Each investor of the fund must be a “Qualifying Relevant Owner” for the purposes for section 13CA of the Income Tax Act and the Income Tax (Exemption of Income of Non-residents Arising from Funds Managed by Fund Manager in Singapore) Regulations 2010. Non-Qualifying Relevant Owners must notify the fund manager and/ or the fund administrator immediately and would be subject to financial penalties.
The information contained in this document is not tax advice. Investors should consult their advisers to seek appropriate advice before providing any representation to the Fund.
An investor is a Qualifying Relevant Owner if he:
- either alone or together with his associates, beneficially owns (directly or indirectly) on the last day of the financial year of the Fund, issued securities of the Fund the value of which is not more than 30% (or 50%, where there are more than 10 shareholders) of the total value of all issued securities of the Fund on the last day of the financial year of the Fund;
- is an individual;
- is a bona fide entity not resident in Singapore who does not have a permanent establishment in Singapore (other than a fund manager) and does not carry on a business in Singapore;
- is a bona fide entity not resident in Singapore (excluding a permanent establishment in Singapore) who carries on an operation in Singapore through a permanent establishment in Singapore where the funds used to invest directly or indirectly in the Fund are not obtained from such operation;
- is a designated person;
- is an approved company under the Tax Exemption Scheme for Singapore Resident Funds which, at all times during the basis period for the year of assessment, beneficially owns directly 100% of the total value of all issued securities of the Fund;
- is an approved person under the Enhanced-Tier Fund Tax Exemption Scheme.
Reporting obligations of Non-Qualifying Relevant Owners
A Non-Qualifying Relevant Owner will have to declare to the Inland Revenue Authority of Singapore (IRAS) the penalty liable to be paid in his income tax return for the relevant year of assessment.
Penalty for Non-Qualifying Relevant Owners
The penalty is determined as follows:
Penalty = A x B x C
A is the percentage which the value of the issued securities owned by the owner on the last day of the financial year of the Fund bears to the total value of all issued securities of the Fund;
B is the amount of income of owner as reflected in the audited account of the person for the basis period relating to that year of assessment; and
C is the corporate tax rate applicable to that year of assessment (currently 17%).