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Singapore Updates REIT e-Tax Guide

Tuesday, June 23, 2015

The Inland Revenue Authority of Singapore (IRAS) has issued a revision to its e-Tax Guide explaining income tax rules on real estate investment trusts (REITs) and, in particular, the "tax transparency treatment" permitted for certain income distributions to unitholders.

For income tax purposes, a REIT refers to a trust that is constituted as a collective investment scheme authorized under section 286 of the Securities and Futures Act (Cap. 289) that is listed on the Singapore Exchange and that invests or proposes to invest in immovable property and immovable property-related assets.

Under Singaporean law, special rules allow for so-called "tax transparency treatment" for certain types of income earned by the REIT. Tax transparency treatment allows for the income to not be taxed in the hands of its trustee and instead be taxed in the hands of the unitholders, as long as the trustee distributes at least 90 percent of the taxable income to the unitholders in the same year in which the income is derived.

Among the numerous changes in the updated guide is a new section that defines what types of REIT income qualify for tax transparency treatment under section 43(2A)(a) of the Income Tax Act, namely:

  • Rental income or income from the management or holding of immovable property but not including gains from the disposal of immovable property;
  • Income that is ancillary to the management or holding of immovable property but not including gains from the disposal of immovable property and Singapore dividends;
  • Income (excluding Singapore dividends) that is payable out of rental income or income from the management or holding of immovable property in Singapore, but not out of gains from the disposal of such immovable property; and
  • Distribution from an approved sub-trust of the REIT in cash, out of the following types of income: rental income or income from the management or holding of immovable property but not including gains from the disposal of immovable property; and/or income that is ancillary to the management or holding of immovable property but not including gains from the disposal of immovable property and Singapore dividends.

The updated Guide removes the previous administrative procedure that required that an advance ruling had to be obtained from the IRAS before the trustee of a REIT could benefit from tax transparency treatment.

In addition, changes have been made to clarify that distributions made on or after January 1, 2015, by a trustee of a REIT to a branch in Singapore of a company incorporated outside Singapore need not be subject to withholding tax.

The guide confirms also the removal of the requirement that the trustee has to notify the Comptroller of Income Tax in writing that the conditions for making distributions in units are met prior to the distributions. The trustee can now provide the confirmation at the time of submitting a tax return.

Further changes have been made to the guidance:

  • Concerning Rollover Income Adjustments (RIAs);
  • On the extension to the period, to March 31, 2020, during which gross REIT distribution made to a qualifying non-resident non-individual unitholder is subject to a final rate of 10 percent. This refers to a non-resident non-individual unitholder which does not have any permanent establishment in Singapore, or who does carry on an operation through a permanent establishment in Singapore, where the funds used to acquire the units in a REIT were not obtained from that operation;
  • To remove the condition that a REIT distribution treated as a return of capital for tax purposes cannot be onward distributed as income by the unitholders and each subsequent level of unitholders;
  • Clarify that all unitholders, and not just traders, should reduce the cost of units by the amount of return of capital;
  • To delete the requirement (in Annex 2 paragraph (f)(ii)) for Singapore branches of companies incorporated outside Singapore to obtain the Comptroller's approval for distributions to be made to them without deduction of tax; and
  • To update the format of Annex 4 (Claim for Refund of Tax Over Deducted from Distributions) so that it can be used by both individuals and non-individuals.

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The Report

Offshore Trusts Guide: Introduction

The History of Offshore Trusts
Development of Professional Competence in the Jurisdictions
What Future for the Trust?
The New Age of Transparency
The Swiss Association of Trust Companies
The Society of Trusts and Estates Practitioners

Offshore Trusts Guide: Jurisdictions

Bahamas

Bahamas: Legal Framework and Formation Rules and Fees
Bahamas: 2006 Private Trust Companies Legislation

Barbados

Barbados: Legal Framework and Formation Rules and Fees
Barbados: Supervisory and Licensing Regime and Fees

Bermuda

Bermuda: Legal Framework and Formation Rules and Fees
Bermuda: Supervisory and Licensing Regime and Fees

British Virgin Islands

British Virgin Islands: Legal Framework and Formation Rules and Fees
British Virgin Islands: Special Trusts Act 2003
British Virgin Islands: The Trustee Act 2003
British Virgin Islands: :Supervisory and Licensing Regime and Fees
British Virgin Islands: New Laws on Private Trust Companies
British Virgin Islands: New Private Trust Company Regulations

Cayman Islands

Cayman Islands: Legal Framework and Formation Rules and Fees
Cayman Islands: Supervisory and Licensing Regime and Fees

Cook Islands

Cook Islands: Legal Framework and Formation Rules and Fees
Cook Islands: Supervisory and Licensing Regime and Fees

Cyprus

Cyprus: Legal Framework and Formation Rules and Fees
Cyprus: Supervision, Licensing and Tax

Gibraltar

Gibraltar: Legal Framework and Formation Rules and Fees
Gibraltar: Legislation, Regulation and Supervision

Guernsey

Guernsey: Legal Framework and Formation Rules and Fees
Guernsey: Trusts Law 2007

Isle of Man

Isle of Man: Legal Framework and Formation Rules and Fees
Isle of Man: Supervisory and Licensing Regime
Isle of Man: Uses Clients and Tax Treatment

Jersey

Jersey: Legal Framework and Formation Rules and Fees
Jersey: Supervisory and Licensing Regime
Jersey: Trusts Amendment Act 2006
Jersey: Foundations

Liechtenstein

Liechtenstein: Legal Framework and Formation Rules and Fees
Liechtenstein: Regulation Supervision and Transparency
Liechtenstein: Characteristics of Liechtenstein Trusts
Liechtenstein: Foundations

Madeira

Madeira: Legal Framework and Formation Rules and Fees

Malta

Malta: Legal Framework and Formation Rules and Fees
Malta: The Trust and Trustees Act 2004

Mauritius

Mauritius: Legal Framework and Formation Rules and Fees
Mauritius: Characteristics of the 2001 Trusts Act
Mauritius: Additional Provisions of the 2001 Trusts Act
Mauritius: Tax Treatment

Monaco

Monaco: Legal Framework and Formation Rules and Fees

Nevis

Nevis: Legal Framework and Formation Rules and Fees

Panama

Panama: Legal Framework and Formation Rules and Fees
Panama: Requirements for Acting as Trust Company in Panama

Seychelles

Seychelles: Legal Framework and Formation Rules and Fees

Turks & Caicos

Turks & Caicos: Legal Framework and Formation Rules and Fees
Turks & Caicos: The Voidable Dispositions Ordinance

Vanuatu

Vanuatu Legal Framework and Formation Rules and Fees




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