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Public Ruling No. 4/2021 – Taxation of Income Arising from Settlements
The IRB has published Public Ruling (PR) No. 4/2021: Taxation of Income Arising from Settlements, dated 13 August 2021. The new 18-page PR comprises the following paragraphs and sets out 20 examples:
1.0 Objective
2.0 Relevant provisions of the law
3.0 Interpretation
4.0 Introduction
5.0 Settlor
6.0 Settlements
7.0 Income of settlement deemed to be income of the settlors
8.0 Settlement creating a trust
9.0 Settlement cases where a trust is not created
10.0 Resolution of amount of any payment of income made or apportionment of income or statutory income
11.0 Two or more settlors to a settlement
12.0 Recovery of income tax paid by a settlor
13.0 Disclaimer
Broadly, the PR explains the taxation of income arising from a settlement created by a person for the benefit of another person. In particular, the PR:
- Clarifies and provides examples to demonstrate who constitutes a “settlor” and what constitutes “settlements” for income tax purposes
- Explains and provides examples to demonstrate circumstances where income arising from a settlement is deemed to be income of a settlor and hence assessable on him/her, pursuant to Section 65 of the Income Tax Act 1967 (ITA)
- Explains how the amount of income of a settlor from settlements is determined
- Explains and provides an example to demonstrate the tax treatment in a settlement where there are two or more settlors