IRAS e-Tax Guide

Securities Lending and Repurchase

Arrangements
Published by
Inland Revenue Authority of Singapore

Published on 29 Jun 2012

Disclaimers

IRAS shall not be responsible or held accountable in any way for any damage,
loss or expense whatsoever, arising directly or indirectly from any inaccuracy or
incompleteness in the Contents of this e-Tax Guide, or errors or omissions in the
transmission of the Contents. IRAS shall not be responsible or held accountable
in any way for any decision made or action taken by you or any third party in
reliance upon the Contents in this e-Tax Guide. This information aims to provide a
better general understanding of taxpayers’ tax obligations and is not intended to
comprehensively address all possible tax issues that may arise. While every effort
has been made to ensure that this information is consistent with existing law and
practice, should there be any changes, IRAS reserves the right to vary our
position accordingly.

© Inland Revenue Authority of Singapore

All rights reserved. No part of this publication may be reproduced or transmitted in

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1
 Table of Contents

Page

1 Aim.............................................................................................................3

2 At a glance ................................................................................................3

3 Glossary ....................................................................................................4

4 Background...............................................................................................8

5 Qualifying securities lending and repo arrangements ..........................8

6 Economic ownership................................................................................9

7 Tax treatment of gain/loss from transfer of securities or collateral

under qualifying securities lending and repo arrangements.............. 10

8 Tax treatment of actual distribution and compensatory payment

arising from qualifying securities lending and repo arrangements ... 14

9 Tax treatment of other related payments ............................................. 16

10 Administrative requirements ................................................................. 17

11 Contact information................................................................................ 17

12 Updates and Amendments .................................................................... 18

Annex 1 – Transferor (whether or not Singapore-based) receives

distribution from Singapore-based transferee ........................ 20

Annex 2 – Transferor (whether or not Singapore-based) receives

compensatory payment from Singapore-based transferee.... 22

Annex 3 – Singapore-based transferor receives compensatory

payment from non Singapore-based transferee ..................... 24

2
Securities Lending and Repurchase Arrangements

1 Aim

1.1 This e-Tax guide gives details on the income tax treatments and tax
concessions of qualifying securities lending and repurchase (“repo”)
arrangements under Section 10N of the Income Tax Act (“ITA”)1.

1.2 It is relevant to any person who engages in securities lending and repo
arrangements.

2 At a glance

2.1 When a person needs certain securities for the purpose of, say
covering short sale, it can enter into a securities lending arrangement
to borrow the securities. It is obliged to provide collateral and return the
borrowed securities at a later date.

2.2 On the other hand, when a person has certain securities but needs
cash, it can enter into a securities repo arrangement to sell the
securities for cash with the agreement that the securities will be sold
back to it at a later date.

2.3 Both arrangements involve transferring of ownership of the securities

but only temporary. If the arrangement is a qualifying arrangement, the
person who originally owns the securities will not be treated as having
sold the securities.

2.4 Briefly, this is the tax position for qualifying arrangements:

Securities lending Securities repo

arrangement arrangement
Lender Borrower Seller Buyer
Is gain/loss arising from
transfer of securities No Yes2 No Yes2
taxable/deductible?

Is dividend or interest
subjected to tax if it is not Yes No Yes No
exempt from tax?

2.5 Please refer to the paragraphs below for further details.

1
This e-Tax guide replaces the IRAS’ e-Tax guide on “IRAS guide on securities lending and
repurchase (“REPO”) arrangement” published on 23 Nov 2001.
2
When the transfer is made by the person in the normal course of its trade or business.
3
3 Glossary

3.1 Borrowing fee

This is a fee payable by a borrower to a lender under a securities

lending arrangement for the use of the borrowed securities.

3.2 Compensatory payments

These refer to payments made by the transferee to the transferor which

are of equal value to the distributions of the transferred securities or
collateral that the transferee never receives.

3.3 Equivalent securities

Equivalent securities (including securities used as collateral) are

securities which are identical in type, nominal value, description and
amount to the transferred securities and collateral.

