Singapore legislation
Regulation 20
Regulation 20
Treatment of tax credits
Subregulation 1
The FANIL of a constituent entity of an MNE group for a financial year must be adjusted so that —
qualified refundable tax credits are accounted for as income (and not as a negative amount of tax expense);
tax credits that are marketable transferable tax credits are accounted for as income or loss under paragraph (2), (3) or (4) (and not as a negative amount of tax expense); and
subject to paragraph (5), other tax credits are accounted for as a negative amount of tax expense in determining the adjusted covered taxes under paragraph 1 of the First Schedule to the Act (and regulation 11 applies accordingly); and are excluded from the FANIL to the extent they are included in the consolidated financial statements as income in the FANIL.
Subregulation 2
For the purpose of paragraph (1)(a) and (b), a qualified refundable tax credit or marketable transferable tax credit is accounted for as income as follows:
if the constituent entity is the originator of the tax credit and the tax credit is related to the acquisition or construction of assets and the originator has an accounting policy of reducing the carrying value of its assets in respect of such tax credits or recognising such tax credits as deferred income, the originator must follow the accounting policy;
in any other case, the face value of the tax credit is treated as income in the financial year in which the entitlement under the tax credit accrues.
Subregulation 3
For the purpose of paragraph (1)(b), where the constituent entity is the originator of the marketable transferable tax credit —
if the tax credit is transferred by the constituent entity in the financial year in which it is granted or within 15 months after that financial year, the consideration for the transfer must be accounted for as income for the financial year in which it is granted;
if the tax credit is not transferred by the constituent entity within that period, the value of the tax credit must be accounted for as income when accrued as income according to the accounting policy of the constituent entity;
if the tax credit is transferred by the constituent entity after that period for a consideration less than the remaining value of the tax credit, the difference between the remaining value of the tax credit and the consideration received must be accounted for as a loss for the financial year in which the transfer occurs; and
if the tax credit expires, any unutilised value of the tax credit must be accounted for as a loss (or as an increase to the carrying value of the asset where paragraph (2)(a) applies) for the financial year in which the tax credit expires.
Subregulation 4
For the purpose of paragraph (1)(b), where the constituent entity is a purchaser of the marketable transferable tax credit —
if any part of the tax credit is utilised by the constituent entity in a financial year, the following amount must be accounted for as income for that financial year:where —
A is the amount of the tax credit utilised;
B is the full value of the tax credit; and
C is the price paid by the constituent entity for the tax credit;
if the tax credit is transferred by the constituent entity, the following amount must be accounted for as income or a loss (as the case may be) for the financial year in which the transfer occurs:where —
D is the consideration received by the constituent entity for the transfer;
E is the amount of the tax credit that has been utilised by the constituent entity for that financial year and all previous financial years;
F is the consideration paid by the constituent entity to acquire the tax credit; and
G is the total amount that is accounted for as income by the constituent entity under sub‑paragraph (a) in respect of the tax credit for that financial year and all previous financial years; and
if the tax credit expires, the following amount must be accounted for as a loss for the financial year in which the tax credit expires: (F + G) − E, where F, G and E have the same meanings as in sub‑paragraph (b).
Subregulation 5
Where the constituent entity is the purchaser of a non‑marketable transferable tax credit and incurs a net loss (being a negative amount computed by the formula in regulation 41(2)(b)) on the transfer of the tax credit to another person, the net loss must be accounted for as a loss for the financial year in which the transfer occurs.
Subregulation 6
Where the constituent entity is the purchaser of a qualified refundable tax credit and incurs a net loss after applying the formula in paragraph (4)(c) on the expiry of the tax credit, the net loss must be accounted for as a loss for the financial year in which the expiry of the tax credit occurs.