Income categories and rates
DEI income is income from qualifying activities in the incentive certificate; other income is non-DEI. Only DEI income exceeding the certificate’s base income bears the certificate’s concessionary rate. Base income is taxed at the prevailing corporate rate. Identify every category’s revenue and direct expenses separately with adequate accounting controls.
Functional currency and conversion
Prepare accounts and computations in the primary economic environment’s functional currency. For non-Singapore-dollar accounts, calculation items through chargeable income after exemption remain in that currency, but Form C and appendices are in Singapore dollars. Use the basis period’s average exchange rate: the sum of each month-end rate divided by the number of months. The notes point to MAS for commonly used currency rates.
Common expenses and common assets
Shared expenses and capital allowances must use a basis connected to activities and reasonably reflecting each category’s activity level, consistently across YAs unless circumstances change. Turnover is a guide for similar manufactured goods, trading or similar services; it includes section 10(1)(a) trade revenue, excluding passive or non-trade items such as interest and capital receipts. Different activities may require gross margin, cost of sales, floor area or headcount. Complete Common Expenses and CA (Common Assets); transfer total common expenses to the profit-and-loss account and disallowable amounts and capital allowances to each computation column.
Medical expenses and base income
Medical expenditure exceeding the specified employee-remuneration percentage goes into non-DEI at the prevailing rate. Base income is the certificate’s average corresponding income. If DEI subtotal P is non-positive, base-income transfer Q is zero. If P is positive, Q is the lower of P and certificate base income. Deduct Q from DEI and add the same Q to non-DEI.
Section 37B and four examples
Unused capital allowances, losses or donations set against a differently taxed category require rate adjustment. No cross-category loss adjustment arises if both categories are profitable or both have losses. The PDF assumes DEI 10% and normal 17% for illustration, not every certificate. Example 1A: DEI profit 50,000 and normal loss 10,000; use 10,000 loss ×17/10 =17,000 against DEI, leaving DEI 33,000 and normal zero. Example 1B: DEI 17,000 and normal loss 50,000; use 17,000×10/17 =10,000 normal loss, leaving normal loss 40,000 and DEI zero.
Reverse-direction loss examples
Example 2A: DEI loss 10,000 and normal profit 50,000; deduct 10,000×10/17 =5,882 from normal profit, leaving 44,118 and DEI zero. Example 2B: DEI loss 50,000 and normal profit 5,882; use DEI loss 5,882×17/10 =10,000 as shown with source rounding, leaving DEI loss 40,000 and normal zero. The converted deduction differs from the amount of loss consumed; preserve both columns when preparing the computation.
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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