27. The principal Act is amended by inserting, immediately after section 34I, the following section:“Tax treatment arising from adoption of FRS 116 or SFRS(I) 16 |
34J.—(1) Where an MSI recipient (called in this section an electing recipient) makes an election in accordance with subsection (10) to adopt the tax treatment under this section, then, despite any other provision of this Act, that tax treatment applies in relation to the electing recipient in accordance with this section.(2) If, in any applicable period, a sublease by the electing recipient of a sublease asset is recognised by the electing recipient as a finance lease in accordance with FRS 116 or SFRS(I) 16, any income of the electing recipient derived under that sublease in that applicable period is taken as having been derived from a finance lease for the purpose of section 10D. |
(3) If, in any applicable period, a sublease by the electing recipient of a sublease asset is recognised by the electing recipient as an operating lease in accordance with FRS 116 or SFRS(I) 16, any income of the electing recipient derived under that sublease in that applicable period is taken as not having been derived from a finance lease for the purpose of section 10D. |
(4) The electing recipient is not entitled to any deduction under Part V in a year of assessment for any outgoing or expense incurred during an applicable period in relation to a qualifying asset of which it is a lessee, against any income derived by it from any use of that qualifying asset. |
(5) Where the electing recipient makes an election under subsection (10) at the time of lodgment of the return of income for the year of assessment for the basis period in which 12 December 2018 falls, then —(a) | for the year of assessment for the basis period in which that date falls — the capital allowances to be made to it under section 19, 19A or 22 for any qualifying asset of which it is a lessee, are to be reduced by an amount computed by the formula (i) | A is the number of days between 12 December 2018 and the last day of the basis period for that year of assessment (both days inclusive); and | (ii) | B is the amount of the capital allowances for that year of assessment for that qualifying asset; |
| (b) | for the year of assessment for the basis period in which that date falls — no allowance may be made to, and no charge may be made on, the electing recipient under section 20 or 21 for any event mentioned in section 20(1) that occurs in the period between 12 December 2018 and the last day of the basis period for that year of assessment (both days inclusive), in relation to any qualifying asset of which it is a lessee; and | (c) | for any subsequent year of assessment other than the last year of assessment —(i) | the electing recipient is not entitled to any allowance under section 19, 19A or 22; and | (ii) | no allowance may be made to, and no charge may be made on, the electing recipient under section 20 or 21 for any event mentioned in section 20(1) that occurs in the basis period for that year of assessment, |
in relation to any qualifying asset of which it is a lessee. |
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(6) Where the electing recipient makes the election under subsection (10) at the time of lodgment of the return of income for the year of assessment for any basis period other than that in which 12 December 2018 falls, then, for every year of assessment beginning with the basis period in which it makes the election and before the last year of assessment —(a) | the electing recipient is not entitled to any allowance under section 19, 19A or 22; and | (b) | no allowance may be made to, and no charge may be made on, the electing recipient under section 20 or 21 for any event mentioned in section 20(1) that occurs in the basis period for that year of assessment, |
in relation to any qualifying asset of which it is a lessee. |
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(7) For the last year of assessment, the capital allowances under section 19, 19A or 22 for any qualifying asset of which the electing recipient is a lessee, and which was leased for its trade or business before the date it ceases to be an MSI recipient, are to be —(a) | computed on the residue of the capital expenditure or reducing value of the qualifying asset (as the case may be) after deducting all such allowances (including initial and annual allowances) that have or would (but for subsection (5) or (6)) have been made to the electing recipient for all past years of assessment, even if no such allowance was made; and | (b) | reduced by an amount computed by the formula (i) | A is the number of days between the first day of the basis period of the last year of assessment and the day before the day the electing recipient ceases to be an MSI recipient (both days inclusive); and | (ii) | B is the amount of the capital allowances for the last year of assessment as computed in accordance with paragraph (a). |
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(8) For the last year of assessment, no allowance may be made to, and no charge may be made on, the electing recipient under section 20 or 21 for any event mentioned in section 20(1) that occurs between the first day of the basis period of that year of assessment and the day before the day it ceases to be an MSI recipient (both days inclusive), in relation to any qualifying asset of which it is a lessee. |
(9) For each subsequent year of assessment after the last year of assessment, the capital allowances under section 19, 19A or 22 for any qualifying asset of which the electing recipient is a lessee, and which was leased for its trade or business before the day it ceases to be an MSI recipient, are to be computed on the residue of the capital expenditure or reducing value of the qualifying asset (as the case may be) after deducting —(a) | all such allowances (including initial and annual allowances) that have or would (but for subsection (5) or (6)) have been made to the electing recipient for all past years of assessment, even if no such allowance was made; and | (b) | the total amount of such allowances that would have been made to the electing recipient for the last year of assessment without the reduction under subsection (7)(b). |
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(10) An MSI recipient may make an election to adopt the tax treatment under this section by providing a written notice to the Comptroller of this —(a) | at the time of lodgment of the return of income for the year of assessment relating to a basis period during which its financial accounts are prepared in accordance with FRS 116 or SFRS(I) 16; or | (b) | within such further time as the Comptroller may allow. |
