IRAS has ruled that a loan waiver is a capital transaction, with any resulting gain not subject to tax under section 10(1) of the Income Tax Act 1947.
Singapore’s Inland Revenue Authority of Singapore (IRAS) has ruled that an intended waiver of a loan between a company and its intermediate holding company is a capital transaction, with any resulting gains not subject to tax under section 10(1) of the Income Tax Act 1947 (ITA).
The ruling, issued in Advance Ruling Summary No. 15/2026 on 1 September 2026, concerns a Singapore-incorporated and domiciled company that received a working capital loan from its intermediate holding company to fund administrative expenses. The loan was recorded as a non-trade “Amount due to holding company” in the borrower’s audited financial statements.
The borrower, which has been inactive and dormant, intends to liquidate but has a current net capital deficiency and cannot repay the loan. The lender therefore intends to waive the outstanding amount, which would result in a gain being recognised by the borrower.
IRAS determined that the loan is capital in nature because the parties’ relationship is that of borrower and lender and the loan was provided to meet the borrower’s working capital requirements. The resulting gain is therefore not subject to tax under section 10(1) of the ITA.
