{"id":32800,"date":"2025-05-26T05:22:21","date_gmt":"2025-05-26T05:22:21","guid":{"rendered":"https:\/\/glutenfreepleasure.com\/__proxy_domain\/www.wlp.com.sg\/?p=32800"},"modified":"2025-05-26T05:22:24","modified_gmt":"2025-05-26T05:22:24","slug":"preparing-tax-computations-in-functional-currencies-other-than-singapore-dollars","status":"publish","type":"post","link":"https:\/\/glutenfreepleasure.com\/__proxy_domain\/www.wlp.com.sg\/preparing-tax-computations-in-functional-currencies-other-than-singapore-dollars\/","title":{"rendered":"Preparing Tax Computations in Functional Currencies Other Than Singapore Dollars"},"content":{"rendered":"

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Preparing Tax Computations in Functional Currencies Other Than Singapore Dollars<\/strong><\/h3>\n

Tax Computations in Non \u2013 Singapore Dollars Functional Currencies<\/strong><\/h4>\n

Companies that prepare their financial statements in a functional currency other than Singapore Dollars (S$) are required to prepare their tax computations in that same non-S$ currency. However, all amounts declared in the Corporate Income Tax Return must still be reported in S$.<\/p>\n\n

Key Considerations for Preparing Tax Computations<\/strong><\/h4>\n

For companies using non-S$ functional currencies, all figures in the tax computation\u2014up to the point of determining chargeable income (after applying any partial tax exemption or start-up tax exemption)\u2014must be reflected in the company\u2019s functional currency.<\/p>\n

If a company changes its functional currency from S$ to a non-S$ currency, transitional rules apply. These rules ensure that previously reported S$ balances are correctly converted into the new functional currency.<\/p>\n\n

Translation Rules for Specific Tax Computation Items<\/strong><\/h4>\n1. Current-Year Items<\/strong>\n

These include tax-adjusted profits or losses, capital allowances, other income sources, and donations. They must be reported in the tax computation based on their actual values in the company\u2019s functional currency, as per the financial statements.<\/p>\n2. Tax Written Down Value (TWDV) of Transferred Assets (Section 24)<\/strong>\n

If assets are transferred between parties with different functional currencies, the TWDV must be converted from the seller\u2019s currency to the buyer\u2019s using the exchange rate on the date of sale.<\/p>\n3. Group Relief \u2013 Loss Items<\/strong>\n

Losses are transferred based on the functional currency of the transferor. If the transferor and claimant use different currencies, the losses must be converted using the average exchange rate for the relevant Year of Assessment (YA).<\/p>\n4. Tax Exemption Amounts (Partial or Start-Up Relief)<\/strong>\n

These exemptions are granted in S$. The exempt amounts should be translated into the functional currency using the average exchange rate for the YA.<\/p>\n5. Tax Payable<\/strong>\n

To calculate tax payable, multiply the chargeable income (in the functional currency, after exemptions) by the corporate tax rate and the average exchange rate for the YA.<\/p>\n6. Foreign Tax Credit (FTC)<\/strong>\n

The S$ equivalent of Singapore tax payable on foreign-sourced income is computed by applying the corporate tax rate and the average exchange rate to the foreign income amount. The foreign tax paid is similarly converted to S$ using the average rate.<\/p>\n7. S$ Dividends and Interest Received<\/strong>\n

These must be converted into the recipient\u2019s functional currency using the YA\u2019s average exchange rate.<\/p>\n\n

Calculating the Average Exchange Rate<\/strong><\/h4>\n

The average exchange rate is derived from the average of month-end exchange rates during the financial period forming the basis period. These rates can be obtained from the Monetary Authority of Singapore (MAS):<\/p>\n\n