Funding and fixed-rate terms
A trustee of a REIT established and listed in Singapore issued fixed-rate subordinated perpetual securities. Proceeds supported group working capital, capital expenditure, investments and partial or full refinancing. Distributions were fixed-rate and semi-annual in arrears. The issuer could, with notice, omit or partly pay them; deferred amounts were non-cumulative and bore no interest. Optional distributions could subsequently pay up to the unpaid amount.
Ranking and redemption
The securities had no fixed redemption date, with issuer redemption permitted in specified cases. They were direct, unconditional, subordinated and unsecured obligations, ranking equally with each other and issuer parity obligations. The ruling assessed these contractual features together when classifying the hybrid instrument.
Payment stopper and release
Except for specified exceptions and proportionate parity actions, non-payment restricted dividends, distributions, other payments and redemption, reduction, cancellation, buy-back or acquisition of junior and specified parity obligations. Release could occur after all securities were redeemed, the next scheduled distribution was fully paid, an optional distribution matching the latest unpaid scheduled amount was fully paid, or holders passed an extraordinary resolution permitting payment.
Holder tax treatment
The securities were debt under section 43H(4) of the Income Tax Act 1947 (2020 Revised Edition) and regulation 2 of the QDS Regulations. Normal and optional distributions were interest on indebtedness. Holders could obtain section 43H concessions and section 13(1)(a) exemptions only if the governing QDS conditions were satisfied.
Issuer deductions are separately tested
IRAS required detailed tracing of proceeds. Section 14(1)(a) deduction applied where the raised capital was employed in acquiring taxable income of the issuer, section 14 expense conditions were met and no other provision prohibited deduction. The scheduled payment date alone did not fix deduction: a distribution had to be legally due and payable.
Historical ruling limits
Published on 1 August 2022, this transaction-specific summary refers to hybrid-instruments guide paragraphs 5, 7 and 9. It is binding only for the applicant and specified transaction and is not updated for subsequent statutory or interpretative changes.
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.
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