Income Tax (Deductible Borrowing Costs) Regulations 2008

No. S 115

Income Tax Act

(Chapter 134)

Income Tax (Deductible Borrowing Costs) Regulations 2008

In exercise of the powers conferred by section 14(1)(a) of the Income Tax Act, the Minister for Finance hereby makes the following Regulations:

Citation and commencement

1.  These Regulations may be cited as the Income Tax (Deductible Borrowing Costs) Regulations 2008 and shall have the effect for the year of assessment 2008 and subsequent years of assessment.

Prescribed sums payable in lieu of interest or for reduction thereof

2.—(1)  For the purposes of section 14(1)(a)(ii) of the Act, the prescribed sums payable by any person in lieu of interest or for the reduction thereof are any deductible borrowing costs incurred by the person.

(2)  In paragraph (1), “deductible borrowing costs” means any of the items specified in the first column of the Schedule which are of the description specified in the second column thereof.

Restriction of deduction in respect of money borrowed before basis period relating to year of assessment 2008

3.  Where a discount on debt securities referred to in item 3 in the Schedule or premium on debt securities referred to in item 4 in the Schedule is incurred by any person on any debt securities issued before the basis period relating to the year of assessment 2008, only such amount of the discount or premium attributable to the year of assessment 2008 and subsequent years of assessment as determined —

(a) in accordance with the formula

where A	is the number of days between the first day of the basis period relating to the year of assessment 2008 and the date the discount or premium is incurred by the person (both dates inclusive);
B	is the number of days between the date the debt security was issued and the date the discount or premium is incurred by the person (both dates inclusive); and
C	is the total amount of discount or premium incurred by the person; or

(b) where it is just and reasonable in the circumstances of any particular case, on such other basis as the Comptroller thinks fit,

shall be deductible.

THE SCHEDULE

Regulations 2 and 3

Deductible Borrowing Costs

	First column		Second column
	Item		Description
1.	Guarantee fees	—	Fees payable to a guarantor to enable the borrower to enjoy preferential interest rates and reduce his interest costs
2.	Bank option fees	—	Fees payable to the lender to keep the interest rate on borrowing at a fixed level or within a specified range
3.	Discount on debt securities payable on the maturity or early redemption of those securities	—	Discount suffered by the issuer of debt securities, with zero or below market interest rate, that is equal to the difference between the amount payable to the holder of the securities upon the maturity or early redemption of the securities and the amount paid by the first holder of the securities for the issue of the securities
4.	Premium on debt securities payable on the maturity or early redemption of those securities	—	Premium payable upon maturity of debt securities or early redemption thereof by the issue of the securities, with zero or below market interest rate, that is equal to the difference between the amount payable to the holder of the securities upon the maturity or early redemption of the securities and the amount paid by the first holder of the securities for the issue of the securities
5.	Prepayment fees or early redemption fees	—	Fees payable to the lender upon the early redemption of borrowing which represent compulsory adjustments to the interest obligation of the borrower
6.	Extension fees	—	Fees payable to the lender to extend the repayment date of the borrowing which represent compensation to the lender for the time value of the money borrowed for the extended period
7.	Increased costs	—	Upward interest rate adjustments payable when certain event occurs as specified in the loan agreement
8.	Interest rate cap premiums	—	Upfront premiums payable to cap the interest rate at a certain level
9.	Interest rate swap payments	—	Amounts payable to protect the borrower against interest rate fluctuations
10.	Conversion fees or amendment fees	—	Any amount payable to the lender under the loan agreement for conversion of the interest rate specified in the loan agreement that is applicable at the point of the conversion, to a lower interest rate
11.	Cancellation fees	—	Fees payable to the lender when the loan or any part thereof is cancelled which represent adjustments of the interest return to the lender
12.	Front‑end fees or back‑end fees	—	Any amount payable to the lender, either at the beginning or at the end of the term of borrowing, which is equivalent to the interest which the borrower would otherwise be required to pay to the lender under the loan agreement

[S 533/2014 wef Y/A 2014 subs Ys/A]

Made this 28th day of February 2008.

TEO MING KIAN

Permanent Secretary,
Ministry of Finance,
Singapore.

[MF(R)32.7.3.V18; AG/LEG/SL/134/2005/33 Vol. 1]