4 March 2016
On 26 February 2016, the Inland Revenue Authority of Singapore (IRAS) issued new content on its website covering the filing of income tax computations in non-Singapore dollars (S$) functional currencies.
The Financial Reporting Standards of Singapore (FRS) requires companies to present their financial statements in the functional currency i.e. currency of the primary economic environment in which a business operates.
The general rules on filing of income tax computations in non-S$ functional currencies are as follows:
- For companies, all items in their tax computations up to the chargeable income should be in their non-S$ functional currencies;
- For partnerships, all items in their computations up to the distributable profit / loss, as well as the CA claimed, should be in their non-S$ functional currencies; and
- For sole proprietors, all items in their tax computations up to the adjusted profit / loss (but before any loss brought forward), as well as the CA for that trade or business, should be in their non-S$ functional currencies.
All amounts declared in the Income Tax Return (Form C-S/C) and the appendices, however, must be in Singapore dollars. Those companies with their financial statements and tax computations in non-S$ functional currencies will be required to translate the relevant non-S$ items into S$ equivalent amounts using the average rate.
Should there be a change in functional currency from S$ to non-S$ (i.e. financial statements and tax computations for previous YAs were prepared in S$), transitional rules to translate existing S$ balances into the non-S$ functional currency will apply (see paragraphs 5.1 to 5.7 of the e-Tax Guide, “Filing of income tax computations in functional currencies other than Singapore dollars”).
IRAS has also outlined the translation methods of specific items in the tax computation. For more details, see paragraphs 5.8 to 5.28 of the e-Tax Guide, “Filing of Income Tax Computations in functional currencies other than Singapore Dollars”.
For further details, please refer to the IRAS website.
Source: This article was extracted from the Inland Revenue Authority of Singapore (IRAS) website. Visit http://www.iras.gov.sg for more information.