An investment holding company refers to a company whose principal activity is that of investment holding. It owns investments such as properties and shares for long term investment and derives investment income such as dividend, interest or rental.
What is the basis of assessment?
From Year of Assessment (YA) 2009 onwards, all investment income of a company is assessed on an accounting year basis. For details, please refer to the Supplementary e-tax guide "Simplification of Income Tax rules and procedures - Assessment of Non-Trade Income and Deduction of Approved Donations on an Accounting Year Basis" (125KB).
Prior to YA 2005, investment income is assessed on a preceding calendar year basis, that is, from 1 Jan to 31 Dec of the year preceding the YA, regardless of the financial year end of the company.
Effective from YA 2005, an administrative concession is granted to all companies with an accounting year that does not end on 31 Dec to have their investment income assessed on a preceding accounting year basis. Under the concession, Singapore franked dividends continue to be assessed on a preceding calendar year basis. For more details, please refer to the e-Tax Guide "Assessment of Non-Trade Income and Deduction of Approved Donations on an Accounting Year Basis" (127KB).
What are the deductible expenses?
Expenses that are attributable to the investment income taxable in Singapore are deductible.
Examples of the deductible expenses are:
- Statutory expenses
Expenses incurred in accordance with statutory provisions, such as the Companies Act, are deductible:
Examples of statutory expenses:
- Audit fee
- Accounting fee
- Secretarial fee
- Income tax service fees
- Basic printing and stationery
- Bank charges
- Annual listing fees
- Direct expenses
Revenue expenses directly incurred to earn investment income are deductible against the respective source of investment income.
Examples of direct expenses are:
- Interest expenses (on loan taken to acquire the investment, e.g.shares or properties)
- Property tax (for rental properties)
- Insurance (for rental properties)
- Repair and maintenance (for rental properties)
- MCST management fees (for rental properties)
- Cost of collecting rent (for rental properties)
Expenses incurred before the investment commences to produce income are not deductible expenses. For example, interest incurred on loan taken to acquire shares or properties that have not commence to derive any dividend or rental income is not deductible.
- Indirect expenses
Indirect expenses incurred are not deductible. However, as a concession, an amount not exceeding 5% of the gross investment income that is chargeable to tax is deductible.
Examples of such indirect expenses are:
- Directors' fees
- Office rental
- Office telephone charges
- Office water and light
- Staff salaries, allowances, bonus and approved provident fund contributions
- Transport expenses (exclude motor vehicle expenses on "S"-plate cars which are not deductible)
- General expenses
- Administrative and management fees
What are the non-deductible expenses or claims?
How to prepare tax computation for an investment holding company?
Please refer to the "Basic Format of Tax Computation for An Investment Holding Company" (24KB).
With effect from YA 2009, investment companies are required to file ECI within three months from the end of their accounting year.
For YA 2005 to YA 2008, if the company elects for its investment income (excluding Singapore franked dividends) to be assessed on an accounting year basis, it has to submit its ECI within 3 months from the end of its accounting period relating to that year of assessment.
From YA 2009 onwards, all investment income of a company must be assessed on an accounting year basis. No election is allowed.
For YA 2005 to YA 2008, companies can elect for investment income to be assessed on an accounting year basis by preparing the tax computation on an accounting year basis. The revised tax treatment once elected, is irrevocable.