What is the name of the business input that refers to the money needed to start up and operate a business?
An investment holding company can claim deduction of expenses that are incurred to produce the investment income. The expenses may be incurred directly, indirectly, or in accordance with statutory and regulatory provisions. Show
What is an Investment Holding CompanyAn investment holding company refers to a company that owns investments such as properties and shares for long term investment and derives investment income ('non-trade income') such as dividend, interest or rental income. The company's principal activity is that of investment holding. An investment holding company is different from an investment dealing company. An investment dealing company refers to a company that owns investments such as properties and shares as trading stock to derive trade income from the purchase and sale of these investments (e.g. gain on sale of real properties and shares). Unlike an investment holding company, the company's principal activity is that of investment dealing. All investment income of your investment holding company is assessed on a financial year basis. As a guide to work out the income that is chargeable to tax for your investment holding company, you may refer to the following templates: Deductions AllowedExpenses that are attributed to the investment income may be deductible. These may be incurred in the course of your company’s operations or in accordance with statutory and regulatory provisions. Direct ExpensesThese are expenses directly incurred to earn investment income and are deductible against the respective source of investment income. Some examples are:
Expenses incurred before the investment starts to produce income are not deductible. For example, interest incurred on a loan taken to acquire shares or properties that have not commenced to produce any dividend or rental income is not deductible. Statutory and Regulatory ExpensesThese are expenses incurred in accordance with statutory and regulatory provisions, such as the Companies Act. Some examples are:
Learn more about statutory and regulatory expenses that are deductible. Other Allowable ExpensesOther than statutory and regulatory expenses and direct expenses, in some cases, your investment holding company may incur the following expenses:
As your investment holding company is not carrying on a trade and derives only non-trade income, only a reasonable amount of such other expenses is allowable. As a guide, the total amount of such expenses allowable should not exceed 5% of your company’s gross investment income. Deductions/ Claims Not AllowedCapital Expenses and Expenses on Non-Income Producing InvestmentsExpenses that are capital in nature and expenses attributable to investments that do not produce any income are not deductible. Some examples are:
Excess Expenses from 1 Source of InvestmentExpenses are deductible against their source of income. For instance, property tax expenses incurred on an investment property is deductible against the rental income generated by the same property. When the expenses exceed the income generated by the investment, the excess expenses from this source of investment are not deductible against income from another source of investment. For example, any excess of expenses over rental income cannot be deducted against dividend or interest income. As a concession, the deficit arising from a block of shares may be set-off against the net dividend income from other blocks of shares within the same group. Learn more about the concessionary ‘group’ tax treatment for dividend income. Capital Allowance ClaimsYour investment holding company is not entitled to claim capital allowances as it is not carrying on a trade or business. Only fixed assets purchased to replace existing fixed assets can be claimed as deductible expenses. Unutilised LossesYour investment holding company cannot carry forward any unutilised losses to set-off the income of future Years of Assessment (YAs). Group Relief ClaimsYour investment holding company cannot transfer (to other companies in the same group) current year unutilised losses arising from the excess of expenses over investment income under the Group Relief system. However, your company may transfer current year unutilised Industrial Building Allowance, Land Intensification Allowance and donations to other companies in the same group under Group Relief system. Tax Exemption for New Start-Up CompaniesYour investment holding company is not eligible to claim the tax exemption for new start-up companies. However, your company is still eligible for the partial tax exemption. Learn more about the . FAQsThe nature, tax treatment and applicable period/ YA of each REIT distribution are reflected in the Annual Distribution Statement issued by the Central Depository Pte Ltd (CDP). A REIT distribution is taxable in the relevant YA as reflected in the CDP statement, unless stated otherwise (e.g. distribution is tax-exempt or distribution is a return of capital). Where the distribution is taxable, your company is required to report the gross income indicated in the CDP statement, as taxable income in the Corporate Income Tax Return for the relevant YA. Learn more about the income tax treatment of REITs (PDF, 590KB) (refer to the section on Tax Treatment of the Unit Holder). New! Expenses incurred in securing leases of immovable properties are capital in nature and hence, not deductible. Prior to YA 2022 For the first property acquired by your investment holding company, all expenses incurred to secure the first tenant for the property cannot be deducted against the rental income of that property. As a concession, if your investment holding company acquires another property, the commission, advertising, legal fees and stamp duty incurred to secure the first tenant for the additional property can be deducted against the rental income of that property. With effect from YA 2022 Section 14ZE of the Income Tax Act 1947 provides that a deduction may be given for certain expenses incurred to grant, renew or extend a lease1 of an immovable property that is deriving rental income taxable under Section 10(1)(f). Hence, for the first and any additional property acquired by your investment holding company, the commission, advertising, legal fees and stamp duty incurred to secure the first tenant for the property can now be deducted against the rental income of that property, subject to Section 14ZE. |