Latest news with #InlandRevenueAuthorityofSingapore
Time of India
2 days ago
- Business
- Time of India
Singapore casts tax shadow on India bets, shuns shell companies
Mumbai: Singapore is intensifying scrutiny of companies and investment entities, a move that could ignite new tax disputes. This development particularly impacts many MNCs and international funds that use the Asian financial hub as a base to invest in and acquire companies in India. The catalyst for these potential disputes is a recent series of advance rulings by the Inland Revenue Authority of Singapore (IRAS), which define and endorse what constitutes ' economic substance '. If a Singaporean entity fails to meet the conditions emphasized by the tax administrator and thus cannot prove it has adequate 'substance,' the Indian Income Tax (I-T) department could levy higher taxes. This could involve claiming tax on certain stock sale transactions or demanding increased tax on earnings from dividends and loan interest paid by an Indian company. Dealmakers and businesses are closely monitoring this situation. "These advance rulings are the first to evaluate economic substance factors since their inclusion in 2024 as Section 10L of Singapore's Income Tax Act for taxing gains from the sale of foreign assets. These factors could be used by Indian tax authorities to determine whether a Singapore-based entity is merely a conduit, particularly when applying the Principal Purpose Test (PPT)," explained Ashish Karundia of the CA firm Ashish Karundia & Co. (A PPT is a provision that allows denial of treaty benefits). According to Girish Vanvari, founder of the tax and regulatory advisory firm Transaction Square, the implications are far-reaching due to the change in law prioritizing substance and economic reality over legal form. "For tax professionals and business leaders, this means a necessary recalibration of how Singapore is used in cross-border structuring -especially in relation to Indian operations. So, if you're using Singapore as a holding or IP base for India-related investments, it's time to revisit the structure. The days of relying purely on treaty protection without operational presence are over," said Vanvari. Many foreign investors betting on India utilize Singapore to leverage the tax treaty between the two countries. A common structure involves one of their arms in a tax-friendly jurisdiction setting up a company in Singapore (say, S1), which in turn owns another company in Singapore (say, S2). In this two-layered structure, S2 serves as a vehicle to invest in India. Typically, when exiting an Indian investment, S1 might sell the shares of S2, which holds shares in an Indian company; alternatively, S2 would directly sell its interest in the Indian company. THE PARAMETERS The IRAS underscored that economic substance would require: (a) a company to have adequate human resources with the necessary qualifications and experience; (b) have a premise in Singapore; (c) take key business decisions there; and (d) incurs expenditure. If S1 or S2 does not fulfil these criteria, they would come under the lens of the tax authorities in either Singapore or India. How? Here are the possible situations: · Say, S1 sells shares of S2 (both local entities) and if India demands tax on the 'indirect transfer' by invoking India's domestic tax regulations, companies like S1 have till now argued that under the treaty India has no right to tax gains from indirect transfers. However, in future, the I-T department could assert that the treaty holds only if S1 has substance. But if it doesn't (as per Singapore's terms), S1 cannot avail treaty benefits and must pay tax to India. Here, I-T would challenge that S1 was formed primarily to escape tax. · If S2 directly sells shares of the Indian company, there's no capital gains tax if the shares were bought before 2017 (under a grandfathering provision introduced when the treaty was amended). However, if S2 lacks substance, I-T may demand tax on the grounds that treaty relief can be denied to a shell outfit. · Suppose, S1 sells stocks it directly holds of another company in a third country. S1 can avoid tax in Singapore if it can demonstrate substance. However, if S1 fails the substance test (and is taxed by Singapore), then India would also have strong grounds to demand tax from S1 when it sells shares of S2. · Also, there's an increased risk of double taxation - with India taxing based on source and Singapore taxing based on substance.
