The Inland Revenue Authority of Singapore (IRAS) has issued an updated e-Tax Guide Securities Lending and Repurchase Arrangements (Second Edition) on 4 December 2024.

This e-Tax Guide gives details on the income tax treatments and tax concessions of qualifying securities lending and repurchase (“repo”) arrangements under section 10H of the Income Tax Act 1947 (“ITA”).

When a person needs certain securities for the purpose of, say covering short sale, it can enter into a securities lending arrangement to borrow the securities. It is obliged to provide collateral and return the borrowed securities at a later date.

On the other hand, when a person has certain securities but needs cash, it can enter into a securities repo arrangement to sell the securities for cash with the agreement that the securities will be sold back to it at a later date.

Both arrangements involve transferring of ownership of the securities but only temporarily. If the arrangement is a qualifying arrangement, the person who originally owns the securities will not be treated as having sold the securities.

In December 2024, several updates were made to the tax guide, including the revision of the short title of the Income Tax Act (ITA) based on the 2020 Revised Edition. References to sections 10N and 43N were changed to 10H and 43H, respectively, due to renumbering in the revised edition. Amendments were made to paragraphs 2.4, 3.2, and 8.1, with new paragraphs 3.3, 5.3, and footnote 4 added to reflect key updates, including the expanded scope of qualifying securities lending and repo arrangements from November 27, 2024. A new definition of “distribution” was introduced in section 10H(12) to align with this expanded scope, while mentions of dividend and interest were removed.

The term “Capitalisation issue” was updated to “Bonus issue” in the table at renumbered paragraph 3.4 to align with the definition of “equivalent securities” in section 10H(12). Renumbered paragraphs 3.9 and 3.10 were amended for consistency with section 10H(12). A new paragraph 7.6 clarified that any gain from the transfer of foreign securities under securities lending or repo arrangements from January 1, 2024, would be treated as taxable income under section 10(1)(g) of the ITA, if within the scope of section 10L.

Further amendments included updates to S/N (iii) in paragraph 7.4 and paragraph 7.7 to remove repealed provisions, as well as an update in paragraph 7.11 to reflect more recent examples. Changes to paragraphs 8.5, 8.6, and 8.7, including footnotes 9-17, clarified the tax treatment of actual distributions and compensatory payments.

Additionally, paragraphs 9.1 to 9.3 were amended to clarify the tax treatment of interest payments derived from collateral. Various editorial changes and renumbering of paragraphs were also made throughout the guide.