Income Tax (Amendment) Bill

Bill No. 1/1989

Read the first time on 16th January 1989.
An Act to amend the Income Tax Act (Chapter 134 of the 1985 Revised Edition).
Be it enacted by the President with the advice and consent of the Parliament of Singapore, as follows:
Short title
1.—(1)  This Act may be cited as the Income Tax (Amendment) Act 1989.
(2)  Sections 3, 4, 12, 13, 14 and 16 shall have effect for the year of assessment 1988 and subsequent years of assessment.
Amendment of section 2
2.  Section 2 of the Income Tax Act (referred to in this Act as the principal Act) is amended —
(a)by inserting, immediately after the word “products” in the fifth line of the definition of “research and development”, the word “, produce,”; and
(b)by deleting the word “manufacturing” in the definition of “research and development organisation”.
Amendment of section 10
3.  Section 10 of the principal Act is amended by inserting, immediately after subsection (9), the following subsection:
(10)  (a)  For the purposes of subsection (1)(a) or (f), the income derived by an individual, being a citizen or permanent resident of Singapore who is an inventor or author of an approved invention or approved product innovation, from any royalties or other payments received as consideration for the assignment of or for the rights in the approved invention or approved product innovation shall be deemed to be the amount remaining after the deductions allowable under Part IV have been made or an amount equal to 10% of the gross amount of the royalties or other payments, whichever is the less.

(b)Notwithstanding subsection (10)(a), where it appears to the Comptroller that any amount of income which has been determined under this subsection for the purposes of subsection (1)(a) or (f) ought not to have been so determined for any year of assessment, the Comptroller may, within 12 years after the end of that year of assessment, make such assessment or additional assessment upon the individual as may be necessary in order to make good any loss of tax.

(c)In this subsection —

“approved” means approved by the Minister or such other person as he may appoint;
“product innovation” means —
(i)any new product, or any new method in the manufacture or processing of goods or materials; or
(ii)a substantial improvement in any product, or in any method in the manufacture or processing of goods or materials,
which involves novelty or originality but does not include a computer program unless it is in the nature of a new computer operating system or new language used in a computer program;
“rights in the approved invention or approved product innovation” means the rights relating to any patent, copyright, industrial design or know-how of an approved invention or approved product innovation.”.

