The Inland Revenue Authority of Singapore published new guidance on 31 March 2022 regarding the tax treatment of interest, gains or profits derived from negotiable certificates of deposit by non-financial institutions.
Tax Treatment of Interest, Gains or Profits Derived from Negotiable Certificates of Deposit by Non-Financial Institutions
Where a non-financial institution (non-FI) derives interest from a negotiable certificate of deposit (NCD) or derives gains or profits from the sale thereof, the amount of taxable income derived must be computed based on the rules prescribed under Section 10(12) of the Income Tax Act 1947. This is notwithstanding the adoption of FRS 109 tax treatment by the non-FI.
The paragraphs below summarise the tax treatment of interest, gains or profits derived from NCDs by a non-FI.
Deemed passive interest income
All interest, gains or profits derived from NCDs by a non-FI are deemed as passive interest income taxable under Section 10(1)(d).
Original holders of NCDs
An original holder of an NCD must report any interest, gains or profit as interest income in its tax returns. Any loss incurred on the sale of NCDs cannot be deducted against other sources of income.
Subsequent holders of NCDs
For a subsequent holder, its deemed interest income from NCDs is determined as follows: