§ 34AA — Adjustment on change of basis of computing profits of financial instruments resulting from FRS 109 or SFRS(I) 9

34AA.—(1) Despite the provisions of this Act but subject to section 34G(3), (4) and (5), the amount of any profit, loss or expense to be brought into account for the basis period for any year of assessment in respect of any financial instrument of a qualifying person for the purposes of sections 10, 14, 14G and 37, respectively, is that which, in accordance with FRS 109 or SFRS(I) 9 (as the case may be), is recognised in determining any profit, loss or expense in respect of that financial instrument for that year of assessment.[39/2017; 45/2018]

(2) To avoid doubt, subsection (1) does not apply to anything recognised in accordance with FRS 109 or SFRS(I) 9 (as the case may be), that is capital in nature.[39/2017; 45/2018]

(3) Despite subsection (1), for the purposes of sections 10, 14, 14G and 37, the profit, loss or expense in respect of a financial instrument mentioned in each of the following paragraphs must be dealt with in accordance with that paragraph:(a)

where a qualifying person to whom section 10(12)(b) applies derives interest from a negotiable certificate of deposit or derives a gain or profit from the sale of that certificate, the person’s income from that certificate or sale must be treated in the manner set out in section 10(12);

(b)

where a qualifying person derives interest from debt securities or loans, the interest that is chargeable to tax under section 10(1)(d) is the amount computed at the contractual interest rate and not at the effective interest rate;[Act 33 of 2022 wef 04/11/2022]

(c)

any amount of profit or expense in respect of a loan for which no interest is payable must be disregarded;

(d)

where the creditor and debtor of a loan did not deal with each other at arm’s length, the interest income chargeable to tax, and the interest expense allowable as a deduction, are the amounts of such income and expense that are computed at the contractual interest rate and not at the effective interest rate;

(e)

in a case where section 14(1)(a) applies, only interest expense incurred in respect of the money borrowed and computed at the contractual interest rate is allowed as a deduction under that provision;

(f)

any amount of profit or loss in respect of a hedging instrument acquired under a bona fide commercial arrangement for the sole purpose of hedging against any risk associated with the underlying asset or liability must be disregarded, if the underlying asset or liability is employed or intended to be employed as capital;

(g)

any amount of expected credit losses of a financial instrument that is not credit‑impaired, being losses that are recognised in accordance with FRS 109 or SFRS(I) 9 (as the case may be) in determining the profit or loss of such instrument, must be disregarded;

(h)

despite paragraph (g), section 14G applies in relation to a provision made by a qualifying person that is a bank or qualifying finance company for an expected credit loss arising from its loans or investments in securities, or both, where the loans or securities are not credit impaired;[Act 25 of 2025 wef 08/12/2025]

(i)

where an equity instrument on revenue account of a qualifying person that is measured at fair value through other comprehensive income is disposed of, an amount prescribed as the gain or loss to the qualifying person on such disposal, is chargeable to tax, or is to be allowed as a deduction;

(j)

a gain from discounts or premiums on debt securities, being a gain chargeable to tax under section 10(1)(d) —(i)

is treated as accruing only on the maturity or redemption of the debt securities; and

(ii)

is treated as equal to the difference between the amount received on the maturity or redemption of the debt securities and the amount for which the debt securities were first issued;

(k)

in a case where a qualifying person issues debt securities at a discount or redeems issued debt securities at a premium, and section 14(1)(a) applies in respect of the outgoing represented by such discount or premium, such outgoing is treated to be incurred and deductible only when it is paid on the maturity or redemption of the debt securities and —(i)

for debt securities issued in the basis period relating to the year of assessment 2008 or subsequent years of assessment, is treated as equal to the difference between the amount paid on the maturity or redemption of the debt securities and the amount for which the debt securities were first issued; or

(ii)

for debt securities issued before the basis period relating to the year of assessment 2008, is treated as equal to the part of the difference in sub‑paragraph (i) that would be attributable to the year of assessment 2008 and subsequent years of assessment;

(l)

in a case where —(i)

a qualifying person issues debt securities at a discount or redeems issued debt securities at a premium;

(ii)

the debt securities were issued with an embedded derivative to acquire shares or units in the qualifying person; and

