IRAS has ruled that gains from the transfer of intellectual property rights between two group companies are capital in nature and not taxable, although a charge applies to rights on which writing down allowances were claimed.
The Inland Revenue Authority of Singapore (IRAS) has ruled in Advance Ruling Summary No. 17/2026 published on 1 October 2026, that gains from a group’s transfer of intellectual property rights are not taxable under section 10(1) of the Income Tax Act 1947. The transfer is capital in nature, so any gain is not taxable and any loss is not deductible.
The transaction
Company A and Company B own and manage the group’s key intellectual property rights. Company B is the regional entrepreneur for Asia Pacific. Company A plans to acquire the Asia Pacific rights from Company B at market value as part of a move to a new operating model. Company B will then cease to own the rights, become a service company for a period and eventually go dormant.
Section 19B IPRs
These are the rights on which Company B claimed five-year writing down allowances under section 19B of the Income Tax Act 1947. IRAS ruled that a charge will be imposed on them, based on the lower of the transfer price and the capital expenditure incurred in acquiring the rights. The charge is taxed in the Year of Assessment relating to the basis period in which the transfer occurs. It is imposed under section 19B(5), subject to section 19B(10J), after the writing down period has ended.
Residual IPRs
These are mainly rights for which no writing down allowances were claimed, and rights developed under a research and development cost sharing agreement for which deductions were claimed under sections 14(1) and 14C. IRAS ruled that their transfer is capital in nature, so any gain is not taxable and any loss is not deductible.
Basis of the decision
IRAS based its decision on the nature of Company B’s business since it acquired the rights, the internal group reorganisation, and the complete sterilisation of the company’s profit-making apparatus.
Scope of the ruling
The ruling binds only the applicant and the specified transaction. The Comptroller is not bound to apply the same treatment to a similar transaction, and Iras will not update the ruling to reflect later changes in law or interpretation.