Business Times
25-04-2025
- Business
- Business Times
Minister for Finance appoints new Iras board chairman Lai Chung Han
[SINGAPORE] Lai Chung Han, 52, incoming permanent secretary for finance, has been appointed chairman of the board of the Inland Revenue Authority of Singapore (Iras), effective May 1. He succeeds Tan Ching Yee, 60, who has served as chairman since 2016, the Ministry of Finance said in a statement on Friday (Apr 25). Lai has held several leadership roles in the Singapore Armed Forces and the Ministry of Defence. He became deputy secretary (policy) at the Ministry of Defence in 2012 and Chief of Navy in 2014. In 2017, he was appointed second permanent secretary for both education and home affairs. He was appointed as permanent secretary (education) in 2019 and, in 2024, took on the role of permanent secretary (development) at the Ministry of Finance. In 2022, he received the Public Administration Medal (Gold) from the president. Under Tan's leadership, Iras participated in major international platforms and represented Singapore as a bureau member on the Organisation for Economic Cooperation and Development Forum on Tax Administration. It grew beyond its traditional role to become the centre of excellence for national grant disbursement, rolling out schemes such as the Rental Support Scheme, Jobs Support Scheme and Wage Credit Scheme, to support businesses and workers. The company also upgraded its digital systems and used artificial intelligence to improve services for taxpayers. 'The Ministry of Finance and the Inland Revenue Authority of Singapore welcome Mr Lai to the Board and would like to express our deep appreciation to outgoing chairman, Mrs Tan Ching Yee, for her significant contributions to the Iras board,' the statement noted.
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CNA
25-04-2025
- Business
- CNA
IRAS board to get new chairman on May 1
SINGAPORE: Mr Lai Chung Han, the incoming Permanent Secretary (Finance), has been appointed chairman of the board of the Inland Revenue Authority of Singapore (IRAS). The appointment takes effect on May 1. He succeeds Mrs Tan Ching Yee, who will soon also retire as Permanent Secretary (Finance) after 38 years of service in the public sector. In a media release on Friday (Apr 25), the Ministry of Finance (MOF) noted that Mr Lai has held various command and staff appointments in the course of his military career in the Singapore Armed Forces and the Ministry of Defence. He was a former Chief of Navy. He was also Permanent Secretary (Education) and Permanent Secretary (Development) in the Ministry of Finance. 'The Ministry of Finance and the Inland Revenue Authority of Singapore welcome Mr Lai to the board and would like to express our deep appreciation to outgoing chairman, Mrs Tan Ching Yee, for her significant contributions to the IRAS Board,' the ministry said. CONTRIBUTIONS TO IRAS Over her nine years as chairman of the IRAS board, Mrs Tan guided the agency through the COVID-19 pandemic when corporate and property tax rebates were provided. "IRAS also expanded beyond its traditional role to become the Centre of Excellence for disbursing national grants to enterprises, swiftly implementing various grant schemes such as the Rental Support Scheme, Jobs Support Scheme and Wage Credit Scheme, to support businesses and workers," MOF said. It added that IRAS had also upgraded its digital infrastructure under Mrs Tan's leadership, leveraging artificial intelligence and upgrading its IT systems to enhance compliance efforts and make tax filing easier for businesses.
Business Times
25-04-2025
- Business
- Business Times
Minister for Finance appoints new Iras chairman Lai Chung Han
[SINGAPORE] Lai Chung Han, 52, incoming permanent secretary for finance, has been appointed chairman of the board of the Inland Revenue Authority of Singapore (Iras), effective May 1. He succeeds Tan Ching Yee, 60, who has served as chairman since 2016, the Ministry of Finance said in a statement on Friday (Apr 25). Lai has held several leadership roles in the Singapore Armed Forces and the Ministry of Defence. He became deputy secretary (policy) at the Ministry of Defence in 2012 and Chief of Navy in 2014. In 2017, he was appointed second permanent secretary for both education and home affairs. He was appointed as permanent secretary (education) in 2019 and, in 2024, took on the role of permanent secretary (development) at the Ministry of Finance. In 2022, he received the Public Administration Medal (Gold) from the president. Under Tan's leadership, Iras participated in major international platforms and represented Singapore as a bureau member on the Organisation for Economic Cooperation and Development Forum on Tax Administration. It grew beyond its traditional role to become the centre of excellence for national grant disbursement, rolling out schemes such as the Rental Support Scheme, Jobs Support Scheme and Wage Credit Scheme, to support businesses and workers. The company also upgraded its digital systems and used artificial intelligence to improve services for taxpayers. 'The Ministry of Finance and the Inland Revenue Authority of Singapore welcome Mr Lai to the Board and would like to express our deep appreciation to outgoing chairman, Mrs Tan Ching Yee, for her significant contributions to the Iras board,' the statement noted.
