Economic Expansion Incentives (Relief from Income Tax) (Amendment) Bill

Bill No. 10/1979

Read the first time on 5th March 1979.
An Act to amend the Economic Expansion Incentives (Relief from Income Tax) Act (Chapter 135 of the Revised Edition).
Be it enacted by the President with the advice and consent of the Parliament of Singapore, as follows: —
Short title
1.  This Act may be cited as the Economic Expansion Incentives (Relief from Income Tax) (Amendment) Act, 1979.
New Part IVA
2.  The Economic Expansion Incentives (Relief from Income Tax) Act is amended by inserting, immediately after Part IV thereof, the following Part: —
“PART IVA
INTERNATIONAL TRADE INCENTIVES
Interpretation of this Part
37A.  For the purposes of this Part, unless the context otherwise requires —
“commencement day”, in relation to an international trading company, means the date specified in the certificate issued to that company as the date from which that company shall be entitled to tax relief under this Part;
“export sales” means export sales free on board but shall exclude the costs of samples, gifts, test-market materials, trade exhibits and other promotional materials;
“international trading company” means a company which has been issued with a certificate under section 37B;
“qualifying commodities” means any commodities other than —
(a)tin in the form of ore, ingots or slabs;
(b)natural rubber;
(c)crude palm oil, palm kernel oil and palm kernels;
(d)crude coconut oil, copra and coconuts;
(e)logs including sawn timber;
(f)crude petroleum and petroleum products;
(g)spices (raw and unprocessed);
(h)pepper; and
(i)such other commodities as may be excluded by the Minister by notification in the Gazette;
“qualifying manufactured goods” means Singapore manufactured goods in respect of which one or more certificates of origin or other documents indicating that the goods are manufactured in Singapore have been issued by the Department of Trade for the purpose of the export of such goods;
“relevant export sales” means the export sales of an international trading company in respect of qualifying manufactured goods and Singapore domestic produce or in respect of qualifying commodities, as the case may be;
“Singapore domestic produce” means eggs, chicken, orchids and aquarium fish produced in Singapore and such other domestic produce as may be approved by the Minister.
International trading company
37B.—(1)  Where a company is engaged in —
(a)international trade in qualifying manufactured goods or Singapore domestic produce and the export sales of such goods or produce separately or in combination exceed or are expected to exceed ten million dollars per annum; or
(b)entrepot trade in any qualifying commodities and the export sales of such qualifying commodities exceed or are expected to exceed twenty million dollars per annum,
the company may apply in the prescribed form to the Minister for approval as an international trading 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 thinks fit.
(3)  The Minister may issue separate certificates to an international trading company for the purposes of paragraphs (a) and (b) of subsection (1).
(4)  Every certificate issued under this section shall specify a date as the commencement day from which the company shall be entitled to tax relief under this Part.
(5)  The Minister may in his discretion upon the application of an international trading company amend its certificate by substituting for the commencement day specified therein such earlier or later date as he thinks fit and thereupon the provisions of this Part shall have effect as if the date so substituted were the commencement day in relation to that certificate.
(6)  A company shall furnish to the Minister at the time of application to be an international trading company a statement of all its associated companies and export agents and the activities they are engaged in and such other particulars as may be required; and where there is any change in such particulars the company shall notify the Minister as soon as possible of such change.
Tax relief period of international trading company
37C.  The tax relief period of an international trading company, in relation to any certificate issued to that company, shall commence on the commencement day and shall continue for a period of five years.
Power to give direction
37D.  For the purposes of the Income Tax Act (Cap. 141) and this Act, the Comptroller may direct that —
(a)any sums payable to an international trading company in any accounting period which but for the provisions of this Act might reasonably and properly have been expected to be payable, in the normal course of business, after the end of that period shall be treated as not having been payable in that period but as having been payable on such date, after that period, as the Comptroller thinks fit and, where that date is after the end of the tax relief period of the international trading company, as having been so payable on that date as a sum payable in respect of its post tax relief trade or business; and
(b)any expenses incurred by an international trading company within one year after the end of its tax relief period which but for the provisions of this Act might reasonably and properly have been expected to be incurred, in the normal course of business, during its tax relief period shall be treated as not having been incurred within that year but as having been incurred on such date, during its tax relief period, as the Comptroller thinks fit.
