Companies and first dividend
A was incorporated and operated outside Singapore. Its shareholder B was a Singapore-tax-resident investment holding company. A would declare US$X dividends proportionately and satisfy them with promissory notes under separate payment direction letters.
Same-day dividends up the chain
B would declare US$Y to its Singapore-incorporated shareholder and direct A to issue the relevant notes to that shareholder or its nominee. Intermediate companies would do likewise up to foreign-incorporated ultimate shareholder Z. On the same day all dividends were declared and the notes issued, Z would hold A notes totalling US$X. X and Y were anonymised amounts.
Note terms and offshore settlement
Principal and unpaid accrued interest were due at close of business in year T unless mutually extended. Interest was determined at arm’s length; outstanding principal and interest could be prepaid without penalty. Payment amounts depended on Z’s cash needs and A’s accumulated surplus. A would pay Z entirely through offshore banking or payment gateways. Notes were prepared and executed abroad and never received or brought into Singapore.
Decision under sections 10(25) and 10(1)
IRAS ruled that A’s dividend to B, settled by these notes kept entirely offshore under the direction letters, was not received in Singapore under section 10(25), and thus was not taxable under section 10(1). This conclusion was expressly conditional.
Conditions 1 and 2: foreign source and no inward movement
The dividend must constitute B’s foreign-sourced income. From accrual to B until onward payment as one-tier tax-exempt dividends, it must not be remitted, transmitted or brought into Singapore.
Conditions 3 and 4: prohibited uses and avoidance
The income must not discharge a debt incurred for B’s Singapore trade or business; buy movable property B brings into Singapore; or represent foreign income already remitted, transmitted or brought here in that interval. The transaction must not be a section 33 avoidance scheme. IRAS directs readers to its overseas-income receipt guidance.
Publication date and reliance
This article explains the IRAS ruling published on 4 September 2023. It binds only the applicant and specified transaction. Another similar transaction need not receive identical treatment. IRAS does not update published summaries for later legislative or interpretive changes; the provision numbers describe this source edition.
Official source
This article independently explains the substantive contents of the official PDF, including the relevant conditions, procedures and annexes. The linked document remains the authoritative source for its original wording, and later changes should be checked separately.
Read the official PDF ↗