(iii)

the outgoing represented by such discount or premium is deductible under section 14(1),

such part of the outgoing that is attributable to the embedded derivative is not deductible;

(m)

where a financial instrument on revenue account of a qualifying person (being a financial liability measured at fair value through profit or loss) matures or is sold, bought back or redeemed, any gain or loss to the qualifying person that is realised on such maturity or from such sale, buy back or redemption (being a gain or loss that is recognised in other comprehensive income in accordance with FRS 109 or SFRS(I) 9 (as the case may be)) is chargeable to tax, or is to be allowed as a deduction.[39/2017; 45/2018]

(4) To avoid doubt, subsection (3)(d) does not affect the operation of section 34D.[39/2017]

(5) In a case where —(a)

a loan on revenue account is transferred by a qualifying person (called in this subsection the transferor) to another person (called in this subsection the transferee);[Act 30 of 2023 wef 30/10/2023]

(b)

the transfer is not pursuant to a qualifying amalgamation within the meaning of section 34C(2) in relation to which an election is made under section 34C(4);

(c)

a provision for an expected credit loss arising from that loan that is credit‑impaired, being a loss that is recognised in accordance with FRS 109 or SFRS(I) 9 (as the case may be) in determining the profit or loss of such loan, is also transferred by the transferor to the transferee; and

(d)

a deduction of an amount in respect of the provision mentioned in paragraph (c) was previously allowed under section 14 (read with this section or section 34A) to the transferor,

then, despite any provision in this Act —

(e)

in a case where both the transferor and the transferee are on the date of the transfer in the business of lending money, the deduction previously allowed to the transferor is treated, for the purposes of section 14, as having been allowed to the transferee under that section; and

(f)

in any other case, the provision for the expected credit loss mentioned in paragraph (c) that is transferred by the transferor and allowed a deduction under paragraph (d) is treated as a trading receipt of the transferor for the basis period in which the date of transfer falls.[39/2017; 45/2018]

[Act 30 of 2023 wef 30/10/2023]

(6) A person who is not a qualifying person under paragraph (a) or (b) of the definition of that term in subsection (15), may apply to the Comptroller for approval to be a qualifying person; and if the Comptroller approves the application, that person is a qualifying person starting from the year of assessment of the basis period in which the approval is granted or such later year of assessment as the Comptroller may approve.[39/2017]

(7) If —(a)

any gain, loss or expense in respect of a financial instrument of a qualifying person to which subsection (1) applies is recognised under FRS 109 or SFRS(I) 9 (as the case may be) on a certain date;

(b)

it is not possible to determine, on the date the Comptroller makes an assessment of the amount of chargeable income of that person for the year of assessment of the basis period in which the date mentioned in paragraph (a) falls, whether that gain, loss or expense is capital or revenue in nature;

(c)

because of this, the gain was not charged with tax or a deduction was allowed for that loss or expense, as the case may be; and

(d)

the Comptroller later discovers (called the discovery time) that the gain ought to have been charged with tax as it is revenue in nature, or a deduction ought not to have been allowed for the loss or expense as it is capital in nature, as the case may be,

then, and despite anything in this Act but subject to subsection (9), the amount of the gain, loss or expense, together with the additional amount mentioned in subsection (8), is treated as the person’s income for the year of assessment within which the discovery time falls.

[39/2017; 45/2018]

(8) The additional amount in subsection (7) is the amount of any other gain, loss or expense in respect of the same financial instrument —(a)

that was not charged with tax, or for which a deduction was allowed, for one or more past years of assessment, for the same reason as that in subsection (7)(b); and

(b)

that is ascertained in accordance with the regulations made under subsection (13).[39/2017]

(9) For any qualifying person, no assessment may be made in respect of the income mentioned in subsection (7) more than 4 years immediately after the end of the year of assessment of the basis period in which the financial instrument is disposed of by the qualifying person.[39/2017]

(10) If —(a)

any gain, loss or expense in respect of a financial instrument of a qualifying person to which subsection (1) applies is recognised under FRS 109 or SFRS(I) 9 (as the case may be) on a certain date;

