REPUBLIC OF SINGAPORE
GOVERNMENT GAZETTE
ACTS SUPPLEMENT
Published by Authority

NO. 33]Friday, October 25 [1996

The following Act was passed by Parliament on 10th October 1996 and assented to by the President on 16th October 1996:—
Economic Expansion Incentives (Relief from Income Tax) (Amendment) Act 1996

(No. 36 of 1996)


I assent.

ONG TENG CHEONG
President
16th October 1996.
Date of Commencement: 25th October 1996
An Act to amend the Economic Expansion Incentives (Relief from Income Tax) Act (Chapter 86 of the 1996 Revised Edition).
Be it enacted by the President with the advice and consent of the Parliament of Singapore, as follows:
Short title and commencement
1.—(1)  This Act may be cited as the Economic Expansion Incentives (Relief from Income Tax) (Amendment) Act 1996.
(2)  Sections 2, 4 and 5 shall have effect for the year of assessment 1997 and subsequent years of assessment.
New Part IIIB
2.  The Economic Expansion Incentives (Relief from Income Tax) Act (referred to in this Act as the principal Act) is amended by inserting, immediately after section 19H, the following Part:
PART IIIB
DEVELOPMENT AND EXPANSION INCENTIVE
Interpretation of this Part
19I.  For the purposes of this Part, unless the context otherwise requires —
“commencement day,” in relation to a development and expansion company, means the date specified under section 19J(3) in the certificate issued to the company under that section;
“development and expansion company” means a company which has been issued with a certificate under section 19J(2);
“qualifying activity” means any of the following:
(a)the manufacturing or increased manufacturing of any product from any industry that would be of economic benefit to Singapore;
(b)any qualifying activity as defined in section 16; and
(c)such other services or activities as may be prescribed.
Application for and issue of certificate to development and expansion company
19J.—(1)  Any company engaged in any qualifying activity may apply in the prescribed form to the Minister for approval as a development and expansion company.
(2)  The Minister may, if he considers it expedient in the public interest to do so, approve the application and issue the company with a certificate subject to such terms and conditions as he may impose.
(3)  Every certificate issued to a development and expansion company under this section shall specify —
(a)a date as the commencement day from which the company shall be entitled to tax relief under this Part;
(b)its qualifying activities; and
(c)the concessionary rate of tax to be levied for the purposes of this Part.
(4)  The Minister may, in his discretion, upon an application of a development and expansion company, amend its certificate by substituting for the commencement day specified therein such other date as he thinks fit and thereupon the provisions of this Part shall have effect as if that date were the commencement day in relation to that certificate.
(5)  Notwithstanding section 43 of the Income Tax Act [Cap. 134], tax at such concessionary rate, not being less than 10% as the Minister may specify, shall be levied and paid for each year of assessment upon the expansion income derived by a development and expansion company during its tax relief period from its qualifying activities.
(6)  The expansion income shall be the income from such qualifying activities to which the certificate issued under this section relates that exceeds the average corresponding income.
(7)  The average corresponding income referred to in subsection (6) shall be determined by taking one-third of the total of the corresponding income from such qualifying activities for the 3 years immediately preceding the commencement day specified in the certificate issued under this section.
(8)  Notwithstanding subsection (7), the Minister may, if he thinks fit, specify any amount to be the average corresponding income in substitution of the amount determined under that subsection.
Tax relief period of development and expansion company
19K.—(1)  The tax relief period of a development and expansion company shall commence on its commencement day and shall continue for such period not exceeding 10 years as the Minister may determine.
(2)  The Minister may, if he is satisfied that it is expedient in the public interest to do so and subject to such terms and conditions as he may impose, extend the tax relief period of a development and expansion company for such further period or periods, not exceeding 5 years at any one time, as he may determine, except that the tax relief period of the company shall not in the aggregate exceed 20 years.
(3)  Where a development and expansion company has been granted tax relief under Part IIIA in respect of any qualifying activity specified in the certificate issued under section 19J(2), the Minister shall, in extending the tax relief period of the company under subsection (2), take into account the tax relief period of the company under that Part.
Certain dividends exempted from income tax