However, certain corporate events may make it impossible for the

transferee to return equivalent securities to the transferor. In such
situations, the equivalent securities will mean:

Corporate events Equivalent securities

affecting transferred
securities or collateral
(i) Conversion, sub- Securities into which the transferred
division or securities or collateral have been
consolidation converted, sub-divided or consolidated

(ii) Redemption Proceeds from the redemption of

transferred securities or collateral

(iii) Takeover Cash or securities representing the

proceeds of acceptances

(iv) Call on partly-paid Paid-up securities (provided the

securities transferor has paid to the transferee the
sum due on the call)

(v) Capitalisation issue Transferred securities or collateral

together with the securities allotted by
way of bonus

(vi) Rights issue • Transferred securities or collateral

together with the securities allotted,
where the transferor has directed the
transferee to take up the rights issue
and has paid to the transferee any
sum due on the issue; or

4
 Corporate events Equivalent securities
affecting transferred
securities or collateral
• Transferred securities or collateral
together with the proceeds from the
disposal of the rights, where the
transferor has directed the transferee
to sell the rights

(vii) Distributions in the Transferred securities or collateral

form of securities or a together with the securities or certificate
certificate which may or entitlement equivalent to those
be exchanged for allotted
securities or an
entitlement to acquire
securities

(viii) Any event similar to Transferred securities or collateral

(vii) above together with or replaced by a sum of
money or securities equivalent to that
received in respect of such event

3.4 Loan rebate fee

This is a fee payable by a lender to a borrower when the borrower

provides cash collateral to the lender for the transferred securities
under a securities lending arrangement.

3.5 Price differential

This is generally the difference between the sale and repurchase price
under a securities repo arrangement and is payable by the seller to the
buyer.

3.6 Securities lending arrangement

This is an arrangement where a person (“lender”) lends its securities to

another (“borrower”) in exchange for collateral. The borrower is
obliged to return the transferred securities or their equivalent to the
lender, either on the lender’s demand or within the period of the
arrangement. When the lender receives the transferred securities or
their equivalent, it returns the transferred collateral or its equivalent to
the borrower.

Under the arrangement, the lender transfers the legal ownership of the
securities to the borrower. However, it retains the economic ownership
of the transferred securities. Please refer to paragraph 6 on the
definition of economic ownership.

5
 The collateral provided by the borrower can be cash or other securities.
Like the lender, the borrower also transfers the legal ownership of the
collateral to the lender but retains the economic ownership of the
transferred collateral.

A securities lending arrangement is usually initiated by the borrower to

cover a short sale, fail trade or other settlement or for market arbitrage
or hedging activity.

3.7 Securities repo arrangement

This is an arrangement where a person (“seller”) sells its securities to

another (“buyer”) for cash and the buyer agrees to sell back the
transferred securities or their equivalent at a specified price on an
agreed future date or on the seller’s demand.

Under the arrangement, the seller transfers the legal ownership of the
securities to the buyer but retains the economic ownership of the
transferred securities. Please refer to paragraph 6 on the definition of
economic ownership.

A securities repo arrangement is usually initiated by the seller who has

the securities but needs cash.

3.8 Singapore-based transferee

A Singapore-based transferee means a transferee who is resident in

Singapore (except in respect of any business carried on outside
Singapore through a permanent establishment outside Singapore) or
which is a permanent establishment in Singapore.

3.9 Singapore-based transferor

A Singapore-based transferor means a transferor who is resident in

Singapore (except in respect of any business carried on outside
Singapore through a permanent establishment outside Singapore) or
which is a permanent establishment in Singapore.

3.10 Transferee

This refers to a person who receives the transferred securities or

collateral. It, therefore, includes:

(i) the borrower who receives transferred securities under a

securities lending arrangement;

(ii) the lender who receives the transferred collateral under a

securities lending arrangement; and

(iii) the buyer who receives the transferred securities under a

securities repo arrangement.

6
3.11 Transferor

This refers to a person who transfers the securities (including securities

used as collateral) to another person. It, therefore, includes:

(i) the lender who lends the transferred securities under a

securities lending arrangement;

(ii) the borrower who provides the transferred collateral under a

securities lending arrangement; and

(iii) the seller who sells the transferred securities under a securities
repo arrangement.

3.12 Transferred collateral

These are securities which the borrower passes over to the lender as
collateral under a securities lending arrangement.

3.13 Transferred securities

These are securities which the lender passes over to the borrower
under a securities lending arrangement or seller passes over to the
buyer under a securities repo arrangement.

7
4 Background

4.1 A securities lending arrangement involves a lender and a borrower of

securities. The lender would transfer the securities to the borrower. In
return, the borrower would transfer cash or securities as collateral to
the lender. When the borrower subsequently returns the transferred
securities or their equivalent to the lender, the lender will return the
transferred collateral or its equivalent to the borrower3.