(b)

it is not possible to determine, on the date the Comptroller makes an assessment of the amount of chargeable income of that person for the year of assessment of the basis period in which the date mentioned in paragraph (a) falls, whether that gain, loss or expense is capital or revenue in nature;

(c)

because of this, the gain was charged with tax or a deduction was not allowed for that loss or expense, as the case may be; and

(d)

the Comptroller later discovers (called the discovery time), with or without a claim made by the qualifying person, that the gain ought not to have been charged with tax as it is capital in nature, or a deduction ought to have been allowed for the loss or expense as it is revenue in nature, as the case may be,

then, and despite anything in this Act but subject to subsection (12), the amount of the gain, loss or expense, together with the additional amount mentioned in subsection (11), is to be allowed as a deduction against the income of the person for the year of assessment within which the discovery time falls.

[39/2017; 45/2018]

(11) The additional amount in subsection (10) is the amount of any other gain, loss or expense in respect of the same financial instrument —(a)

that was charged with tax, or for which a deduction was not made, for one or more past years of assessment, for the same reason as that in subsection (10)(b); and

(b)

that is ascertained in accordance with the regulations made under subsection (13).[39/2017]

(12) For any qualifying person, no claim mentioned in subsection (10)(d) may be made more than 4 years immediately after the end of the year of assessment of the basis period in which the financial instrument is disposed of by the qualifying person.[39/2017]

(13) For the purposes of this section, the Minister may make regulations to give effect to this section, including —(a)

[Deleted by Act 45 of 2018]

(b)

providing for the computation of the additional amounts mentioned in subsections (8) and (11); and

(c)

providing for any transitional, supplementary or consequential matter, including —(i)

treating a specified amount of any profit in respect of a financial instrument of a person, being an amount recognised under FRS 109 or SFRS(I) 9 (as the case may be) as such profit as of a date before the date the person becomes a qualifying person, as the person’s income for a specified year of assessment; and

(ii)

allowing a specified amount of any loss or expense in respect of a financial instrument of a person, being an amount recognised under FRS 109 or SFRS(I) 9 (as the case may be) as such loss or expense as of a date before the date the person becomes a qualifying person, as a deduction against the person’s income for a specified year of assessment.[39/2017; 45/2018]

(14) The regulations under subsection (13) may prescribe different amounts for the purposes of subsection (3)(i) for different descriptions of instruments.[39/2017]

(15) In this section —“bank”, “loan” and “qualifying finance company” have the meanings given by section 14G(7);

“contractual interest rate”, in relation to any financial instrument, means the applicable interest rate specified in the financial instrument;

“debt securities” has the meaning given by section 43H(4);

“expected credit loss” has the meaning given by FRS 109 or SFRS(I) 9;[Act 25 of 2025 wef 08/12/2025]

“FRS 109” means the financial reporting standard known as Financial Reporting Standard 109 (Financial Instruments) that is made, and amended from time to time, under Part 3 of the Accounting Standards Act 2007;

“qualifying person”, in relation to any year of assessment, means —(a)

in the case of a year of assessment for a basis period beginning on or after 1 January 2018, a person who is required to prepare or maintain financial accounts in accordance with FRS 109 or SFRS(I) 9 for that basis period;

(b)

in the case of a year of assessment for a basis period beginning on a date before 1 January 2018, a person mentioned in paragraph (a) who prepares or maintains financial accounts in accordance with FRS 109 or SFRS(I) 9 (as the case may be) for that basis period; or

(c)

in any case, a person who is treated as a qualifying person under subsection (6);

“SFRS(I) 9” means the financial reporting standard known as Singapore Financial Reporting Standard (International) 9 (Financial Instruments) that is made, and amended from time to time, under Part 3 of the Accounting Standards Act 2007.[39/2017; 45/2018]

(16) Any term used in this section and not defined in this section but defined in FRS 109 or SFRS(I) 9, has the same meaning as in FRS 109 or SFRS(I) 9, as the case may be.[45/2018]

(17) This section does not apply to any profit, loss or expense in respect of any financial instrument of an insurer as defined in section 34AAA(1), to be brought into account for the basis period for a year of assessment, being a basis period that begins on or after 1 January 2023, or such earlier basis period as may be approved by the Comptroller in a particular case.[Act 33 of 2022 wef 04/11/2022]

