20. Section 19B of the principal Act is amended —(a) | by inserting, immediately after the words “that trade or business” in subsection (1), the words “and the acquisition date of those rights is on or before the last day of the basis period relating to the year of assessment 2016”; | (b) | by inserting, immediately after subsection (1A), the following subsections:“(1AA) Where —(a) | a company carrying on a trade or business has incurred capital expenditure in acquiring any intellectual property rights for use in that trade or business; and | (b) | the acquisition date of those rights is on or after the first day of the basis period relating to the year of assessment 2017, |
writing-down allowances in respect of that expenditure must be made to it during a writing‑down period of 5 years, 10 years or 15 years (as elected by the company) beginning with the year of assessment relating to the basis period in which that expenditure is incurred. |
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(1AB) The company mentioned in subsection (1AA) must make an irrevocable election to the Comptroller for the writing‑down allowances to be made to it over a writing‑down period of 5 years, 10 years or 15 years. |
(1AC) The election under subsection (1AB) must be made at the time of lodgment of the company’s return of income for the year of assessment relating to —(a) | if the payment for the intellectual property rights is made by instalments, the basis period in which the first of any deposit or instalment payment for those rights is made; or | (b) | in any other case, the basis period in which the expenditure is incurred.”; |
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| (c) | by inserting, immediately after the words “subsection (1)” in subsections (1BAA) and (10)(a), the words “or (1AA)”; | (d) | by inserting, immediately after the words “instalments paid” in subsection (1C)(c), the words “(excluding any finance charges)”; | (e) | by inserting, immediately after the words “all instalments” in subsection (1C)(c), the words “(excluding any finance charges)”; | (f) | by inserting, immediately after subsection (1D), the following subsection:“(1E) To avoid doubt, the writing-down allowance under subsection (1A), (1B) or (1BAA) is to be made to a company during the applicable writing‑down period in subsection (1) or (1AA).”; |
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| (g) | by deleting subsection (2) and substituting the following subsection:“(2) The total writing-down allowance to be made for any year of assessment to a company for capital expenditure incurred in acquiring any intellectual property rights under subsection (1) or (1AA), and under subsection (1A), (1B) or (1BAA), is an amount computed in accordance with the formula | (a) | 20% if the writing‑down period for that allowance is 5 years; |
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(b) | 10% if the writing‑down period for that allowance is 10 years; or |
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(c) | % if the writing‑down period for that allowance is 15 years; and |
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| | (a) | the capital expenditure; and |
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(b) | the writing‑down allowance under subsection (1A), (1B) or (1BAA) for that expenditure. |
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| (h) | by deleting the word “and” at the end of subsection (2A)(a); | (i) | by deleting the full-stop at the end of paragraph (b) of subsection (2A) and substituting the word “; and”, and by inserting immediately thereafter the following paragraph:“(c) | in the case of writing‑down allowances mentioned in subsection (1AA), the company makes the election mentioned in subsection (1AB).”; |
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| (j) | by deleting the words “the requirement under subsection (2A)” in subsections (2B) and (2D) and substituting in each case the words “any of the requirements under subsection (2A)(a) and (b)”; | (k) | by inserting, immediately after the words “subsections (1)” wherever they appear in subsections (2C), (4)(ii), (4A)(b) and (5), “, (1AA)”; | (l) | by deleting the words “5 years” in subsection (2E) and substituting the words “5 years, 10 years or 15 years (depending on the writing‑down period for those allowances)”; | (m) | by inserting, immediately after the words “subsection (1)” in subsection (4), “, (1AA)”; | (n) | by inserting, immediately after “(1A)” wherever it appears in subsection (10A), “, (1AA)”; | (o) | by inserting, immediately after subsection (10D), the following subsections:“(10E) If, in the case of an acquisition of intellectual property rights —(a) | whose acquisition date is on or after 25 March 2016; and | (b) | the payment for which is not made by instalments, |
the capital expenditure incurred for the acquisition exceeds the open‑market price for those rights, then, for the purpose of determining the amount of writing‑down allowances for that expenditure under subsection (1AA), (1BAA) or (2C), the Comptroller may treat the open‑market price as the amount of that expenditure, and in that event subsection (5) also applies as if the open‑market price were the amount of that expenditure. |
