An investment holding company refers to a company that owns investments such as properties and shares for long term investment and derives investment income ("non-trade income") such as dividend, interest or rental income. The company's principal activity is that of investment holding.
Real Estate
The sale and lease of properties in Singapore are subject to GST except for residential properties.
Claiming GST
You may choose to voluntarily register for GST.
Charging and Collecting GST
Once you have registered for GST, you must charge GST on your supplies at the prevailing rate. This GST that is charged and collected is known as output tax. Output tax must be paid to IRAS.
The GST that you incur on business purchases and expenses is known as input tax. You can claim the input tax on your business purchases and expenses.
When purchasing from GST-registered suppliers, you may have incurred GST (input tax). You can claim input tax incurred.
As a GST-registered business:
You must submit your GST return to IRAS one month after the end of each quarterly prescribed accounting period.
You should report both your output tax and input tax in your GST return.
The difference between output tax and input tax is the net GST payable to IRAS or refunded by IRAS.
Deductible Expenses for Investment Holding Companies
Deductible expenses are expenses that are attributed to the investment income. These may be incurred in the course of the company’s operations, or in accordance with statutory and regulatory provisions.
Direct Expenses
These are expenses directly incurred to earn investment income and are deductible against the respective source of investment income.
Some examples are:
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)
Expenses incurred before the investment starts to produce income are not deductible as direct expenses. For example, interest incurred on loan taken to acquire shares or properties that have not commenced to derive any dividend or rental income is not deductible.
Statutory and Regulatory Expenses
These are expenses incurred in accordance with statutory and regulatory provisions. Some examples are:
Accounting fees
Annual listing fees
Audit fees
Bank charges
Income tax service fees
Printing and stationery
Secretarial fees
Other Expenses
Other than statutory and regulatory expenses and direct expenses, in some cases, an investment holding company may incur the following expenses:
Administrative and management fees
Directors' fees
General expenses
Office rental
Office telephone charges
Office water and light charges
Staff salaries, allowances, bonus and approved provident fund contributions
Transport expenses (exclude motor vehicle expenses on S-plated cars which are not deductible)
Deductions/ Claims Not Allowed
Capital Expenses and Expenses on Non-Income Producing Investments
Expenses that are capital in nature and expenses attributable to investments that do not produce any income are not deductible.
Some examples are:
Cost of new assets for the investment property such as refrigerator, air-conditioner, washing machine, furniture and fittings
The cost to acquire the initial new assets is capital in nature and not deductible. The subsequent cost of replacing the assets is deductible for properties already yielding investment income, as the expense is for an income-producing investment.
Stamp duty and legal fees incurred for the purchase of investments
Stamp duty and legal fees incurred for the purchase of investments are capital in nature and therefore not deductible.
As an investment holding company is not carrying on a trade and derives only non-trade income, the total amount of such other expenses allowable should not exceed 5% of the company’s gross investment income.
Tax Exemptions for Investment Holding Companies
Investment holding companies will be eligible for partial tax exemption. They are not eligible to claim Tax Exemption for New Start-up Companies.
Key Points to Consider When Setting Up an Investment Holding Company in Singapore:
Legal Structure: Choose a suitable legal structure, such as a private limited company or a limited liability partnership.
Shareholding Structure: Determine the shareholding structure and ownership of the company.
Minimum Capital: There is no minimum capital requirement for setting up an investment holding company in Singapore.
Taxation: Understand the tax implications and ensure compliance with tax regulations.
Corporate Governance: Implement good corporate governance practices to maintain transparency and accountability.
Financial Reporting: Maintain accurate financial records and prepare annual financial statements.
Regulatory Compliance: Adhere to all relevant regulations and statutory requirements.
How Bestar can Help Setting Up an Investment Holding Company
Bestar is a company formation and business consultancy firm that offers a range of services to help businesses set up and manage their operations in Singapore. We can also assist with setting up an investment holding company. Here are some of the ways Bestar can help:
Company Incorporation:
Legal Structure: Bestar can help you choose the most appropriate legal structure for your investment holding company, such as a private limited company or a limited liability partnership.
Registration Process: We will guide you through the registration process with the Accounting and Corporate Regulatory Authority (ACRA), including preparing and filing the necessary documents.
Corporate Secretarial Services: Bestar can provide ongoing corporate secretarial services, such as maintaining statutory records, filing annual returns, and ensuring compliance with regulatory requirements.
Taxation and Compliance:
Tax Planning: Bestar can help you understand the tax implications of setting up an investment holding company in Singapore and develop a tax-efficient strategy.
Tax Compliance: We can assist with tax filing and compliance, including corporate income tax returns and Goods and Services Tax (GST) returns.
Accounting Services: Bestar can provide accounting services, such as bookkeeping, financial reporting, and audit preparation.
Other Services:
Business Advisory: Bestar can offer advice on various aspects of business operations, including strategic planning, risk management, and corporate governance.
Treasury Services: We can help you manage your company's cash flow and investments.
Payroll Services: Bestar can provide payroll services, including salary processing, CPF contributions, and tax deductions.
In addition to these services, Bestar also has a team of experienced professionals who can provide personalized advice and support throughout the entire process of setting up and managing an investment holding company in Singapore.
By working with Bestar, you can ensure that your investment holding company is set up and managed efficiently and effectively, minimizing risks and maximizing returns.
Bestar professionals can assist customers in the company setup, GST account registration and claiming of GST incurred on property purchase.
If you would like to know more, please contact Bestar.
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