—(1) Despite the provisions of this Act but subject to section 34G(3), (4) and (5), the amount of any profit, loss or expense to be brought into account for the basis period for any year of assessment in respect of any financial instrument of a qualifying person for the purposes of sections 10, 14, 14G and 37, respectively, is that which, in accordance with FRS 109 or SFRS(I) 9 (as the case may be), is recognised in determining any profit, loss or expense in respect of that financial instrument for that year of assessment.[39/2017; 45/2018]

(2) To avoid doubt, subsection (1) does not apply to anything recognised in accordance with FRS 109 or SFRS(I) 9 (as the case may be), that is capital in nature.[39/2017; 45/2018]

(3) Despite subsection (1), for the purposes of sections 10, 14, 14G and 37, the profit, loss or expense in respect of a financial instrument mentioned in each of the following paragraphs must be dealt with in accordance with that paragraph:(a)

where a qualifying person to whom section 10(12)(b) applies derives interest from a negotiable certificate of deposit or derives a gain or profit from the sale of that certificate, the person’s income from that certificate or sale must be treated in the manner set out in section 10(12);

(b)

where a qualifying person derives interest from debt securities or loans, the interest that is chargeable to tax under section 10(1)(d) is the amount computed at the contractual interest rate and not at the effective interest rate;[Act 33 of 2022 wef 04/11/2022]

(c)

any amount of profit or expense in respect of a loan for which no interest is payable must be disregarded;

(d)

where the creditor and debtor of a loan did not deal with each other at arm’s length, the interest income chargeable to tax, and the interest expense allowable as a deduction, are the amounts of such income and expense that are computed at the contractual interest rate and not at the effective interest rate;

(e)

in a case where section 14(1)(a) applies, only interest expense incurred in respect of the money borrowed and computed at the contractual interest rate is allowed as a deduction under that provision;

(f)

any amount of profit or loss in respect of a hedging instrument acquired under a bona fide commercial arrangement for the sole purpose of hedging against any risk associated with the underlying asset or liability must be disregarded, if the underlying asset or liability is employed or intended to be employed as capital;

(g)

any amount of expected credit losses of a financial instrument that is not credit‑impaired, being losses that are recognised in accordance with FRS 109 or SFRS(I) 9 (as the case may be) in determining the profit or loss of such instrument, must be disregarded;

(h)

despite paragraph (g), section 14G applies in relation to a provision made by a qualifying person that is a bank or qualifying finance company for an expected credit loss arising from its loans or investments in securities, or both, where the loans or securities are not credit impaired;[Act 25 of 2025 wef 08/12/2025]

(i)

where an equity instrument on revenue account of a qualifying person that is measured at fair value through other comprehensive income is disposed of, an amount prescribed as the gain or loss to the qualifying person on such disposal, is chargeable to tax, or is to be allowed as a deduction;

(j)

a gain from discounts or premiums on debt securities, being a gain chargeable to tax under section 10(1)(d) —(i)

is treated as accruing only on the maturity or redemption of the debt securities; and

(ii)

is treated as equal to the difference between the amount received on the maturity or redemption of the debt securities and the amount for which the debt securities were first issued;

(k)

in a case where a qualifying person issues debt securities at a discount or redeems issued debt securities at a premium, and section 14(1)(a) applies in respect of the outgoing represented by such discount or premium, such outgoing is treated to be incurred and deductible only when it is paid on the maturity or redemption of the debt securities and —(i)

for debt securities issued in the basis period relating to the year of assessment 2008 or subsequent years of assessment, is treated as equal to the difference between the amount paid on the maturity or redemption of the debt securities and the amount for which the debt securities were first issued; or

(ii)

for debt securities issued before the basis period relating to the year of assessment 2008, is treated as equal to the part of the difference in sub‑paragraph (i) that would be attributable to the year of assessment 2008 and subsequent years of assessment;

(l)

in a case where —(i)

a qualifying person issues debt securities at a discount or redeems issued debt securities at a premium;

(ii)

the debt securities were issued with an embedded derivative to acquire shares or units in the qualifying person; and

