1. An investment holding company is a type of company that its principal activities are usually are follows:
a) owns properties for long term investment and derives rental income
b) owns shares for long term investment and derives dividends and interest
2. Investment income received by an investment holding company is taxable in Singapore, unless exempted. All investment income of an investment holding company is assessed on financial year basis. For example, if the financial year of an investment holding company is from January to December, then all investment income received during this period is assessable to tax.
3. An investment holding company can also claim tax-deductible expenses to reduce the amount of tax to be paid. These tax-deductible expenses may be incurred in the course of the investment holding company’s operations (‘direct expenses’) or in accordance with statutory and regulatory provisions (‘statutory and regulatory expenses’).
4. Direct expenses are expenses directly incurred to earn investment income and are deductible against the respective source of investment income. What this means is that only expenses that are directly attributable to investments that produce income are tax-deductible. Consequently, expenses that are attributable to investments that do not produce any income are not deductible.
5. Some examples of direct expenses are as follows:
- Cost of collecting rent (for rental properties)
- Interest expenses (on loan taken to acquire investments such as shares and property)
- Insurance (for rental properties)
- MCST management fees (for rental properties)
- Property tax (for rental properties)
- Repair and maintenance (for rental properties)
6. Statutory and regulatory expenses are expenses incurred in accordance with statutory and regulatory provisions, such as the Companies Act. Some examples of this type of expenses are accounting fees, audit fees, bank charges, income tax service fees, and secretarial fees
7. Besides direct expenses and statutory and regulatory expenses, other specific expenses incurred by an investment holding company are also tax-deductible. This include director fees, office rental, staff salaries, office utilities, etc. However, the total amount of such expenses allowable should not exceed 5% of an investment holding company’s gross investment income.
8. Contact us if you require assistance to file Tax Returns for your investment holding company. At PL Biz Consulting Pte Ltd, we have the right people and expertise to prepare the financial statements and file Tax Returns for investment holding company.