Application of Part X of Income Tax Act (Cap. 141)
37E.—(1)  Part X of the Income Tax Act (relating to returns of income) applies in all respects as if the whole of the income of an international trading company were chargeable to tax.
(2)  The annual return of income shall be accompanied by such evidence as, in the opinion of the Comptroller, is necessary to verify the income derived from the export sales of qualifying manufactured goods, Singapore domestic produce and qualifying commodities.
Ascertainment of income in respect of other trade or business
37F.  Where during its tax relief period an international trading company carries on any trade or business which is distinct from the trade or business which includes its relevant export sales, separate accounts shall be maintained in respect of that distinct trade or business and in respect of the same accounting period, and the income from that distinct trade or business shall be computed and assessed in accordance with the provisions of the Income Tax Act (Cap. 141) with such adjustments as the Comptroller thinks reasonable and proper.
Computation of export income and exemption from tax
37G.—(1)  The total income of an international trading company, in respect of its trade or business which includes its relevant export sales, shall be ascertained (after making such adjustments as may be necessary in consequence of any direction given under section 37D), for any accounting period during its tax relief period in accordance with the provisions of the Income Tax Act, and in particular the following provisions shall apply: —
(a)income from any commissions and other non-trading sources shall be excluded and separately assessed;
(b)the allowances provided for in sections 16, 17, 18, 19, 20, 21 and 22 (where applicable) of the Income Tax Act shall be taken into account notwithstanding that no claim for such allowances has been made, and where in any year of assessment full effect cannot, by reason of an insufficiency of profits for that year of assessment, be given to such allowances, the provisions of section 23 of the Income Tax Act shall apply;
(c)the amount of any unabsorbed allowances in respect of any year of assessment immediately preceding the tax relief period which would otherwise be available under subsections (2) and (3) of section 23 of the Income Tax Act (Cap. 141) shall be taken into account;
(d)the provisions of section 37 of the Income Tax Act shall apply in respect of any loss incurred prior to or during its tax relief period;
(e)any unabsorbed allowances granted under sections 16, 17, 19, 20 and 21 of the Income Tax Act and losses incurred in respect of any distinct trade or business shall be brought into the computation;
(f)any unabsorbed allowances granted under sections 16, 17, 19, 20 and 21 of the Income Tax Act and losses incurred in respect of the trade or business referred to in this subsection shall, during the tax relief period, only be deducted against the income derived from that trade or business;
(g)subject to the provisions of sections 23 and 37 of the Income Tax Act, any allowances and losses which remain unabsorbed at the end of the tax relief period shall be available for deduction in its post tax relief period.
(2)  The amount of the export income of an international trading company which will qualify for the relief for any year of assessment shall be deemed to be such amount which bears to the total income ascertained under subsection (1) the same proportion as the excess of the total value of the relevant export sales over the relevant base export value bears to the total amount of the sums received or receivable in respect of its total sales; and subject to section 37H, one-half of the amount of the export income which qualifies for the relief as ascertained in this subsection shall not form part of the chargeable income of the international trading company for that year of assessment and shall be exempt from tax.
(3)  The relevant base export value referred to in subsection (2) shall be —
(a)for the basis period for the first year of assessment within the tax relief period of an international trading company, a sum equal to one-third of the total value of the relevant export sales during the three years immediately preceding the date of its application to be an international trading company; and
(b)for the basis period for any subsequent year of assessment within the tax relief period, a sum equal to one-third of the total value of the relevant export sales during the three qualifying years immediately preceding that basis period, and for the purposes of this paragraph a “qualifying year” is a year in which the export sales —
(i)in respect of qualifying manufactured goods or Singapore domestic produce exceed ten million dollars; and
(ii)in respect of qualifying commodities exceed twenty million dollars.
