Singapore publishes guidance on New Alternative Net Tonnage Basis of Taxation for Shipping Income

25 October, 2024

The Inland Revenue Authority of Singapore has updated its guidelines regarding the Tax Treatment for Shipping Income which now includes new provisions related to the alternative net tonnage basis of taxation, which will take effect from the year of assessment 2024.

Alternative Net Tonnage Basis of Taxation

As announced in Budget 2024, to better align Singapore’s tax regime for shipping entities with common international practices, an alternative net tonnage basis of taxation (“NTT basis”) is available for shipping enterprises under Section 13A, approved international shipping enterprises under Section 13E and approved shipping investment enterprises under Section 13P with effect from Year of Assessment (YA) 2024.

The NTT basis is not a separate tax regime but an alternative way of computing the income tax base of a qualifying shipping entity and subjecting that income tax base to the prevailing corporate income tax.

A qualifying shipping entity that makes an election for the NTT basis will apply the NTT basis to all qualifying ships owned/ operated by the entity. The entity’s income tax base for a YA is the total sum of the income for each qualifying ship computed by reference to the net tonnage of that ship, a deemed daily income per net ton and the number of days that the ship was in operation during the basis period of a YA. The election, once made, is irrevocable.

In computing the corporate income tax payable under the NTT basis, a qualifying shipping entity should note the following:

partial tax exemption, tax exemption for new start-up companies, and deductions do not apply to the income computed under the NTT basis

any unutilised capital allowances, trade losses and donations (i.e. unutilised items) cannot be deducted against the income computed under the NTT basis the entity is not eligible to claim carry-back of capital allowances and losses or group relief against the income computed under the NTT basis where applicable, foreign tax credit can be claimed subject to the entity meeting all qualifying conditions under existing tax rules, and the terms and conditions of the relevant double taxation agreement in the case of claims for double tax relief corporate income tax rebate, if any, is applicable for that YA.

For entities that do not elect for the NTT basis, the existing tax exemption under the relevant shipping incentives continues to apply.

Administrative Guidelines for Alternative Net Tonnage Basis of Taxation

Qualifying companies that wish to elect for the alternative net tonnage basis of taxation (“NTT basis”) under Section 34K of the Income Tax Act 1947 with effect from a YA must submit an election form to IRAS and MPA at https://go.gov.sg/electionform by the filing due date of the income tax return for that YA. For example, the election must be made on or before 30 November 2024 for the NTT basis to be applied from YA 2024.

Where the income tax return for YA 2024 has already been filed with IRAS and a qualifying company wishes to elect for the NTT basis, apart from submitting an election form to IRAS and MPA by 30 November 2024, it must also submit a revised tax computation to IRAS with supporting schedules showing the computation of corporate income tax payable under the NTT basis by the same date.

A qualifying company that has elected for the NTT basis (referred to as the electing company) needs to provide the following disclosure* in the tax computation for each of the YA while it is on the NTT basis.

*The company has elected for the alternative net tonnage basis of taxation (NTT basis) under the <Section 13A incentive for shipping enterprise/ Section 13E incentive for approved international shipping enterprise/ Section 13P incentive for approved shipping investment enterprise> with effect from <effective date of incentive or the first day of the basis period of the YA XX (to indicate the later date)>.

Upon election, the start date of the NTT basis will be the electing company’s:

first day of the basis period of the YA for which the election is made; or
the effective date of the company’s incentive status*, whichever is later.

*For an electing company with Section 13A incentive, the effective date of the incentive status refers to the date that it owns/ operates a qualifying Singapore-registered ship (“SRS”). Where the electing company has both the Section 13A and Section 13E incentives, the effective date of the incentive status refers to the earlier of the date that it owns/ operates the qualifying SRS or the effective date of its Section 13E incentive.