4.2 In a securities repo arrangement, the seller sells the securities to a

buyer for cash with an agreement that the buyer would sell back the
transferred securities or their equivalent to the seller at a later date3.

4.3 Both securities lending and repo arrangements, therefore, require the
transfer of securities or collateral (“transferred securities or collateral”)
and the subsequent return of the transferred securities or collateral or
their equivalent (“equivalent securities”).

4.4 Under the arrangements, legal titles change hands although the
transferor continues to retain the economic ownership of the
transferred securities or collateral.

4.5 Based on ordinary tax rules, the gain or loss arising from the securities
lending and repo arrangements is taxable or allowable in the hands of
the transferor and transferee at each transfer if it is derived in the
normal course of a business or trade.

5 Qualifying securities lending and repo arrangements

5.1 If the securities lending and repo arrangements were qualifying

arrangements, instead of applying the general tax position, including
that in paragraph 4.5, the tax treatment and concessions explained in
paragraphs 7 and 8 would apply. These tax treatment and
concessions apply to qualifying securities lending and repo
arrangements entered into on or after 23 November 2001.

5.2 Securities lending and repo arrangements are treated as qualifying

arrangements when the following conditions are satisfied:

(i) the transferred securities or collateral do not involve stocks or

shares of unlisted Singapore resident companies; and

(ii) the transferor continues to bear the risks and retains the
economic ownership of the transferred securities or collateral

3
In this e-Tax guide:
• The lender who lends the securities, the borrower who provides the collateral and the
seller of the securities are collectively referred to as transferors.
• The borrower who receives the securities, the lender who receives the collateral and
the buyer of the securities are collectively referred to as transferees.
Please refer to paragraphs 3.10 and 3.11 of the glossary.
8
 during the period of the securities lending or repo arrangement
although the legal titles are passed to the transferee. Please refer
to paragraph 6 on the definition of economic ownership.

6 Economic ownership

6.1 The requirements for economic ownership are not limited to the
transferor’s entitlement to the distributions on the transferred securities
or collateral. The transferor is considered to have retained the
economic ownership of the transferred securities or collateral if the
following elements are present in a securities lending or repo
arrangement:

Factors Conditions
(i) Structure of It must be documented in writing.
arrangement

(ii) Risks and rewards The transferor must continue to assume

of the transferred the risks and retain the rewards, including
securities or the return of transferred or equivalent
collateral securities by the transferee.

(iii) Distributions on The transferee must pass on the

the transferred distributions on the transferred securities
securities or or collateral or make compensatory
collateral payments of equal value to the transferor.
Please see details on distributions and
compensatory payments in paragraph 8.

(iv) Right to receive Transferor must not dispose of such right.

any part of the
total consideration
payable under the
securities lending
or repo
arrangement

(v) Arm’s length Transferor and transferee must transact

consideration on arm’s length basis and not enter into
the arrangement with a view to avoid,
reduce or defer Singapore tax.

(vi) Transferee’s The transferee must acquire the

reasons for securities for one or more of the following
acquiring the acceptable commercial reasons:
securities
• To settle a sale of securities
• To replace the securities obtained
under an earlier securities lending or

9
 Factors Conditions
repo arrangement
• To on-lend the transferred securities to
another person
• To fulfill obligations of an uncovered
written option position
• To hedge and arbitrage
• To manage liquidity through repo
arrangement
• To hold the transferred securities as
collateral against the obligations of the
counterparty to the securities lending
or repo arrangement
• Such other purposes the Minister (or
such person as the Minister may
appoint) may allow

7 Tax treatment of gain/loss from transfer of securities or collateral

under qualifying securities lending and repo arrangements

Tax treatment for transferor

7.1 Under a qualifying securities lending or repo arrangement, the

transferor retains economic ownership of the transferred securities or
collateral. The transferor only temporarily allows the transferee to use
the transferred securities or collateral.

7.2 Accordingly, for income tax purposes, no gain or loss will be

recognised when:

(i) the transferor transfers the transferred securities or collateral to

the transferee. Such transfer is not regarded as a disposal of the
securities or collateral by the transferor; and

(ii) the transferee subsequently re-transfers the equivalent securities

to the transferor. Such re-transfer is not regarded as a re-
acquisition of the securities by the transferor.