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(10F) In subsection (10E), “open-market price”, for intellectual property rights, means either —(a) | the price which those rights could have been purchased in the open market on the acquisition date of those rights; or | (b) | if, by reason of the special nature of those rights, it is not possible to determine the price mentioned in paragraph (a), such other value as the Comptroller considers to be a reasonable value for those rights after considering the valuation of those rights by an appropriate valuer and other relevant circumstances. |
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(10G) If, in the case of an acquisition of intellectual property rights —(a) | whose acquisition date is on or after 25 March 2016; and | (b) | the payment for which is made by instalments, |
the total amount of the deposits and instalment payments (excluding any finance charges) made in a basis period exceeds the open‑market price for those rights, then, for the purpose of determining the amount of writing‑down allowances in such a case under subsection (1AA) or (2C), the Comptroller may treat the open‑market price as the amount of such expenditure, and in that event subsection (5) also applies as if the open‑market price were the amount of such expenditure. |
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(10H) In subsection (10G), “open‑market price”, for intellectual property rights, means an amount computed by the formula | is the total amount of the deposits and instalment payments (excluding any finance charges) made in the basis period; |
| | is the total amount of all the deposits and instalment payments (excluding any finance charges) under the agreement to acquire those rights; and |
| | (a) | the price (excluding any finance charges) which those rights could have been purchased in the open market on their acquisition date; or |
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(b) | if, by reason of the special nature of those rights, it is not possible to determine the price mentioned in sub‑paragraph (a), such other value as the Comptroller considers to be a reasonable value for those rights after considering the valuation of those rights by an appropriate valuer and other relevant circumstances. |
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(10I) If, in the case of an acquisition of intellectual property rights —(a) | whose acquisition date is on or after 25 March 2016; and | (b) | the payment for which is made by instalments, |
the amount mentioned in subsection (1C)(a)(i) exceeds the open‑market price mentioned in subsection (10F), then, for the purpose of determining the amount of writing‑down allowances to be made for any year of assessment under subsection (1BAA), the Comptroller may treat the open‑market price mentioned in subsection (10F) as the amount mentioned in subsection (1C)(a)(i). |
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(10J) If —(a) | intellectual property rights or a part of such rights are or is sold, transferred or assigned on or after 25 March 2016; and | (b) | the rights or part are or is sold, transferred or assigned for less than the open‑market price, |
then, for the purpose of determining the amount of any charge under subsection (4), (4A) or (5), the Comptroller may treat the open‑market price as the price at which the rights or part (as the case may be) are or is sold, transferred or assigned. |
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(10K) In subsection (10J), “open‑market price”, for intellectual property rights or a part of such rights, means —(a) | the price which those rights or that part would have fetched if sold, transferred or assigned in the open market at the time of the actual sale, transfer or assignment; or | (b) | if, by reason of the special nature of those rights or part, it is not possible to determine the price mentioned in paragraph (a), such other value as the Comptroller considers to be a reasonable value for those rights or that part after considering the valuation of those rights or that part by an appropriate valuer and other relevant circumstances.”; |
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| (p) | by inserting, immediately before the definition of “approved” in subsection (11), the following definition:“ “appropriate valuer” means a valuer who is independent of any party to the acquisition, sale, transfer or assignment (as the case may be) of the intellectual property rights, and has qualifications and experience that are relevant to the valuation in question;”; and |
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| (q) | by inserting, immediately after subsection (12), the following subsection:“(13) In this section, for a company, the acquisition date of any intellectual property rights is —(a) | the date of the signing of the agreement to acquire those rights; or | (b) | if there is no agreement, the date on which those rights are assigned to the company.”. |
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