IRAS - Investment Holding Companies
An investment holding company can claim deduction of expenses that are incurred to produce the investment income. The expenses may be incurred directly, indirectly, or in accordance with statutory and regulatory provisions. Investment holding company refers to a company that owns investments such as properties, derives investment income (‘non-trade income’) such as dividend. The company’s principal activity is that of investment holding. All investment income is assessed on a financial year basis.
Deductions Allowed
Expenses that are attributed to the investment income may be deductible. These may be incurred in the course of company’s operations or in accordance with statutory and regulatory provisions.
- Direct Expenses – Directly incurred to earn investment income and are deductible against the respective source of investment income. Such as Cost of collecting rent.
- Statutory and Regulatory Expenses – Incurred in accordance with statutory and regulatory provisions, such as accounting fees.
- Other Allowable Expenses – Other than statutory and regulatory expenses and direct expenses, in some cases, the investment holding company may incur the other expenses such as office telephone charges.
Deductions/ Claims Not Allowed
Expenses that are capital in nature and expenses attributable to investments that do not produce any income are not deductible. Such as stamp duty and legal fees incurred for the purchase of investments.
Excess Expenses from 1 Source of Investment
Expenses are deductible against their source of incom
e. For instance, property tax expenses incurred on an investment property is deductible against the rental income generated by the same property.
Capital Allowance Claims
Investment holding company is not entitled to claim capital allowances as it is not carrying on a trade or business. Only fixed assets purchased to replace existing fixed assets can be claimed as deductible expenses.
Unutilised Losses
Investment holding company cannot carry forward any unutilised losses to set-off the income of future Years of Assessment (YAs).
Group Relief Claims
Investment holding company cannot transfer (to other companies in the same group) current year unutilised losses arising from the excess of expenses over investment income under the Group Relief system. However, company may transfer current year unutilised Industrial Building Allowance, Land Intensification Allowance and donations to other companies in the same group under Group Relief system.
Tax Exemption for New Start-Up Companies
Investment holding company is not eligible to claim the tax exemption for new start-up companies. However, only eligible for partial tax exemption.