7.3 But when an actual disposal takes place, the transferor has to
recognise the gain or loss. Actual disposal can arise under these
situations:

Event which takes place When is transferor regarded as

after the transfer of making an actual disposal?
securities or collateral
(i) Redeems the At the time of redemption
transferred securities

10
 Event which takes place When is transferor regarded as
after the transfer of making an actual disposal?
securities or collateral
(ii) Transferor directs the At the time the take-over offer is due
transferee to accept the for acceptance
take-over offer

(iii) Transferor instructs the At the time the sale to issuer occurs
transferee to sell the
transferred securities to Under the ITA, the proceeds may be
the issuer as a result of regarded as disposal proceeds or
a share buyback dividend4. However, for qualifying
securities lending and repo
arrangements, the proceeds shall be
regarded as disposal proceeds in all
cases.

(iv) Either the transferor or Equivalent securities may not be

transferee defaults and returned but the obligations of both
the securities lending or transferor and transferee are set off
repo arrangement is against each other.
terminated
The transferor will be regarded as
having disposed of the transferred
securities in consideration of the
collateral at the time the securities
lending or repo arrangement is
terminated.

The transferor will, however, not be

regarded as having disposed of the
transferred securities or collateral if at
the time the transferee defaults, the
transferor immediately applies the
collateral placed by the transferee to
re-acquire securities equivalent to the
transferred securities.

(v) Event such as those Parties involved should seek

under 3.3(vii) and clarification from the Comptroller of
3.3(viii) Income Tax on how such cases
should be treated for income tax
purposes.

7.4 The gain or loss from the actual disposal is taxable or deductible if the
transferor carries on the transactions in the normal course of its trade
or business.

4
The proceeds may be regarded as dividends under Section 10J if certain conditions are
satisfied.
11
7.5 There is no specific maximum period imposed on a securities lending
or repo arrangement to qualify for this tax treatment.

Tax treatment for transferee

7.6 A transferee may make a gain or loss from:

(i) selling the transferred securities or collateral to another person

other than the transferor; and

(ii) returning the equivalent securities to the transferor subsequently.

The gain or loss is taxable or allowable if the transferee carries on

these transactions in the normal course of its trade or business. Such
gain or loss made by investment companies assessed under section
10A of the ITA is also taxable or deductible.

7.7 The illustration below shows when the gain or loss arising from the
transferee’s short selling will be recognised for income tax purposes:

Transferee

Sells a security it does not own (short position)

Enters into a securities lending arrangement

Receives security from transferor

Disposes transferred security to cover short position Note 1

Purchases equivalent security from market

Returns equivalent security to the transferor Note 2

Completes securities lending arrangement

Note 1: The transferee is to recognise the gain or loss when it

disposes of the transferred securities to another person other
than the transferor to cover its short position.

Note 2: The transferee is to recognise the gain or loss when it returns

the equivalent securities to the transferor.

12
7.8 The securities lending and repo arrangement can be terminated under
the various events described in paragraph 7.3. As such, the transferee
may not be able to purchase from the market and return the equivalent
securities to the transferor. When such event takes place, the
transferee is deemed to have returned the equivalent securities to the
transferor and completed the arrangement. Consequently, the
transferee is required to recognise the gain or loss.

7.9 In calculating the gain or loss, the transferee must first determine the
market value of the transferred securities at the time he borrows them.
This market value is then used as the cost of the transferred securities
and the sale price of equivalent securities.

7.10 Below is an example on a step-by-step computation of the gain or loss

under a securities lending arrangement for a transferee with
accounting year ending on 31 Dec:

Date of Transaction price or market

transaction value of securities, as the
case may be
Transferee short sells 29 Dec 2010 $20,000 (A)
securities it does not
own (consideration received from
short sale)

Transferee borrows 31 Dec 2010 $10,0005 (B)

transferred securities
to cover short position (market value of transferred
securities at date of
borrowing)

Transferee buys 1 Jul 2011 $15,000 (C)

equivalent securities
from the market to (purchase cost of equivalent
return to the transferor securities)

The securties lending arrangement is completed on 1 Jul 2011 when

the transferee returns the equivalent securities to the transferor.

