31 March 2014

On 24 March 2014, the Inland Revenue Authority of Singapore (“IRAS”) published an e-Tax guide “Writing-Down Allowance on Payment for Indefeasible Right of Use”.

The e-Tax guide provides details on the writing-down allowance (“WDA”) granted for the purchase of Indefeasible Right of Use (“IRU”) to use an international telecommunications submarine cable system. The WDA is effective from the year of assessment 2004.

The topics covered in the guide include:

• Tax treatment of expenditure incurred by the grantor to develop and build the international telecommunications submarine cable system;
• Tax treatment of the up-front lump sum payment incurred by the purchaser for the right to use the international telecommunications submarine cable system through an IRU agreement or arrangement for the purpose of acquiring bandwidth capacity.
• How to calculate WDA on IRU payment;
• Deferment of WDA claim;
• Computation of balancing allowance and balancing charge where:

(a) any IRU comes to an end without subsequent renewal;

(b) the person (including companies, sole proprietors and partners) permanently ceases to carry on the trade, business or profession or permanently ceases to use the IRU for the trade, business or profession; or

(c) the person sells, transfers or assigns all or any part of the IRU that he owns;

• Sale or transfer of an IRU between two related parties.

For more information, please refer to the e-Tax guide on the IRAS website.

Source: Inland Revenue Authority of Singapore