Deductibility of Guarantee Fees

Recently, OSH advised a client on the deductibility of fees incurred in respect of trade guarantees procured to secure the performance of certain long-term contracts. The Comptroller was initially of the view that as the fees were incurred in respect of long-term contracts, they were capital in nature and thus not deductible. OSH assisted in the submissions to the Comptroller which presented that, applying the correct legal principles, the fees were revenue in nature. The following facts of the case clearly supported our position: (1) the underlying transaction, in respect of which the fees were incurred, was that of the purchase of stock-in-trade (which is of a revenue character); and (2) the fees were recurring. The success of our submissions was recently communicated to us, with the Comptroller agreeing that the fees are revenue in nature and therefore, deductible under section 14 of the Income Tax Act.

For more information, please contact Joanne Khoo at +65 6804 7568 or