Year of Assessment 2011 - Deemed gain on short sale (29 Dec 2010)
= A–B
= $20,000 - $10,000
= $10,000

Year of Assessment 2012 - Actual loss when transferee buys

equivalent securities from market to return to transferor (1 Jul 2011)
= B–C
5
The market value of the transferred securities at the time of the transfer, which is $10,000,
is taken as the cost of the transferred securities and the sale price of the equivalent
securities.
13
 = $10,000 - $15,000
= $(5,000)

Overall net gain for transferee over two accounting years

= $10,000 - $5,000
= $5,000

8 Tax treatment of actual distribution and compensatory payment

arising from qualifying securities lending and repo arrangements

8.1 In order for a transferor to be considered as the economic owner of the

transferred securities or collateral under a qualifying securities lending
or repo arrangement, when a distribution (e.g. a dividend or interest) is
paid on the transferred securities or collateral, the transferee has to:

(i) pass on such distribution to the transferor if the transferee

receives the distribution; or

(ii) make a payment of equal value to the distribution to the

transferor if the transferee does not receive the distribution
(“compensatory payment”).

8.2 This requirement is consistent with the terms of standard market

agreements such as Global Master Securities Lending Agreement,
Overseas Securities Lender’s Agreement and Global Master
Repurchase Agreement.

8.3 However, in order not to prevent or discourage the buy/sell trades in

repo markets where compensatory payments are not made, the
transferee is not required to make compensatory payment if the repo
arrangement relates to Singapore Government Securities6, qualifying
debt securities7 and foreign debt securities8.

8.4 The tax treatment of actual distribution and compensatory payment is

explained in the following paragraphs.

Tax treatment of actual distribution passed on by Singapore-based

transferee

8.5 The Singapore-based transferee will not:

(i) be taxed on the actual distribution received on the transferred

securities or collateral; and

6
“Singapore Government securities” has the same meaning as in Section 43N(4) of ITA
7
“Qualifying debt securities” has the same meaning as in Section 13(16) of ITA
8
“Foreign debt securities” has the same meaning as in Section 10N(12) of ITA
14
 (ii) be allowed a deduction for the passing on of the distribution to the
transferor.

8.6 Instead, the transferor (or the ultimate transferor in a chain) is regarded
as the recipient of the actual distribution on the transferred securities or
collateral. The transferor will, therefore, be taxed on the distribution
passed on by the Singapore-based transferee. The nature of the
distribution received by the transferor will follow the nature of the actual
distribution received by the Singapore-based transferee. Please refer
to Annex 1 for details on the tax treatment of actual distribution a
transferor receives from a Singapore-based transferee.

Tax treatment of actual distribution passed on by non Singapore-based

transferee

8.7 Where the distribution is passed on by a non Singapore-based

transferee, it would be treated as if the transferee makes a
compensatory payment. The tax treatment of compensatory payment
in paragraphs 8.8 to 8.10 would apply.

Tax treatment of compensatory payment made by transferee

8.8 A transferee may not always hold the transferred securities or collateral
for the entire period of the securities lending or repo arrangement. The
transferee could have delivered them to meet its short selling
obligation. The transferee could have also transferred them under
another securities lending or repo arrangement.

8.9 As such, the transferee could not have received any actual
distributions on the transferred securities or collateral. However, the
transferee should still make a compensatory payment to the transferor.
The transferee will be allowed a deduction for such payment if it is a
revenue expense wholly and exclusively incurred in the production of
the transferee’s income.

8.10 The transferor, on the other hand, will be taxed on the compensatory
payment as follows:

Transferee Transferor Tax treatment of the

compensatory payment in the
hands of the transferor
Singapore- Singapore- The compensatory payments will
based based be assessed at the same tax rate
as would be applicable to the
distribution on the transferred
securities or collateral.

Please refer to Annex 2 for

details on the tax treatment of the
compensatory payment.

15
 Transferee Transferor Tax treatment of the
compensatory payment in the
hands of the transferor
Singapore- Non Singapore- Generally, the compensatory
based based payments will be assessed at the
same tax rate as would be
applicable to the distribution on
the transferred securities or
collateral.

The payment is subject to

withholding tax in accordance
with the provisions of the ITA,
unless tax exemption9 or waiver
of the obligation to withhold tax is
granted.

Please refer to Annex 2 for

details on the tax treatment of the
compensatory payment.

Non Singapore- Singapore- All compensatory payments will

based based be regarded as separate and
distinct foreign income. This
means that they do not follow the
nature of the distributions on the
transferred securities or collateral
and will be subject to tax based
on normal tax rules.

Please refer to Annex 3 for

details on the tax treatment of the
compensatory payment.

