IRAS seeks feedback on tax implications arising from adoption of FRS 109 – Financial Instruments

12 July 2016

The Inland Revenue Authority of Singapore (IRAS) is seeking public consultation on income tax implications arising from the adoption of FRS 109 – Financial Instruments.

FRS 109, issued by the Accounting Standards Council in December 2014, applies to entities for their annual periods beginning on or after 1 January 2018. Earlier application is permitted.

Unless the taxpayer opts out, the FRS 39 tax treatment is currently the default tax treatment for all taxpayers who adopt FRS 39 for accounting purposes. Similar to the approach taken for the adoption of FRS 39 for accounting purposes, if a taxpayer adopts FRS 109 for accounting purposes, the income tax treatment of its financial assets and financial liabilities will generally follow the accounting treatment, except where specific tax treatment has been established under case law or provided under the statutes or where accounting treatment deviates significantly from the tax principles (FRS 109 tax treatment). FRS 109 tax treatment does not apply to taxpayers that do not need to comply with FRS 109 for accounting purposes.

IRAS is seeking comments on the proposed FRS 109 tax treatment, specifically on the following areas:

Financial asset measured at FVOCI

  • To enable the business and CIT to determine the appropriate tax adjustments for equity instruments measured at ‘fair value through other comprehensive income (FVOCI)’, businesses are to furnish a list of such instruments on revenue and capital account, for the following YAs:

– the YA relating to the basis period in which the business is transiting from FRS 39 to FRS 109;

– the YA relating to the basis period in which there is acquisition or disposal of any equity instruments measured at FVOCI.

  • Feedback is sought on the ease of providing such a list to CIT as well as any other methods that may be used to identify the equity instruments on revenue and capital account for tax purposes.

Impairment under the ECL model

  • Challenges anticipated with regard to the tax adjustments and disclosure requirements for entities accounting for the credit loss provisions under the ECL model.
  • Bank or finance companies’ views on the credit loss provision under the ECL model vis-à-vis the requirement provided for under MAS Notices 612, 1005 and 811, which is expected to be higher than that under regulatory requirement, and if so, any specific issues arising should the deduction under section 14I of the ITA be discontinued with the adoption of FRS 109.

Transitional tax adjustments

  • Specific issues faced in respect of the tax adjustments to be made as a result of the transitional rules and with the proposed tax treatment adopted in the transitional year with respect to the impairment losses claimed under FRS 39 for equity instruments designated as measured at FVOCI under FRS 109.
  • The impact on an entity that has to move from the pre-FRS 39 tax treatment to the FRS 109 tax treatment if all the unrealised fair value gains or losses on revenue account are assessed to tax or are allowed in the transitional year.

Reclassification of debt instruments after FRS 109 is adopted

  • Adequacy in the coverage of likely scenarios where a debt instrument is reclassified from one measurement category to another, as well as the tax implications after the adoption of FRS 109 for accounting purposes.


  • Views on the sectors that would be most impacted by FRS 109 as well as any necessity for special tax rules to cater to the accounting changes for these sectors.
  • Any other tax implications relating to FRS 109 that have not been addressed.

Comments and suggestions should be directed by post or via email to

The consultation exercise will be run from 1 July 2016 till 1 August 2016.

For full details, please refer to the IRAS website.

Source: IRAS

Estimated Chargeable Income (ECI) Form for Year of Assessment 2015

23 January 2014

The Estimated Chargeable Income (ECI) Form for the Year of Assessment 2015 is now available on the Inland Revenue Authority of Singapore website.

Companies are required to furnish their ECI within three months from the end of their financial year end.

As an administrative concession, companies do not need to file an ECI if:

  • their annual revenue is S$1 million or below for the financial year end; and
  • their ECI is estimated to be nil.

Companies are encouraged to e-file their ECI to enjoy up to 10 monthly instalments to pay their estimated tax.

Source: Inland Revenue Authority of Singapore

IRAS issues revised e-Tax Guide on Productivity and Innovation Credit (Third Edition)

23 September 2013

The revised edition of the e-Tax Guide on Productivity and Innovation Credit (PIC) was issued by the Inland Revenue Authority of Singapore (IRAS) on 20 September 2013. The PIC scheme was introduced in Budget 2010 and the first edition of the e-Tax Guide to the scheme was published on 15 July 2011, followed by a second edition on 17 August 2012.

In the third edition, amendments were made to reflect the introduction of the PIC bonus and enhancements to the PIC scheme announced in Budget 2013.

With effect from year of assessment 2013, the PIC scheme is enhanced as follows:

  1. The term “automation equipment” has been changed to “information technology (IT) and automation equipment” as PIC already supports IT-related software besides automation equipment.
  2. PIC IT and Automation Equipment (Annex A)
    • The criteria for approving automation equipment on a case-by-case basis are liberalised. Basic tools may also be approved for purposes of PIC if they meet the approval criteria.
  3. Licensing of qualifying Intellectual Property Rights (IPRs) (Annex B)
    • Licensing of qualifying IPRs is included as one of the qualifying activities under PIC.

The e-Tax guide is available on the IRAS website.

