IRAS issues e-Tax Guide: “Tax treatment under section 11(2) of the ITA and qualifying conditions for company limited by guarantee to be approved under section 11(2)”

On By taxsgIn Corporate Tax

8 October 2014

On 8 October 2014, the Inland Revenue Authority of Singapore (IRAS) issued an e-Tax Guide, “Tax treatment under section 11(2) of the Income Tax Act (ITA) and qualifying conditions for company limited by guarantee to be approved under section 11(2)”.

This e-Tax Guide sets out the tax treatment of trade or professional associations under section 11(2) of the ITA where a trade or professional association is deemed to be carrying on a business if more than 50% of its receipts by way of entrance fees and subscriptions from Singapore members are from those who claim or are entitled to claim a deduction under section 14 of the ITA. However, only the income from transactions with Singapore members and non-members will be subject to tax. The income from transactions with foreign members will not be subject to tax.

The e-Tax Guide also provides information on the conditions that a company limited by guarantee must meet to be approved as a mutual concern to which the provisions of section 11(2) apply, i.e.:

  • it must be set up not for purposes of profit or gain and if the company derives any surplus, it must be used to carry out its not-for-profit objectives;
  • it exists for the sole purpose of benefiting its members and is operated exclusively for the same purpose for which it was organised;
  • the contributors to the common fund, as a class, should be identical to the participators in the mutual surplus;
  • there must be arrangements which entitle the contributors to the common fund to control it; and
  • the constituent documents must prohibit the company limited by guarantee from making any distribution, whether in money, property or otherwise, to its members.

Application procedures to the Comptroller of Income Tax to obtain approval as a mutual concern to which the treatment specified in section 11(2) is applicable are also covered.

For full details, please refer the e-Tax Guide on the IRAS website.

Source: This article was extracted from the Inland Revenue Authority of Singapore’s (IRAS) website. Visit http://www.iras.gov.sg/ for more information.