Non Singapore- Non Singapore- Not applicable

based based

9 Tax treatment of other related payments

9.1 Where the borrowing fee, loan rebate fee or price differential is borne
directly or indirectly by a resident of or permanent establishment in
Singapore or is deductible against any income accruing in or derived
from Singapore, they would be deemed to be derived from Singapore
and hence, subject to Singapore tax.

9
Please refer to the Income Tax (Exemption of interest and other payments for economic
and technological development) (No. 3) Notification 2003 (S/N S500/2003).
16
9.2 Singapore withholding tax is applicable if the borrowing fee, loan
rebate fee and price differential are payable or paid to non-resident
transferor or transferee, unless tax exemption10 or waiver of obligation
to withhold tax is granted.

9.3 The deductibility of the borrowing fee, loan rebate fee or price
differential is subject to the existing tax rules.

10 Administrative requirements

10.1 The transferor and transferee, or their agent, have to maintain proper
records of the securities lending or repo arrangement. Such records
include documents showing distributions passed on, compensatory
payments made, economic ownership remains with the transferor, etc.
The records are to be retained for a period of 5 years. Upon request,
transferor, transferee or its agent is to submit full particulars of such
records to Comptroller of Income Tax.

11 Contact information

11.1 If you have any enquiries or need clarification on this Guide, please call
1800-356 8622.

10
Please refer to the Income Tax (Exemption of interest and other payments for economic
and technological development) (No. 3) Notification 2003 (S/N S500/2003).
17
12 Updates and Amendments

Date of
S/N Amendments made
amendment
1 29 Jun 2012 Updated the example in paragraph 11 of the
original e-Tax guide on the transferee’s short
sale transaction that straddles two accounting
years with current dates (see paragraph 7.10).

Paragraphs 13 and 16 of the original e-Tax

guide on exemption of withholding tax for
borrowing fee, loan rebate fee and price
differential have been replaced with the
applicable gazette order under section 13(4) in
footnote 10.

Paragraph 30 of the original e-Tax guide on

exemption of withholding tax for pure
manufactured payment has been replaced with
the applicable gazette order under section 13(4)
in footnote 9.

The terms “manufactured payment” or “pure

manufactured payment” in paragraph 18
onwards of the original e-Tax guide have been
replaced with “distribution” and “compensatory
payment” to be consistent with S10N of ITA.

Paragraphs 21 to 23 and 25 and Appendices C

to G of the original e-Tax guide in respect of the
following have been removed as they are no
longer relevant with the introduction of one-tier
corporate tax system:

• administrative procedure for passing on of

Singapore dividends and related tax credits;

• giving notice to Central Depository (Pte) Ltd

or relevant Depository Agents for passing on
Singapore dividends and related tax credits;
and

• failure to give such notice.

Paragraphs 14, 17 and 31 and Appendix A of

the original e-Tax guide on tax treatment of
borrowing fee, loan rebate fee, price differential
and manufactured payment have been
removed. The summarised tax position is now in
paragraph 9 or Annexes 1 to 3.
18
 Date of
S/N Amendments made
amendment
Appendix B of the original e-Tax guide on tax
treatment of manufactured and pure
manufactured payments has been updated and
replaced with Annexes 1 to 3.

19
Annex 1 – Transferor (whether or not Singapore-based) receives
distribution from Singapore-based transferee

Nature of the actual Tax treatment

distribution received (follow nature of actual distribution)
by Singapore-based Singapore-based Non Singapore-based
transferee transferor transferor
One-tier Singapore Tax exempt Tax exempt
dividend paid by a
listed Singapore
resident company

Interest from • Qualifying individual11 • Qualifying individual –

qualifying debt – tax exempt tax exempt
securities issued by a • Financial Sector • Qualifying non-
Singapore issuer Incentive Standard- 13
resident person – tax
Tier (“FSI-ST”) exempt
company – 12% 12
• All other non-resident
• Company (other than persons – 17% or
FSI-ST company) 20%, whichever is
and body of persons applicable
– 10%

Interest from non- • Qualifying individual • Qualifying individual –

qualifying debt – tax exempt tax exempt
securities issued by a • All other persons – • All other non-resident
Singapore issuer 17% or individual persons – transferee
income tax rates has to withhold tax at
15%, 17% or 20%,
whichever is
applicable

Foreign dividend or • Individual – tax Not subject to Singapore

interest exempt for dividend tax
and interest not
received through
partnership in

