Income Tax Act 1947 - Singapore Statutes Online

Exemption of income of prescribed persons arising from funds managed by fund manager in Singapore

13D.—(1) There is exempt from tax such income as the Minister may by regulations prescribe of any prescribed person arising from funds managed in Singapore by any fund manager.

(1A) Subsection (1) does not apply to any income of a prescribed person that is —

(a)	derived in the prescribed person’s capacity as a trustee of a pension or provident fund approved under section 5;
(b)	derived in the prescribed person’s capacity as a trustee of a designated unit trust referred to in section 35(14) in a basis period or part of a basis period for a year of assessment, where the person has elected under section 35(12) for that provision to apply to any of the person’s income in that basis period or that part of the basis period;
(c)	derived in the prescribed person’s capacity as a trustee of a real estate investment trust within the meaning of section 43(10); or
(d)	exempt from tax under section 13U. [2/2016]

(2) Where —

(a)	income of any prescribed person, being a company, has been exempt from tax under subsection (1) in any year of assessment; and
(b)	a person (called in this section the relevant owner), either alone or together with the relevant owner’s associates, beneficially owns on the relevant day issued securities of the prescribed person the value of which is more than the prescribed percentage of the total value of all issued securities of the prescribed person on the relevant day,

then the relevant owner is liable to pay to the Comptroller, in such manner and within such reasonable time as may be determined by the Comptroller, a penalty to be computed in accordance with the formula

where A

is the percentage which the value of the issued securities of the prescribed person beneficially owned on the relevant day by the relevant owner bears to the total value of all issued securities of the prescribed person on the relevant day;

is the amount of income of the prescribed person as reflected in the audited account of the prescribed person for the basis period relating to that year of assessment; and

is the tax rate specified in section 43(1)(a) applicable to that year of assessment.

(3) Subsection (2) does not apply to a relevant owner if —

(a)	the Comptroller permits the relevant owner to take steps to reduce the ownership of the issued securities by the relevant owner or the relevant owner’s associates within such period as the Comptroller may specify, being a period of no more than 3 months from the relevant day; and
(b)	by the end of the specified period, the value of the issued securities beneficially owned by the relevant owner together with the relevant owner’s associates is no more than the prescribed percentage of the total value of all issued securities of the prescribed person on the relevant day.

(4) Where —

(a)	income of any prescribed person, being the trustee of a trust fund, has been exempt from tax under subsection (1) in any year of assessment; and
(b)	a person (called in this section the relevant beneficiary), either alone or together with the relevant beneficiary’s associates, beneficially owns on the relevant day any part of the trust fund the value of which is more than the prescribed percentage of the total value of the trust fund on the relevant day,

then the relevant beneficiary is liable to pay to the Comptroller, in such manner and within such reasonable time as may be determined by the Comptroller, a penalty to be computed in accordance with the formula

where A

is the percentage which the value of the part of the trust fund beneficially owned on the relevant day by the relevant beneficiary bears to the total value of the trust fund on the relevant day;

is the amount of income of the prescribed person as reflected in the audited account of the prescribed person for the basis period relating to that year of assessment; and

is the tax rate specified in section 43(1)(c) applicable to that year of assessment.

(5) Subsection (4) does not apply to a relevant beneficiary if —

(a)	the Comptroller permits the relevant beneficiary to take steps to reduce the ownership of the trust fund by the relevant beneficiary or the relevant beneficiary’s associates within such period as the Comptroller may specify, being a period of no more than 3 months from the relevant day; and
(b)	by the end of the specified period, the value of the part of the trust fund beneficially owned by the relevant beneficiary together with the relevant beneficiary’s associates is no more than the prescribed percentage of the total value of the trust fund on the relevant day.

(6) Despite subsections (2) and (4), where —

(a)

income of any prescribed person, being a company or the trustee of a trust fund, has been exempt from tax under subsection (1) in any year of assessment;

(b)

a person, either alone or together with the person’s associates, beneficially owns on the relevant day —

(i)	if the prescribed person is a company, any issued securities of the prescribed person; or
(ii)	if the prescribed person is the trustee of a trust fund, any part of the trust fund; and

(c)

the person mentioned in paragraph (b) is a non‑bona fide entity,

then the person mentioned in paragraph (b) is not liable to pay the penalty mentioned in subsection (2) or (4); but a person (called in this section the liable person) who —

(d)	beneficially owns on the relevant day equity interests of the person mentioned in paragraph (b); and
(e)	is not himself, herself or itself a non‑bona fide entity,

is liable to pay to the Comptroller, in such manner and within such reasonable time as may be determined by the Comptroller, a penalty to be computed in accordance with the formula specified in subsection (6A) if, and only if, the total of —

(f)	the value of the equity interests of the prescribed person or of the trust fund for which the prescribed person is the trustee (as the case may be) that are beneficially owned by the liable person on the relevant day; and
(g)	the value of the equity interests of the prescribed person or of the trust fund for which the prescribed person is the trustee (as the case may be) that are beneficially owned by the associates of the liable person on the relevant day,

exceeds the prescribed percentage of the total value of all the equity interests of the prescribed person or of the trust fund (as the case may be) on that day.