19L.—(1)  As soon as any amount of income of a development and expansion company has been subject to tax at the concessionary rate under section 19J, the net amount of the income after deduction of the tax shall be credited to a special account (referred to in this section as the account) to be kept by the company for the purposes of this section.
(2)  Where the account is in credit at the date on which any dividends are paid by the development and expansion company out of the net amount of income credited to that account, an amount equal to those dividends or to that credit, whichever is the less, shall be debited to the account.
(3)  So much of the amount of any dividends so debited to the account as is received by a shareholder of the development and expansion company shall, if the Comptroller is satisfied with the entries in the account, be exempt from tax in the hands of the shareholder.
(4)  Notwithstanding subsection (3), where a dividend is paid on any share of a preferential nature, it shall not be so exempt in the hands of the shareholder.
(5)  Section 44 of the Income Tax Act [Cap. 134] shall not apply in respect of any dividends or part thereof which are debited to the account.
(6)  Where any amount has been received by way of dividend from a development and expansion company by a shareholder and the amount is exempt from tax under this Part, if that shareholder is a company (referred to in this section as the holding company) which holds, throughout its tax relief period (or such shorter period as the Minister may approve), the beneficial interest in all the issued shares of the company (or in not less than such proportion of those shares as the Minister may approve) any dividends paid by the holding company to its shareholders, to the extent that the Comptroller is satisfied that those dividends are paid out of that amount, shall be exempt from tax in the hands of those shareholders; and section 44 of the Income Tax Act shall not apply in respect of any such dividends or part thereof so exempted.
(7)  A development and expansion company shall deliver to the Comptroller a copy of the account made up to any date specified by him whenever called upon to do so by notice in writing.
(8)  Notwithstanding subsections (1) to (7), where it appears to the Comptroller that —
(a)any income of a development and expansion company which has been subject to tax at the concessionary rate under section 19J; or
(b)any dividends, including any dividends paid by a holding company under subsection (6), which have been exempted from tax in the hands of any shareholder,
ought not to have been so taxed or exempted for any year of assessment, the Comptroller may, subject to section 73 of the Income Tax Act [Cap. 134] —
(i)make an assessment or additional assessment upon the company or any such shareholder as may be necessary in order to make good any loss of tax; or
(ii)direct the company to debit the account with such amount as the circumstances require.
Application of sections 19D, 19E, 19G and 19H to development and expansion company
19M.  Sections 19D, 19E, 19G and 19H shall apply, with the necessary modifications, to a development and expansion company and for the purposes of such application, any reference to a post-pioneer company in those sections shall be read as a reference to a development and expansion company.”.
Amendment of section 66
3.  Section 66 (1) of the principal Act is amended by inserting, immediately after the definition of “normal investment allowance account”, the following definition:
“ “relevant income”, in relation to a company, means any income which —
(a)does not form part of the statutory income of the company or is exempt from tax under the provisions of this Act (other than this Part) or the Income Tax Act [Cap. 134]; or
(b)is subject to tax at the concessionary rate under Part IIIA or IIIB;”.
Amendment of section 67
4.  Section 67 (1) of the principal Act is amended by deleting the word “potable” in paragraph (e).
Amendment of section 68
5.  Section 68 (1) of the principal Act is amended by deleting “50%” in the second line and substituting “100%”.
Amendment of section 69
6.  Section 69 of the principal Act is amended —
(a)by inserting, immediately after subsection (1), the following subsection:
(1A)  Notwithstanding subsection (1), no investment allowance shall be given to a company for an approved project from which relevant income of the company is derived.”; and
(b)by inserting, immediately after subsection (4), the following subsection:
(4A)  Notwithstanding subsections (1) to (4), where a company has incurred, on or after 1st January 1996, fixed capital expenditure for a project approved under section 67(1) (e), the Minister may, if he is satisfied that it is expedient in the public interest to do so, direct that an investment allowance be given to the company for such expenditure, and such investment allowance shall be credited into a normal investment allowance account.”.