Singapore Releases New e-Tax Guide for Business Trusts

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SINGAPORE – The Inland Revenue Authority of Singapore (IRAS) has released a new e-tax guide which provides details on the income tax treatment of trusts registered under the Business Trusts Act, applicable to both trustee-managers and unit-holders.

A Business Trust is a trust that runs and operates a business enterprise. They have traditionally been used in Singapore to secure Asian equity. A registered business trust (RBT) must have a trustee-manager whose role is to safeguard the interests of the trust’s beneficiaries, known as unit-holders.

The guide states that for tax purpose, in order to be considered a resident of Singapore, an RBT trustee must, in his capacity as such, carry on a trade or business in Singapore, the control and management of which must also be based in Singapore.

Given the similarities in economic purpose, structure and operation, an RBT will be taxed like a company from the first year it commences operation as an RBT.

RELATED: Singapore to Streamline Regulatory Fees for Businesses

As such, RBTs will be subject to corporate tax features such as rates of tax, tax reliefs, and foreign tax credits that are applicable to companies. Furthermore, relief under the Stamp Duties Act, which is applicable to companies, also applies to the transfer of assets to an RBT.

The trustee will be taxed on the RBT’s income, but unit-holders will be exempt.  Additionally, unit-holders will not receive any credit for the tax paid by the trustee.

Various features of the corporate tax system will also apply to an RBT, these include:

  1. Group Relief
  2. The application of a “shareholding test”
  3. Election of section 24 for sale of property
  4. Mergers and acquisitions scheme
  5. Gains on disposal of shares

More detailed information on these individual features is provided on pages four to seven of the e-Tax guide.

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