On 24 March 2014, the IRAS revised the e-Tax Guide on Writing Down Allowance on Payment for Indefeasible Rights of Use (“IRU“) as follows:
Paragraphs 8.3 and 8.5 clarify that the balancing charge computed will be restricted to the WDA claimed previously.
Paragraph 8.7 has been inserted to highlight that the IRU is deemed to have been sold at open market price at the date of permanent cessation of the use if it were to remain with the person after it permanently ceased to be used.
Paragraph 8.8 has been inserted to highlight that any sale, transfer or assignment of IRU that occurs after the date on which a relevant trade, business, profession permanently ceases would be deemed to have occurred immediately before the cessation.
Paragraph 11.2 has been inserted to highlight the withholding tax treatment for payment to non-resident person for the use of international telecommunications submarine cable capacity including payment for IRU. In summary, payment for the use of international telecommunications submarine cable capacity (other than payment made under IRU agreement) is treated as a payment for services. Where services are performed by non-residents in Singapore, it would be subject to withholding at the prevailing corporate tax rate.
Other the other hand, payment for the use of international telecommunications submarine cable capacity under the IRU agreement is treated as rent or payment for the use of movable property under Section 12(7)(d) of the Income Tax Act. However, withholding tax exemption has been granted until 27 Feb 2018.
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