Source: Inland Revenue Authority of Singapore

Company director jailed for making false Productivity and Innovation Credit claims

23 September 2013

Company director Khoo Tzyh Shin was sentenced to eight weeks’ jail and ordered by the court to pay a penalty of $232,574.40 for fraudulently claiming a Productivity and Innovation Credit (PIC) cash payout of $58,143.60 for his company.

In a statement released on 19 September 2013, the Inland Revenue Authority of Singapore (IRAS) said that Khoo had falsified invoices and declared a sum of S$193,812 as qualifying expenditure in order to claim the PIC cash payout when there was no such expenditure incurred by the company.

The company, Greenit Pte Ltd, was also ordered to pay a fine of $10,000 and a penalty of $232,574.40. The penalty is four times the amount of cash payout that it had fraudulently claimed.  This is the first such case since the PIC scheme was introduced in 2010 to encourage productivity and innovation activities in Singapore.

Under the scheme, businesses can enjoy a 400% tax deduction or 30% cash payout for year of assessment (YA) 2011 and YA 2012 (60% for YA 2013 to YA 2015) for investments under six qualifying activities.  In Budget 2013, an additional dollar-for-dollar matching cash bonus (known as PIC Bonus) was introduced.

The IRAS takes a serious view of any abuse of PIC scheme. Those convicted of PIC fraud will have to pay a penalty of up to four times the amount of cash payout fraudulently obtained.  In addition, they will face a maximum fine of $50,000 and/or five years’ jail.

Examples of what IRAS regards as abuse of the PIC scheme includes:

  • Making PIC claims using false records or documents, when the company did not incur the expenditure or where the actual expenditure was lower than claimed.
  • Creating a shell company to claim PIC on purchase of automation equipment from a related company, when the transaction did not actually take place and the equipment continued to be owned and used by the related company.
  • Claiming PIC by colluding with a third party to purchase automation equipment, when the seller is not the legal owner of the equipment but merely renting or leasing it.
  • Using phantom employees to meet the PIC qualifying condition of having made CPF contributions for three or more local employees.
  • Engaging in arrangements that seek to inflate PIC claims such as purchase/lease arrangements bundled with non-qualifying costs.
  • Inflating the staff cost allocated to software development.

Guidance on the common mistakes to avoid when claiming PIC is available on the IRAS website

Source: Inland Revenue Authority of Singapore

Results of public consultation on draft Income Tax (Amendment) Bill 2012 – MOF accepts 19 out of 42 suggestions

5 October 2012

The Ministry of Finance (MOF) has accepted for implementation 19 out of the 42 suggestions on the draft Income Tax (Amendment) Bill 2012 received during the public consultation exercise held from 24 July to 13 August 2012.

According to the MOF, the remaining 23 suggestions were not accepted for implementation as they were “inconsistent with the legislative drafting conventions or the policy objectives for the proposed legislative changes”.

Most feedback received were on the following tax changes:

  • Enhancement to the Productivity and Innovation Credit (PIC) Scheme
  • Certainty of non-taxation of gains on disposal of equity investment
  • Enhancement to the Mergers and Acquisition Scheme
  • Refinements to tax deduction regime for donations

A summary of the key suggestions accepted relate to:

  • Certainty of non-taxation of gains on disposal of ordinary shares under the new proposed section 13Z

The law will be amended to make it clear that non-taxation of gains on disposal of shares will only be accorded to taxpayers if they opt for it. For taxpayers who do not opt for the treatment, the current practice will continue to apply, i.e. IRAS will determine the tax treatment of the disposal gains based on the facts and circumstances of each disposal. The law will also be amended to make it clear that ordinary shares held in trust by nominees do not qualify for the certainty of non-taxation of gains treatment.

  • Enhancement to the Mergers and Acquisition Scheme 

For legislative clarity, the law will be amended to make clear that the acquiring company and any number of acquiring subsidiaries may together make the qualifying acquisition, in order to enjoy the Mergers and Acquisition Allowance.

  • Refinements to tax deduction regime for donations

The law will be amended to provide that a 250% tax deduction will be given to donations that are net of the value of the benefit that the donor receives. It was suggested that MOF take a practical approach toward designing these rules as it may be difficult to determine the value of intangible benefits, such as naming a school hall after a donor.  MOF has agreed to conduct a consultation on the rules so as to develop an approach that is practical and consistent with the policy objective.

Suggestions rejected by the MOF include the following:

  • Enhancement to the Productivity and Innovation Credit Scheme

Section 37I(1)(viii) provides that any equipment purchased under hire-purchase agreements signed in the basis periods of the years of assessment 2012 to 2015 will not be eligible for the cash payout option, while section 37I(4A) provides that such purchases qualify for the cash payout option.  As the intent is to allow these purchases to qualify for cash payouts in respect of years of assessment 2012 to 2015, to avoid confusion, it was suggested that the exclusion phrase in section 37I(1)(viii) be deleted.  MOF has clarified that the provisions detailing the administration of the cash payout need to be covered in two separate sections (sections 37I(1)(viii) and 37I(4A)).

Further details can be found on the MOF website.

The suggestions accepted will be incorporated into the revised Income Tax (Amendment) Bill 2012.

Source: Ministry of Finance