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Singapore Issues Business Trust e-Tax Guide

Tuesday, October 14, 2014

The Inland Revenue Authority of Singapore (IRAS) has published a new e-Tax Guide, which sets out the income tax treatment of trusts established under the Business Trusts Act, and is therefore applicable both to trustee managers and to unitholders of a registered business trust.

Business trusts, which are run and operate as business enterprises, have been used in Singapore as a means of securing equity from Asian investors. They are normally established with a portfolio of assets that are sold into the trusts by their sponsors.

Registered business trusts must have a trustee manager, whose role it is to safeguard the interests of beneficiaries (referred to as unitholders) of the trust and to manage the business of the trust.

As the economic purpose, structure, and operation of a registered business trust are similar to those of a company, IRAS has confirmed that such trusts should be treated like companies for income tax purposes.

Rates of tax, tax reliefs, and foreign tax credits that are applicable to companies similarly apply to registered business trusts. In addition, relief under the Stamp Duties Act that applies to companies also applies to the transfer of assets to registered business trusts.

For tax purposes, a registered business trust is considered a resident of Singapore if its trustee, in his capacity as such, carries on a trade or business in Singapore and the control and management of his business is in Singapore.

The trust's income is taxable at the trustee level. Unitholders are not taxed on trust income, and no credit will be allowed to the unitholders for the tax paid by trustees.

Last, the Guide also sets out how certain corporate tax features are to be applied to a registered business trust.