Taxation of investment holding companies in Singapore

There are two types of investment companies, namely, investment dealing companies and investment holding companies.

Investment dealing company

The main activity of the above company is to make investments to then subsequently see it. The proceeds from the sale of investments are assessed under s10(1)(a). The deductibility of the expenses is also alike other companies whereby s14 and s15 apply and capital allowances can be claimed by the company.

Investment holding company

The main activity of an investment holding company is the passive holding of long-term investments. The company earns passive income in the form of rentals, dividends and interest. The income derived is assessed under s10(1)(d) or (f). Any subsequent sale of these long-term investments is considered to be capital gains.


The expenses allowable for deduction are that which are attributable to the investment income taxable in Singapore.

Deductibity of the expenses is administered by the following:

  • The investment must be income-producing, and
  • The expenses excess of income cannot be deducted against other sources of income and it cannot be carried forward as it is not a trade loss.

Direct expenses

Direct expenses are expense directly incurred to earn each source of investment income. Examples of such expenses are custodian fees, property tax, insurance, repairs, maintenance & interest expenses. The expenses can be deducted against each income source.

Statutory expenses

These are deductible expenses incurred in accordance with the Companies Act or the requirements of the Singapore Exchange. Examples of such expenses will be audit fee, accounting fee, Income tax service fees, annual listing fees, insurance premiums, fees paid to the share registrar etc.

Indirect expenses

In substance, indirect expenses 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 indirect expenses are:

  • Director’s fees.
  • Public utilities for office.
  • Office rental.
  • Administrative and Management fees.
  • Fund management expenses.
  • General expenses.
  • Transport expenses (exclude motor vehicle expenses on “S”- plate cars which are not deductible).

Non-deductible expenses

Some expenses are not deductible for the purposes of Investment Holding Company (IHC). These include:

  • Capital expenses.
  • Expenses related to non-income producing investments.
  • Cost of new assets e.g. furniture & fittings (Replacement cost for fixed assets are deductible expenses).
  • Cost related to secure the first tenancy. e.g. advertising, legal costs etc.
  • IHCs cannot claim capital allowances as it is not carrying on trade and business (Fixed assets replacements can be claimed as deductible expenses).
  • IHCs incorporated after 25th of February 2013 is not eligible to claim the tax exemption for new start-up companies. Nevertheless, IHCs can claim partial exemption.

Basis of assessment

From Year of Assessment (YA) 2009, all investment income is assessed on an accounting year basis.

Prior to YA 2005, investment income is assessed on a preceding accounting year basis but effective YA 2005 concession has been given to companies which do not have a December 31st accounting year end.

These companies can have their investment income assessed on a preceding accounting year basis.

Investment holding company carrying on business of making investments

The principal activity of such a company is that of carrying on a business of making investments. The company owns investments such as properties and shares for the business of making investments e.g. a business of renting immovable properties or service apartments.

The companies derives investment income as a trade income S10(1)(a) which is subject to S10E restrictions.

Section 10E restrictions

a) Any non-income producing expenses incurred by the company or trustee of a property trust in respect of investments of that business are not deductible.

b) Any expenses incurred in respect of investments which produce income are only deductible against the income derived from such investments. The rest of the expenses not setoff in that year should be disregarded.

c) Capital allowances relating to that business are deductible only against income derived from the investments of that business and the excess in any year shall be disregarded.

d) Industrial Building Allowance (IBA) is only deductible against the income derived from investments which produce income. Any IBA which cannot be fully untilised by the entity in a year end is not disregarded.


A summary of the tax implications for each company is as follows:

  Investment dealing Investment holding company in business of making investments Investment holding
Charging section: Section 10 (1)(a). Section 10 (1)(a), however S10 provsisions apply. Section 10 (1)(d).
Expenses: Normal rules apply. Restrictions under S10E. Restrictions imposed per IRAS press release.
Loses: Trade loss. Excess not deductible against other income and cannot be carried forward or transferred under the group relief system.  Non-trade loss.
Capital allowances: Normal rules apply. Can be claimed but cannot be untilised against other income and cannot be carried forward or transferred under the group relief system (except for IBA). Not available (except IBA claim for qualifying industrial building or structure).

IRAS Practice: IRAS e-Tax Guide: ascertainment of income from business of making investment dated 11th of April 2012.

Take the next step, we are here to help.

Register a Singapore company.
Open a Singapore bank account.



Key amendments to the Singapore Companies Act

Significant changes to the commercial and company law in Singapore have come into effect. The changes to the Singapore Companies Act will hopefully make business entities more transparent as well as mitigating the risks of money laundering and terrorist financing.

Panama Law 52: Updated legislation for all legal entities

Panama Law 52: Updated legislation for all legal entities

Last month the Government in Panama officially approved Law Number 52; legislation which creates the regulatory framework for the implementation regarding automatically exchanging tax information, in a further attempt to comply with global regulations for tax transparency, and to be fully in line with all supervisory and compliance matters.

Important 2016 reporting deadlines for BVI Financial Institutions

Important 2016 reporting deadlines for BVI Financial Institutions

Officials from the British Virgin Islands have come together to clarify various filing deadlines as per the automatic exchange of information systems in a press release.

Thinking of relocating your business to Singapore? Let us help you!

Thinking of relocating your business to Singapore? Let us help you!

Singapore has quickly become one of the world's most prosperous countries with strong international trading links and per capita GDP equal to that of the leading nations in Western Europe, making it an ideal destination and potential location for Business Owners to relocate and start a new business and lifestyle.

How to register a branch in Cyprus

How to register a branch in Cyprus

Overseas companies may register a branch in Cyprus, according to the Companies Law, Chapter 113, regulated by section 347. A branch will not essentially consider as being a new legal entity in Cyprus.

To Brexit or not to Brexit?

To Brexit or not to Brexit?

To Brexit or not to Brexit - this has been the question of the year for Britain and with the referendum taking place imminently, just two options remain: leave the EU or stay in. Why has this been such a difficult decision to decide upon?

Selecting a Management Information System

Selecting a Management Information System

A management information system or MIS is used to assist in the analyses and formulation of business strategy, as well as facilitating operational objectives. Selection of an MIS can help increase understanding and control in an organisation and can be scaled to suit the complexity of most modern businesses. If the right MIS is selected and it is implemented correctly it can provide a competitive advantage for the organisations utilising it.

Windows 10 update: having issues with the installation?

Windows 10 update: having issues with the installation?

By now you have probably about Windows 10, the latest operating system developed by Microsoft.