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Income Tax Advance Ruling on Adequacy of Economic Substance
The foreign-sourced disposal gains tax regime provided in section 10L of the Income Tax Act 1947 takes effect from 1 January 2024. Under the tax regime, certain gains from the sale or disposal of foreign assets are treated as income chargeable to tax when received in Singapore. Foreign-sourced disposal gains from the sale or disposal of a foreign asset (not being an intellectual property rights) will not be treated as income chargeable to tax in Singapore if the entity has adequate economic substance in Singapore.
You may apply for an advance ruling to seek certainty on the adequacy of economic substance if the proposed sale or disposal of foreign asset is expected to occur within one (1) year from the date of the application.
Application Procedure
You may make an application on an entity basis or submit a group application. In the case of a group application, the application must be made jointly by all entities of the group to be covered under the advance ruling.
A group application may be submitted only under the following circumstances:
- where the economic activities of the entities of the group to be covered by the advance ruling are outsourced to an outsourced entity under a single service agreement; or
- where the economic substance test is to be applied at the holding company level on behalf of its special purpose vehicles.
The advance ruling on the adequacy of economic substance, if issued, may be valid for up to five (5) Years of Assessment, including the Year of Assessment relating to the basis period in which the proposed sale or disposal of the foreign assets is envisaged to take place. This means that the ruling may be applicable to the foreign-sourced disposal gains from any subsequent sale or disposal of foreign assets within the advance ruling validity period. This is provided that the relevant facts and representations made for the purpose of the ruling application remain unchanged and there is no change in the tax laws or the interpretation of the tax laws from the date of the advance ruling.
Documents to Submit
Submit the following additional documents for applications on adequacy of economic substance:
- Form for income tax advance ruling on the adequacy of economic substance (ESR Form) (DOCX, 141KB)
- Annex to ESR form (XLSX, 28KB), if applicable
- A copy of the outsourcing service agreement, if applicable
- Any additional information (PDF, 118KB) that may assist to expedite the review of your ruling application