Foreign dividend held through a nominee
Singapore-incorporated and resident X received shares in unrelated Country A company A as part payment for asset sales. Related Country B company B held the shares in trust for X and collected dividends on its behalf. A paid dividends directly into B’s offshore bank account. The money remained offshore and X recorded an amount receivable from B.
Capital reduction and fee settlement
X proposed assigning part of the B receivable to its shareholder in return for redemption and cancellation of redeemable preference shares. Those shares were equity for Singapore income-tax purposes. The remaining receivable would settle B’s fees for holding the shares and receiving dividends. Neither proposed use involved physical remittance, transmission or bringing funds into Singapore.
Section 10(25) result
IRAS ruled that the described use of unremitted dividends for capital reduction and fees did not constitute receipt or deemed receipt in Singapore under section 10(25) of the 2014 Revised Edition Income Tax Act. Its reason addressed capital reduction and a non-trade expense; it did not establish that every overseas fee payment has the same result.
Three essential factual conditions
The dividends had to genuinely be X’s foreign-sourced income. The assigned and fee amounts had to be paid directly to recipient accounts for the specified purposes without funds physically entering Singapore. Finally, the receivable could not represent income that had already been remitted, transmitted or brought into Singapore at any point between accrual and its assignment or fee use.
Scope of the published summary
Ruling 12/2021 was published on 1 September 2021 and points readers to IRAS guidance on when foreign income is received in Singapore. It binds only the applicant and specified transaction. Similar transactions are not automatically covered, and the summary is not updated for later changes in law or interpretation.
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 ↗