(iii)

the outgoing represented by such discount or premium is deductible under section 14(1),

such part of the outgoing that is attributable to the embedded derivative is not deductible;

(m)

where a financial instrument on revenue account of a qualifying person (being a financial liability measured at fair value through profit or loss) matures or is sold, bought back or redeemed, any gain or loss to the qualifying person that is realised on such maturity or from such sale, buy back or redemption (being a gain or loss that is recognised in other comprehensive income in accordance with FRS 109 or SFRS(I) 9 (as the case may be)) is chargeable to tax, or is to be allowed as a deduction.[39/2017; 45/2018]

(4) To avoid doubt, subsection (3)(d) does not affect the operation of section 34D.[39/2017]

(5) In a case where —(a)

a loan on revenue account is transferred by a qualifying person (called in this subsection the transferor) to another person (called in this subsection the transferee);[Act 30 of 2023 wef 30/10/2023]

(b)

the transfer is not pursuant to a qualifying amalgamation within the meaning of section 34C(2) in relation to which an election is made under section 34C(4);

(c)

a provision for an expected credit loss arising from that loan that is credit‑impaired, being a loss that is recognised in accordance with FRS 109 or SFRS(I) 9 (as the case may be) in determining the profit or loss of such loan, is also transferred by the transferor to the transferee; and

(d)

a deduction of an amount in respect of the provision mentioned in paragraph (c) was previously allowed under section 14 (read with this section or section 34A) to the transferor,

then, despite any provision in this Act —

(e)

in a case where both the transferor and the transferee are on the date of the transfer in the business of lending money, the deduction previously allowed to the transferor is treated, for the purposes of section 14, as having been allowed to the transferee under that section; and

(f)

in any other case, the provision for the expected credit loss mentioned in paragraph (c) that is transferred by the transferor and allowed a deduction under paragraph (d) is treated as a trading receipt of the transferor for the basis period in which the date of transfer falls.[39/2017; 45/2018]

[Act 30 of 2023 wef 30/10/2023]

(6) A person who is not a qualifying person under paragraph (a) or (b) of the definition of that term in subsection (15), may apply to the Comptroller for approval to be a qualifying person; and if the Comptroller approves the application, that person is a qualifying person starting from the year of assessment of the basis period in which the approval is granted or such later year of assessment as the Comptroller may approve.[39/2017]

(7) If —(a)

any gain, loss or expense in respect of a financial instrument of a qualifying person to which subsection (1) applies is recognised under FRS 109 or SFRS(I) 9 (as the case may be) on a certain date;

(b)

it is not possible to determine, on the date the Comptroller makes an assessment of the amount of chargeable income of that person for the year of assessment of the basis period in which the date mentioned in paragraph (a) falls, whether that gain, loss or expense is capital or revenue in nature;

(c)

because of this, the gain was not charged with tax or a deduction was allowed for that loss or expense, as the case may be; and

(d)

the Comptroller later discovers (called the discovery time) that the gain ought to have been charged with tax as it is revenue in nature, or a deduction ought not to have been allowed for the loss or expense as it is capital in nature, as the case may be,

then, and despite anything in this Act but subject to subsection (9), the amount of the gain, loss or expense, together with the additional amount mentioned in subsection (8), is treated as the person’s income for the year of assessment within which the discovery time falls.

[39/2017; 45/2018]

(8) The additional amount in subsection (7) is the amount of any other gain, loss or expense in respect of the same financial instrument —(a)

that was not charged with tax, or for which a deduction was allowed, for one or more past years of assessment, for the same reason as that in subsection (7)(b); and

(b)

that is ascertained in accordance with the regulations made under subsection (13).[39/2017]

(9) For any qualifying person, no assessment may be made in respect of the income mentioned in subsection (7) more than 4 years immediately after the end of the year of assessment of the basis period in which the financial instrument is disposed of by the qualifying person.[39/2017]

(10) If —(a)

any gain, loss or expense in respect of a financial instrument of a qualifying person to which subsection (1) applies is recognised under FRS 109 or SFRS(I) 9 (as the case may be) on a certain date;

(b)

it is not possible to determine, on the date the Comptroller makes an assessment of the amount of chargeable income of that person for the year of assessment of the basis period in which the date mentioned in paragraph (a) falls, whether that gain, loss or expense is capital or revenue in nature;