(6A) The formula for the penalty referred to in subsection (6) is as follows:

where A

is the percentage which the value of the equity interests of the prescribed person or of the trust fund for which the prescribed person is the trustee (as the case may be) beneficially owned on the relevant day by the liable person bears to the total value of all equity interests of the prescribed person or of the trust fund on the relevant day;

is the amount of income of the prescribed person as reflected in the audited account of the prescribed person for the basis period relating to that year of assessment; and

is the tax rate applicable to that year of assessment as specified in section 43(1)(a) (if the prescribed person is a company) or 43(1)(c) (if the prescribed person is a trustee of a trust fund).

(6B) Subsection (3) or (5) (whichever is applicable) applies, with the necessary modifications, to the liable person as it applies to a relevant owner or relevant beneficiary as if the reference to subsection (2) or (4) (as the case may be) is a reference to subsection (6).

(7) For the purposes of subsections (6)(d), (f) and (g) and (6A), if —

(a)	a person beneficially owns (including by virtue of one or more applications of this subsection) equity interests of a person (called in this subsection a first level entity); and
(b)	the first level entity beneficially owns equity interests of another person (called in this subsection a second level entity),

then the firstmentioned person is taken to beneficially own equity interests of the second level entity; and the percentage which the value of those equity interests bears to the total value of all equity interests of the second level entity is computed in accordance with the formula

where A

is the percentage which the value of equity interests of the first level entity beneficially owned by the firstmentioned person bears to the total value of all equity interests of the first level entity; and

is the percentage which the value of equity interests of the second level entity beneficially owned by the first level entity bears to the total value of all equity interests of the second level entity.

(7A) Subsection (7) also has effect for the purpose of determining, under subsections (6)(f) and (g) and (6A), the beneficial ownership of a person in the equity interests of a trust fund for which a prescribed person is a trustee, with the following modifications:

(a)	the reference in subsection (7)(b) to the equity interests of another person (when applied to that trust fund) is to be read as the equity interests in that fund;
(b)	the reference in the definition of B under subsection (7) to the value of equity interests of the second level entity beneficially owned by the first level entity (when applied to that trust fund) is to be read as the value of the part of the trust fund beneficially owned by the first level entity;
(c)	the reference in the definition of B under subsection (7) to the total value of all equity interests of the second level entity (when applied to that trust fund) is to be read as the total value of the trust fund.

(7B) The Minister or an authorised body may at any time, in the discretion of the Minister or authorised body and subject to such conditions as the Minister or authorised body may impose, remit or refund, wholly or in part, the penalty that is payable or paid by a person under subsection (2), (4) or (6); and section 92(2B) to (2E) applies, with the necessary modifications, to any non‑compliance with any such condition as it applies to the non‑compliance with a condition imposed under section 92(2).

[37/2014]

[Act 41 of 2020 wef 06/12/2022]

(8) Regulations made under this section may —

(a)	provide for the determination of the amount of income of any prescribed person to be exempt from tax;
(b)	provide for the circumstances under which a person would be considered to be an associate for the purposes of this section;
(c)	exempt any person or class of persons from subsection (2), (4) or (6); and
(d)	make provision generally for giving full effect to or for carrying out the purposes of this section.

(9) In this section —

“equity interest” means —

(a)	in relation to a company, any issued security of that company;
(aa)	in relation to a trust fund for which a prescribed person is a trustee, any part of the trust fund; or
(b)	in relation to a person other than a company, such right or interest as may be prescribed;

“issued securities”, in relation to a company, means —

(a)	issued debentures of, or issued stocks or shares in, the company;
(b)	any right, option or derivative in respect of any such debentures, stocks or shares;
(ba)	any other instrument that confers or represents a legal or beneficial ownership interest in the company; or
(c)	such other securities of the company as may be prescribed;

“non‑bona fide entity” means a person not resident in Singapore (excluding a permanent establishment in Singapore) who —

(a)	is set up solely for the purpose of avoiding or reducing payment of tax or penalty under this Act; or
(b)	does not carry out any substantial business activity for a genuine commercial reason;

“relevant day” means —

(a)

the last day of the basis period of the prescribed person for the year of assessment referred to in subsection (2), (4) or (6), as the case may be;

(b)

if on a day within that basis period the prescribed person becomes an approved person under section 13U(1)(a) the day immediately before the firstmentioned day; or

(c)

if on a day within that basis period the prescribed person becomes an approved master fund or approved feeder fund of —

(i)	an approved master‑feeder fund structure under section 13U(1)(b);
(ii)	an approved master‑feeder fund‑SPV structure under section 13U(1)(c); or
(iii)	an approved master fund‑SPV structure under section 13U(1)(d),

the day immediately before the firstmentioned day;

“value” —

(a)

in relation to issued securities of a company other than those prescribed under paragraph (c) of the definition of “issued securities”, means —

(i)	where the relevant day is before 1 April 2014, the value of those securities at the time of their issue by the company; and
(ii)	where the relevant day falls on or after 1 April 2014, the net asset value of those securities as at the relevant day; or

(b)

in relation to issued securities of a company prescribed under paragraph (c) of the definition of “issued securities”, means —

(i)	where the relevant day is before 1 April 2014, the value of those securities at the prescribed time; and
(ii)	where the relevant day falls on or after 1 April 2014, the net asset value of those securities as at the relevant day. [37/2014; 2/2016; 45/2018]

(10) This section does not apply to —

(a)

a company or trustee of a trust fund (as the case may be) that is incorporated or constituted on or after 1 January 2025; or

(b)

a company or trustee of a trust fund (as the case may be) that —

(i)	is incorporated or constituted before 1 January 2025; and
(ii)	is not a prescribed person at any time before that date. [13CA [37/2014; 32/2019]

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