11
A qualifying individual refers to an individual whose distribution or compensatory payment
is not derived through a partnership in Singapore or from the carrying on of a trade,
business or profession.
12
This concessionary tax rate applies to income derived on or after 1 January 2011 as
provided in the Income Tax (Concessionary rate of Tax for Financial Sector Incentive
Companies) Regulations. The concessionary tax rate is 10% for income derived during
the period from 1 January 2004 to 31 December 2010.
13
Qualifying non-resident person refers to (i) a non-resident person who does not have any
permanent establishment in Singapore; (ii) a non-resident person who carries on any
operation in Singapore through a permanent establishment in Singapore where the funds
used by that person to acquire the qualifying debt securities are not obtained from the
operation.
20
 Nature of the actual Tax treatment
distribution received (follow nature of actual distribution)
by Singapore-based Singapore-based Non Singapore-based
transferee transferor transferor
Singapore
• FSI-ST company -
12% if payment
derived from loan of
foreign securities14
• All other persons –
exempt15, 17% or
individual income tax
rates

Note:
The Singapore-based
transferor may submit
relevant receipts to
claim tax credits for
foreign tax suffered by
the Singapore-based
transferee.

14
Please refer to the Income Tax (Concessionary rate of tax for Financial Sector Incentive
Companies) Regulations.
15
The income would be exempt from tax if it falls within Section 13(8) of ITA.
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Annex 2 – Transferor (whether or not Singapore-based) receives
compensatory payment from Singapore-based transferee

Nature of Tax treatment

distribution not (generally follow same tax rate as would be
received by the applicable to distribution)
Singapore-based Singapore-based Non Singapore-based
transferee, but for transferor transferor
which compensatory
payment is made
One-tier Singapore Tax exempt Tax exempt
dividend paid by a
listed Singapore
resident company

Interest from • Qualifying individual Singapore-based

qualifying debt – tax exempt transferee is a financial
securities issued by a • FSI-ST company – institution16
Singapore issuer 12% • Specified non-resident
• Company (other than person17 – tax exempt
FSI-ST company)
and body of persons Singapore-based
– 10% transferee is not financial
institution:
• Qualifying individual –
tax exempt
• Qualifying non-
resident person – tax
exempt

All other non-resident

person - 17% or 20%,
whichever is applicable

Interest from non- • Qualifying individual Singapore-based

qualifying debt – tax exempt transferee is a financial
securities issued by a • All other persons – institution
Singapore issuer 17% or individual • Specified non-resident
income tax rates person – tax exempt

Singapore-based
transferee is not a
financial institution
• Qualifying individual –
tax exempt

16
The financial institution includes a bank, merchant bank, licensed securities company, etc
17
Specified non-resident person refers to a person neither resident in Singapore nor a
permanent establishment in Singapore who enters into qualifying securities lending or repo
arrangement as a principal.
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Nature of Tax treatment
distribution not (generally follow same tax rate as would be
received by the applicable to distribution)
Singapore-based Singapore-based Non Singapore-based
transferee, but for transferor transferor
which compensatory
payment is made
All other non-resident
persons – transferee has
to withhold tax at 15%,
17% or 20%, whichever
is applicable

Foreign dividend or • Individual – tax Singapore-based

interest exempt for dividend transferee is a financial
and interest not institution:
received through • Specified non-resident
partnership in person – tax exempt
Singapore
• FSI-ST company - Singapore-based
12% if payment transferee is not financial
derived from loan of institution:
foreign securities • Qualifying individual–
• All other persons – tax exempt
exempt, 17% or
individual tax rates All other persons –
transferee has to
Note: withhold tax at 15%, 17%
The Singapore-based or 20%, whichever is
transferor cannot claim applicable
tax credit as no actual
foreign tax was suffered
by the Singapore-based
transferee

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Annex 3 – Singapore-based transferor receives compensatory payment
from non Singapore-based transferee

Nature of distribution not Tax treatment for

received by non Singapore-based transferor
Singapore-based
transferee, but for which
compensatory payment is
made
Not a tax consideration All compensatory payments received from
the non Singapore-based transferee are
regarded as separate and distinct foreign
income.

The Singapore-based transferor is assessed

on arising or remittance basis and the
following exemption or tax rates may apply:

• Individual – tax exempt if not received

through partnership in Singapore

• FSI-ST company - 12%

• All other persons – 17% or individual

income tax rates

The Singapore-based transferor may claim

tax credit under existing provisions in the ITA.

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