(c)

because of this, the gain was charged with tax or a deduction was not allowed for that loss or expense, as the case may be; and

(d)

the Comptroller later discovers (called the discovery time), with or without a claim made by the qualifying person, that the gain ought not to have been charged with tax as it is capital in nature, or a deduction ought to have been allowed for the loss or expense as it is revenue in nature, as the case may be,

then, and despite anything in this Act but subject to subsection (12), the amount of the gain, loss or expense, together with the additional amount mentioned in subsection (11), is to be allowed as a deduction against the income of the person for the year of assessment within which the discovery time falls.

[39/2017; 45/2018]

(11) The additional amount in subsection (10) is the amount of any other gain, loss or expense in respect of the same financial instrument —(a)

that was charged with tax, or for which a deduction was not made, for one or more past years of assessment, for the same reason as that in subsection (10)(b); and

(b)

that is ascertained in accordance with the regulations made under subsection (13).[39/2017]

(12) For any qualifying person, no claim mentioned in subsection (10)(d) may be made more than 4 years immediately after the end of the year of assessment of the basis period in which the financial instrument is disposed of by the qualifying person.[39/2017]

(13) For the purposes of this section, the Minister may make regulations to give effect to this section, including —(a)

[Deleted by Act 45 of 2018]

(b)

providing for the computation of the additional amounts mentioned in subsections (8) and (11); and

(c)

providing for any transitional, supplementary or consequential matter, including —(i)

treating a specified amount of any profit in respect of a financial instrument of a person, being an amount recognised under FRS 109 or SFRS(I) 9 (as the case may be) as such profit as of a date before the date the person becomes a qualifying person, as the person’s income for a specified year of assessment; and

(ii)

allowing a specified amount of any loss or expense in respect of a financial instrument of a person, being an amount recognised under FRS 109 or SFRS(I) 9 (as the case may be) as such loss or expense as of a date before the date the person becomes a qualifying person, as a deduction against the person’s income for a specified year of assessment.[39/2017; 45/2018]

(14) The regulations under subsection (13) may prescribe different amounts for the purposes of subsection (3)(i) for different descriptions of instruments.[39/2017]

(15) In this section —“bank”, “loan” and “qualifying finance company” have the meanings given by section 14G(7);

“contractual interest rate”, in relation to any financial instrument, means the applicable interest rate specified in the financial instrument;

“debt securities” has the meaning given by section 43H(4);

“expected credit loss” has the meaning given by FRS 109 or SFRS(I) 9;[Act 25 of 2025 wef 08/12/2025]

“FRS 109” means the financial reporting standard known as Financial Reporting Standard 109 (Financial Instruments) that is made, and amended from time to time, under Part 3 of the Accounting Standards Act 2007;

“qualifying person”, in relation to any year of assessment, means —(a)

in the case of a year of assessment for a basis period beginning on or after 1 January 2018, a person who is required to prepare or maintain financial accounts in accordance with FRS 109 or SFRS(I) 9 for that basis period;

(b)

in the case of a year of assessment for a basis period beginning on a date before 1 January 2018, a person mentioned in paragraph (a) who prepares or maintains financial accounts in accordance with FRS 109 or SFRS(I) 9 (as the case may be) for that basis period; or

(c)

in any case, a person who is treated as a qualifying person under subsection (6);

“SFRS(I) 9” means the financial reporting standard known as Singapore Financial Reporting Standard (International) 9 (Financial Instruments) that is made, and amended from time to time, under Part 3 of the Accounting Standards Act 2007.[39/2017; 45/2018]

(16) Any term used in this section and not defined in this section but defined in FRS 109 or SFRS(I) 9, has the same meaning as in FRS 109 or SFRS(I) 9, as the case may be.[45/2018]

(17) This section does not apply to any profit, loss or expense in respect of any financial instrument of an insurer as defined in section 34AAA(1), to be brought into account for the basis period for a year of assessment, being a basis period that begins on or after 1 January 2023, or such earlier basis period as may be approved by the Comptroller in a particular case.[Act 33 of 2022 wef 04/11/2022]