New section 10A
4.  The principal Act is amended by inserting, immediately after section 10, the following section:
Profits of investment company
10A.—(1)  Notwithstanding any other provisions of this Act, the Minister may by regulations —
(a)provide that tax on gains or profits derived from the disposal of securities by an approved investment company shall be levied and paid for each year of assessment upon such amount as may be determined by reference to the period during which those securities have been held;
(b)provide for the deduction of such amount of allowances under section 19, 19A, 20, 21 or 23 to be granted in such manner as may be prescribed;
(c)provide for the deduction of such amount of losses arising from the disposal of securities as may be determined by reference to the period during which those securities have been held;
(d)provide for the deduction of such amounts of expenses and donations allowable under this Act in such manner as may be prescribed.
(2)  For the purposes of this section —
“approved” means approved by the Minister or such other person as he may appoint;
“investment company” means any company whose business consists wholly or mainly in the making of investments and the principal part of whose income is derived therefrom, and includes any unit trust;
“securities” means —
(a)debentures, stocks, shares, bonds or notes issued by a government or company; or
(b)any right or option in respect of any such debentures, stocks, shares, bonds or notes.”.
Amendment of section 13
5.  Section 13(1)(z) of the principal Act is amended by deleting the words “5 years” and substituting the words “10 years”.
Amendment of section 13A
6.  Section 13A(6) of the principal Act is amended by deleting the full-stop at the end of paragraph (f) and substituting a semi-colon, and by inserting immediately thereafter the following paragraph:
(g)notwithstanding paragraphs (c) and (f), no dividend paid on or after the commencement of the Income Tax (Amendment) Act 1989 on any share of a preferential nature shall be exempt from tax in the hands of the shareholder.”.
Amendment of section 13B
7.  Section 13B of the principal Act is amended —
(a)by deleting the words “debited to the account” in the first line of subsection (6) and substituting the words “exempt from tax under this section”; and
(b)by inserting, immediately after subsection (6), the following subsection:
(6A)  Notwithstanding subsections (4) and (6), no dividend paid on or after the commencement of the Income Tax (Amendment) Act 1989 on any share of a preferential nature shall be exempt from tax in the hands of the shareholder.”.
New section 13D
8.  The principal Act is amended by inserting, immediately after section 13C, the following section:
Exemption of certain dividends
13D.—(1)  Where an investment company has been approved under section 10A, the provisions of this section shall have effect.
(2)  As soon as any amount of the income has been determined to be not chargeable to tax in accordance with regulations prescribed under section 10A, the net amount of that income shall be credited to a special account (referred to in this section as the account) to be kept by the investment company for the purposes of this section.
(3)  Subsections (3) to (8) of section 13B shall apply with such modifications as may be necessary in respect of any dividends paid out of the account of that investment company.
(4)  In this section, “net amount” in relation to the income referred to in subsection (2) for any year of assessment means the amount of that income less —
(a)expenses and donations allowable under this Act for that year of assessment which are determined in accordance with regulations prescribed under section 10A as attributable to that income;
(b)any amount of loss for that year of assessment arising from the disposal of securities which is determined in accordance with regulations prescribed under section 10A by reference to the period during which those securities have been held and which is not deductible under those regulations;
(c)any amount of allowances for that year of assessment under section 19, 19A, 20, 21 or 23 which is determined in accordance with regulations prescribed under section 10A as attributable to that income; and
(d)any amount of the expenses, donations, allowances and losses referred to in paragraphs (a), (b) and (c) which have not been deducted in arriving at the net amount of the income for any previous year of assessment.”.
Amendment of section 14D
9.  Section 14D of the principal Act is amended —
(a)by deleting the words “manufacturing” in subsection (1);
(b)by deleting the words “1st April 1979” in subsection (1) and substituting the words “the respective dates referred to in subsection (1A)”;
(c)by inserting, immediately after subsection (1), the following subsection:
(1A)  For the purposes of subsection (1) —
(a)any person carrying on a manufacturing trade or business shall only be allowed as deduction expenditure incurred on or after 1st April 1979; and
(b)any person carrying on a trade or business for the provision of specified services shall only be allowed as deduction expenditure incurred on or after 1st April 1988.”;
(d)by inserting, immediately after the definition of “approved” in subsection (2)(a), the following definition:
(aa)
“specified services” means —
(i)services and activities which relate to the development of computer programs;
(ii)services and activities which relate to the technology involved in acquiring, storing, processing or distributing information by the use of computers or computer programs;
(iii)services and activities which relate to technology applied to agriculture, horticulture or the farming of livestock, fish or other forms of aquatic life;
(iv)laboratory and testing services;
(v)services and activities which relate to medical research; and
(vi)any other services or activities as may be prescribed by the Minister;”; and
(e)by deleting the word “manufacturing” in subsection (2)(b).
Amendment of section 14E
10.  Section 14E of the principal Act is amended —
(a)by deleting the word “or” at the end of subsection (1)(a);
(b)by deleting the comma at the end of subsection (1)(b) and substituting the word “; or”, and by inserting immediately thereafter the following paragraph:
(c)a person carrying on a trade or business for the provision of any specified services has incurred expenditure on or after 1st April 1988, in undertaking directly by himself, or in paying a research and development organisation to undertake on his behalf, an approved research and development project in Singapore which is related to that trade or business,”; and
(c)by deleting subsection (4) and substituting the following subsection:
(4)  For the purposes of this section —
“approved” means approved by the Minister or such other person as he may appoint;
“specified services” has the same meaning as in section 14D.”.
Amendment of section 14F
11.  Section 14F of the principal Act is amended by inserting, immediately after subsection (3), the following subsection:
(4)  This section shall not apply to any investment company which has been approved under section 10A.”.
Amendment of section 18
12.  Section 18(1) of the principal Act is amended —
(a)by inserting, immediately after the word “activities” in paragraph (i), the words “for any manufacturing trade or business”;
(b)by deleting the word “or” at the end of paragraph (j); and
(c)by deleting the comma at the end of paragraph (k) and substituting the word “; or”, and by inserting immediately thereafter the following paragraph
(l)for prescribed purposes and where such building or structure has been approved by the Minister or such other person as he may appoint,”.
Amendment of section 23
13.  Section 23 of the principal Act is amended by inserting, immediately after subsection (2), the following subsection:
(2A)  The Minister may, where there is a substantial change in the shareholders of a company and he is satisfied that such change is not for the purpose of deriving any tax benefit or obtaining any tax advantage, exempt that company from the provisions of subsection (2); and upon such exemption the balance of the allowances referred to in subsection (1) may be added to and be deemed to form part of the corresponding allowance to be given to that company under that subsection but only for deduction against the gains or profits derived from the same trade or business in respect of which the allowances would have been made.”.
Amendment of section 37
14.  Section 37 of the principal Act is amended by inserting, immediately after subsection (7), the following subsection:
(8)  The Minister may, where there is a substantial change in the shareholders of a company and he is satisfied that such change is not for the purpose of deriving any tax benefit or obtaining any tax advantage, exempt that company from the provisions of subsection (5); and upon such exemption the loss referred to in subsection (2)(a) incurred by that company may be deducted but only against profits from the same trade or business in respect of which that loss was incurred.”.
Amendment of section 40
15.  Section 40(1) of the principal Act is amended by deleting the words “paragraph 4” in the ninth line and substituting the words “paragraph 3”.
Amendment of section 42
16.  Section 42 of the principal Act is amended by inserting, immediately after subsection (4), the following subsection:
(5)  Notwithstanding Part B of the Second Schedule, in respect of the chargeable income of a person other than an individual, the rate of tax applicable to that person on every dollar of his chargeable income shall be 33% where the effective rate of tax arrived at by dividing the income tax chargeable on his chargeable income by the amount of that income exceeds 33%.”.
Amendment of section 44
17.  Section 44 of the principal Act is amended by deleting the word “At” in the first line of subsection (8) and substituting the words “Without prejudice to subsection (7), within 3 months from”.
Amendment of section 46
18.  Section 46(2) of the principal Act is amended by deleting the words “section 44(6A)” and substituting the words “section 44(11)”.
Amendment of section 94
19.  Section 94(2A) of the principal Act is amended by deleting the word “section” in the second line and substituting the words “section 44(7), 44(8),”.