(4)  Where an international trading company —
(a)was engaged in the trading of qualifying manufactured goods, Singapore domestic produce or qualifying commodities for less than three years immediately preceding its application under this Part;
(b)during its tax relief period has acquired any sales in respect of qualifying manufactured goods, Singapore domestic produce or qualifying commodities from any person or has acquired the beneficial interest directly or indirectly of any company engaged in similar trade or business; or
(c)has less than three qualifying years for the purpose of determining its relevant base export value under paragraph (b) of subsection (3), the Minister may specify such other relevant base export value for one or more basis periods as he thinks fit having regard to the circumstances of the case.
Conditions for relief
37H.  The tax relief provided under section 37G shall, for a year of assessment, apply only if —
(a)an international trading company has complied with the conditions stipulated under this Part and such other conditions as may be specified in its certificate; and
(b)in the case of a company engaged in international trade under paragraph (a) of subsection (1) of section 37B, the export sales in respect of the qualifying manufactured goods or Singapore domestic produce exceed ten million dollars in the basis period for that year of assessment; or
(c)in the case of a company engaged in entrepot trade under paragraph (b) of subsection (1) of section 37B, the export sales in respect of the qualifying commodities exceed twenty million dollars in the basis period for that year of assessment.
Certain dividends exempted from income tax
37I.—(1)  As soon as any amount of chargeable income of an international trading company has become exempt under section 37G, that amount shall be credited to a tax exempt account to be kept by the company for the purposes of this Part.
(2)  Where a tax exempt account is in credit at the date on which any dividends are paid by a company, out of income which has been so exempted, 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 tax exempt account as is received by a shareholder of the company shall, if the Comptroller is satisfied with the entries in the account, be exempt from tax in the hands of the shareholder:
Provided that where the dividend is paid on any share of a preferential nature, it shall not be exempt from tax in the hands of the shareholder.
(4)  Any dividends debited to the tax exempt account shall be treated as having been distributed to the shareholders of the company or any particular class of those shareholders in the same proportions as the shareholders were entitled to payment of the dividends giving rise to the debit.
(5)  The company shall deliver to the Comptroller a copy of the tax exempt account, made up to a date specified by him, whenever called upon to do so by notice in writing sent by him to its registered office, until such time as he is satisfied that there is no further need for maintaining the account.
(6)  Where an amount has been received by way of dividend from a company by a shareholder and the amount is exempt from tax under this Part, if that shareholder is a company, any dividends paid by that 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.
Recovery of tax exempted
37J.  Notwithstanding any other provisions of this Part, where it appears to the Comptroller that —
(a)any amount of exempted income of an international trading company; or
(b)any dividend exempted in the hands of any shareholder,
ought not to have been exempted by reason of a direction made under section 37D or the revocation under section 48 of the certificate issued under section 37B to the company, the Comptroller may at any time within twelve years from the date of the direction or revocation —
(i)make such assessment or additional assessment upon the company or any such shareholder as may appear to be necessary in order to recover such tax as may have been exempted under this Part; or
(ii)direct the company to debit its tax exempt account with such amount as the circumstances require.
Application of Income Tax Act (Cap. 141)
37K.—(1)  Parts XI and XII of the Income Tax Act (relating to objections and appeals) and any regulations made thereunder shall apply, mutatis mutandis, to any direction given under section 37J as if it were a notice of assessment given under those provisions.
(2)  Section 44 of the Income Tax Act shall not apply in respect of any dividend or part thereof which is exempted from tax under this Part.
Application of certain sections of this Act to international trading company
37L.  Sections 28, 29, 34, 35, 36 and 37 shall apply, mutatis mutandis, to an international trading company as they apply to an export enterprise and the reference to export product or export produce in those sections shall be read as a reference to qualifying manufactured goods, Singapore domestic produce or qualifying commodities.”.
