Issuer, funding and questions
A Singapore-listed REIT trustee issued fixed-rate perpetual securities for general corporate purposes of the REIT and its subsidiaries. Summary 4/2022 asked about debt treatment under section 43H(4), QDS relief for distributions and optional distributions, and deduction under section 14(1)(a) of the Income Tax Act 1947, 2020 Revised Edition.
Distribution deferral and optional payments
Payments were scheduled every six months in arrears. With the prescribed notice, the issuer could choose not to pay or pay only part. Deferred distributions were non-cumulative and did not earn interest. It could later make an optional payment corresponding to an unpaid amount, in whole or part, after complying with notice requirements.
Other payments after deferral
Until the specified release event, the issuer could not pay or undertake capital transactions on junior obligations, or on parity obligations except pro rata. Release events were redemption of all securities, full payment of the next scheduled distribution, full payment of the relevant optional distribution for the latest missed amount, or permission by extraordinary resolution of holders. This source requires that relevant optional distribution to be paid in full to release the restriction.
Redemption and preferred-unit ranking
There was no fixed redemption date, although the issuer had specified redemption options. On REIT winding up, holders were treated as holders of preferred units with equal asset-return rights. They ranked equally with preferred unitholders enjoying preferential asset return, ahead of junior obligations. IRAS considered this feature together with the other terms and nevertheless classified the securities as debt.
Conditional tax outcomes
Ordinary and optional distributions were interest on indebtedness. QDS relief required the remaining qualifying conditions. Deduction required detailed examination of issue-proceed uses: capital had to be employed in obtaining the issuer’s taxable income, meet section 14(1) requirements, and avoid other statutory prohibitions. Payment was deductible only when legally due and payable, not simply at a scheduled distribution date.
Further guidance and historical limit
The PDF points to paragraphs 5, 7 and 9 of the hybrid-instruments guide for classification and issuer deductions. Published on 1 March 2022, the ruling binds only its applicant and specified transaction and is not updated for later law or interpretation 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.
Read the official PDF ↗