There are two types of investment companies, which the first one is investment holding and the second one is investment dealing. The clients are having a dilemma to choose between both of the company, which one is better to minimize the tax obligation in Singapore. By making this report is to do a research and to advise the clients to make a good decision on where they should invest their money and to make them pay lower tax.
Investment holding company is a company that doesn’t have any procedure, activities, or other active business itself. But it owns assets (Kennon, 2017). These companies are the passive holding of long-term investment and earn income from passive income such as dividend, interest and rentals (Eltoma, 2016). Meanwhile, investment dealing company is a company that driving out the business of acquiring investment income as a trade is taxed just as its business activities constitute trade (Bila, 2015). This company is to make investments to then finally see it (Eltoma, 2016).
The deductibility of expense is under the section of 14 (1) of the income tax act (ITA) that stated ” for the purpose of ascertaining the income of any person for any period from any source chargeable tax under this act…, there shall be deducted all outgoings and expenses wholly and exclusively incurred during that period by that period by that person in the production of the income..” (Long, 2017). The expense that must be deducted is such as religious dues, medical expenses, payment to related employees, expenses for certain type of motor car, entertainment expenses, payment made to employees, trading stock, losses through theft and misappropriation, legal and professional expenses, head office and management expenses, other miscellaneous expenditure, and deduction against employment income (Tan How Teck, 2015). In the deduction of expenses between holding and dealing company is slightly different. The deduction of expense in the investment dealing company has less restriction rather than in investment holding company (Bila, 2015). Meanwhile the deductible expense in holding company is indirect expenses, direct expenses, and statutory and regulatory expenses.