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(11) An election made under subsection (10) is irrevocable. |
(12) If —(a) | the tax treatment under this section has been applied in relation to a ship that is provisionally registered under the Merchant Shipping Act (Cap. 179), and that is operated by an electing recipient that is a shipping enterprise (called in this subsection and subsection (13) the provisionally‑registered ship); and | (b) | the electing recipient subsequently fails to obtain a permanent certificate of registry under that Act in respect of that ship, |
then the Comptroller must, in relation to every year of assessment for which the tax treatment under this section has already been applied in relation to the provisionally‑registered ship — |
(c) | make an assessment or additional assessment under section 74 on the electing recipient; or | (d) | revise an assessment already made and give a refund to the electing recipient for any tax overpaid, |
as the case may be, as if the tax treatment had not been applied for that year of assessment in relation to both the provisionally‑registered ship and relevant assets. |
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(13) In subsection (12), “relevant assets” means —(a) | if, at the end of the basis period for the year of assessment mentioned in that subsection, the electing recipient operates only the provisionally‑registered ship and no other Singapore ship, all sublease assets and qualifying assets of the electing recipient; or | (b) | if, at the end of the basis period for the year of assessment mentioned in that subsection, the electing recipient operates one or more other Singapore ships in addition to the provisionally‑registered ship, any on‑board equipment integral to the operation of the provisionally‑registered ship but no other ship. |
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(14) In this section —“applicable period” means —(a) | the later of the following:(i) | the period between 12 December 2018 and the last day of the basis period in which that date falls (both days inclusive); | (ii) | the basis period in which the electing recipient makes the election under subsection (10); |
| (b) | each basis period that is subsequent to the period mentioned in paragraph (a) and before the period mentioned in paragraph (c); or | (c) | the period starting on the first day of the basis period in which the electing recipient ceases to be an MSI recipient, and ending on (and including) the day before the day of such cessation; |
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“approved container investment enterprise” means an approved container investment enterprise mentioned in section 43ZA; |
“approved international shipping enterprise” means an approved international shipping enterprise mentioned in section 13F; |
“approved shipping investment enterprise” means an approved shipping investment enterprise mentioned in section 13S; |
“container” has the meaning given by section 43ZA(7); |
“FRS 116” means the financial reporting standard issued by the Accounting Standards Council under Part III of the Accounting Standards Act and known as Financial Reporting Standard 116 (Leases); |
“intermodal equipment” has the meaning given by section 43ZA(7); |
“last year of assessment” means the year of assessment for the basis period in which the electing recipient ceases to be an MSI recipient; |
“Maritime Sector Incentive recipient” or “MSI recipient” means a shipping enterprise, an approved international shipping enterprise, an approved shipping investment enterprise, or an approved container investment enterprise; |
“qualifying asset” means —(a) | in the case of an electing recipient that is a shipping enterprise, any of the following: (i) | any Singapore ship; | (ii) | any on-board equipment integral to the operation of Singapore ships; | (iii) | any container; | (iv) | any intermodal equipment or any other equipment integral to the operation of containers; |
| (b) | in the case of an electing recipient that is an approved international shipping enterprise, any of the following:(i) | any ship; | (ii) | any on-board equipment integral to the operation of ships; | (iii) | any container; | (iv) | any intermodal equipment or any other equipment integral to the operation of containers; |
| (c) | in the case of an electing recipient that is an approved shipping investment enterprise, any of the following:(i) | any ship; | (ii) | any on-board equipment integral to the operation of ships; and |
| (d) | in the case of an electing recipient that is an approved container investment enterprise, any of the following: (i) | any container; | (ii) | any intermodal equipment or any other equipment integral to the operation of containers, |
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but excludes anything that is used solely in the basis period concerned to derive income that is not income that is subject to exemption or a concessionary rate of tax under section 13A, 13F, 13S or 43ZA; |
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“SFRS(I) 16” means the financial reporting standard issued by the Accounting Standards Council under Part III of the Accounting Standards Act and known as Singapore Financial Reporting Standard (International) 16 (Leases); |
“ship” has the meaning given by section 2(1) of the Merchant Shipping Act; |
“shipping enterprise” means a company that owns or operates one or more Singapore ships; |
“Singapore ship” means —(a) | a ship in respect of which a permanent certificate of registry has been issued under the Merchant Shipping Act and whose registry is not closed or deemed to be closed or suspended; or | (b) | a ship that is provisionally registered under that Act; |
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“sublease asset” means —(a) | in the case of an electing recipient that is a shipping enterprise, any Singapore ship or container; | (b) | in the case of an electing recipient that is an approved international shipping enterprise, any ship or container; | (c) | in the case of an electing recipient that is an approved shipping investment enterprise, any ship; and | (d) | in the case of an electing recipient that is an approved container investment enterprise, any container or intermodal equipment, |
but excludes anything that is used solely in the basis period concerned to derive income that is not income that is subject to exemption or a concessionary rate of tax under section 13A, 13F, 13S or 43ZA.”. |
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