations of the entity are managed and performed in Singapore (whether by its employees or outsourced to third parties or group entities), and 

       (iii) the entity has adequate human resources and premises in Singapore to carry out the operations of the entity. 

(b)   A non-pure equity-holding entity is considered to have met the economic substance requirement if it satisfies all the following conditions in the basis period in which the sale or disposal occurs: 

(i)     the operations of the entity are managed and performed in Singapore (whether by its employees or outsourced to third parties or group entities), and

(ii)    the entity has adequate economic substance in Singapore, taking into account the following considerations:

A.     the number of full-time employees of the entity (or other persons managing or performing the entity's operations) in Singapore

B.     the qualifications and experience of such employees or other persons

C.     the amount of business expenditure incurred by the entity in respect of its operations in Singapore

D.     whether the key business decisions of the entity are made by persons in Singapore.

7.   The prescribed financial institutions are:   

      (a)  a bank licensed under the Banking Act 1970

      (b)  a merchant bank licensed under the Banking Act 1970

      (c)   a finance company licensed under the Finance Companies Act 1967

      (d)  an insurer licensed or regulated under the Insurance Act 1966, or

      (e)   a holder of a capital markets services licence under the Securities and Futures Act 2001.

8.  The tax incentives are:   

     (a)    Aircraft Leasing Scheme under Section 43N of the ITA

     (b)   Development and Expansion Incentive under Part 4 of the Economic Expansion Incentives         (Relief from Income Tax) Act 1967 (EEIA)

     (c)     Finance and Treasury Centre Incentive under Section 43E of the ITA

     (d)     Financial Sector Incentive under Section 43J of the ITA

     (e)     Global Trader Programme under Section 43I of the ITA

     (f)       Insurance Business Development Incentive under Sections 43C and 43R of the ITA 

     (g)      Maritime Sector Incentive under Sections 13A, 13E, 13P, 43L, 43P, 43Q and 43U of the ITA

     (h)      Pioneer Certificate Incentive under Parts 2 and 3 of the EEIA.

9.  A qualifying Intellectual Property Right (IPR) refers to:    

     (a)    Any patent under the Patents Act 1994 or the equivalent law of any country or       territory.

     (b)   An application for a patent under the Patents Act 1994 or the equivalent law of       any country or territory 

     (c)   any copyright subsisting in software by virtue of the Copyright Act 2021 or the         equivalent law of any country or territory, and includes a family of qualifying             IPRs.

10.   The modified nexus approach is an international standard set by the Organisation for Economic Co-operation and Development (OECD), which permits jurisdictions to provide tax benefits to the income arising out of a qualifying IPR, so long as there is a direct nexus between the
income receiving benefits and expenditures contributing to that income. The modified nexus ratio is applied to calculate the portion of disposal gains that will not be subject to tax when received in Singapore by the entity. Please refer to the Inland Revenue Authority of Singapore (IRAS) e-Tax Guide “Income Tax: Tax Treatment of Gains or Losses from the Sale of Foreign Assets” for details.