The Inland Revenue Authority of Singapore stated that some jurisdictions have implemented unilateral measures to address the tax challenges of digitalization adding that “companies may have incurred additional taxes overseas due to such measures.”
The Inland Revenue Authority of Singapore (IRAS) has issued a clarification on the deductibility of unilateral tax provisions adopted by countries to address the tax challenges posed by the digital economy.
In a note published on its website, the IRAS stated that “some jurisdictions have implemented unilateral measures to address the tax challenges of digitalization,” adding that “companies may have incurred additional taxes overseas due to such measures.”
The IRAS stated that the deductibility of these unilateral taxes will be based on existing provisions of the Singapore Income Tax Act:
- If such taxes are imposed as an income tax, deduction is prohibited under section 15(1)(g); and
- If such taxes are imposed in the form of turnover taxes (not income taxes), they are generally deductible against income taxable in Singapore under section 14(1). Examples of such taxes are India’s equalization levy and the UK’s digital services tax.
The author is Alex Hunter, Editor, TP News. He oversees and updates the publication and also regularly writes news stories about transfer pricing and international tax law. Alex is reachable at editor@transferpricingnews.com