New Parts VIA, VIB and VIC
3.  The Economic Expansion Incentives (Relief from Income Tax) Act is amended by inserting, immediately after Part VI thereof, the following Parts: —
“PART VIA
INVESTMENT ALLOWANCES
Interpretation of this Part
46A.—(1)  For the purposes of this Part, unless the context otherwise requires —
“approved project” means a project approved by the Minister under subsection (2) of section 46B;
“fixed capital expenditure” means capital expenditure to be incurred on an approved project by a company on factory building (excluding land) in Singapore and on any new productive equipment (and, subject to the approval of the Minister, on any secondhand productive equipment) to be used in Singapore;
“investment allowance account” means an account kept by a company for the purpose of calculating the amount of investment allowance granted under this Part;
“investment day”, in relation to a company, means the date specified in its certificate as the date from which the company shall qualify for the investment allowance.
(2)  For the purposes of this Part fixed capital expenditure shall not be deemed to be incurred by a company unless —
(a)in the case of any factory building or productive equipment to be constructed or installed on site, the expenditure is attributable to payment against work done in the construction of the building or the construction or installation of the productive equipment;
(b)in the case of any productive equipment, other than that to be constructed or installed on site, the company has received delivery of the equipment in Singapore.
Capital expenditure investment allowance
46B.—(1)  Where a company proposes to carry out a project for the manufacture or increased manufacture of any product or for the provision of specialised engineering or technical services it may apply in the prescribed form to the Minister for the approval of an investment allowance in respect of the fixed capital expenditure for the project.
(2)  Where the Minister considers it expedient, having regard to the economic, technical and other merits of the project, he may approve the project and issue the company with a certificate which shall qualify the company for an investment allowance as stipulated in the certificate in respect of the fixed capital expenditure for the approved project subject to such terms and conditions as he thinks fit.
(3)  Every certificate issued under this section shall specify a date as the investment day from which the company shall be entitled to investment allowance under this Part.
(4)  The Minister may in his discretion upon the application of a company amend its certificate by substituting for the investment day specified therein such earlier or later date as he thinks fit and thereupon the provisions of this Part shall have effect as if the date so substituted were the investment day in relation to that certificate.
 
46C.—(1)  The investment allowance granted under section 46B shall be a specified percentage, not exceeding fifty per cent, of the amount (which may be subject to a specified maximum) of the fixed capital expenditure incurred on each item specified by the Minister under subsection (2) on an approved project:
Provided that the fixed capital expenditure is incurred within such period (hereinafter referred to as the qualifying period), not exceeding five years, commencing from the investment day as the Minister may determine.
(2)  The Minister —
(a)shall specify the items of the fixed capital expenditure for the purposes of subsection (1); and
(b)may specify the maximum amount of the investment allowance granted for the approved project.
(3)  Where any question arises as to whether a particular item qualifies as one of the items under paragraph (a) of subsection (2) it shall be determined by the Minister whose decision shall be final.
(4)  In subsection (1) “specified” means specified by the Minister.
Crediting of investment allowances
46D.—(1)  Where in the basis period for a year of assessment a company has incurred fixed capital expenditure, the company shall be given for that year of assessment an investment allowance in respect of such amount of the fixed capital expenditure as qualifies for the investment allowance under the terms and conditions of its certificate and in accordance with section 46C.
(2)  Any investment allowance given to a company on an approved project shall be credited to an account to be called an “investment allowance account” which shall be kept by the company for the purposes of this Part.
Prohibition to sell, lease out or dispose of assets
46E.—(1)  During its qualifying period or within two years after the end of its qualifying period, a company shall not, without the written approval of the Minister, sell, lease out or otherwise dispose of any assets in respect of which an investment allowance has been given.
(2)  Where during its qualifying period or within two years after the end of its qualifying period, a company has sold, leased out or otherwise disposed of any assets in respect of which an investment allowance has been given, an amount equal to the aggregate of such investment allowance given in respect of those assets shall be recovered in the following manner: —
(a)the amount shall be deducted from the investment allowance account; and
(b)where the investment allowance account is insufficient to give full effect to the recovery, an assessment or additional assessment in respect of the amount unrecovered shall be made upon the company or any shareholder of the company and the tax exempt account, kept in accordance with section 37I (as made applicable by section 46G), shall be debited accordingly:
Provided that the Minister may waive wholly or partly the recovery of the investment allowance.
Exemption from income tax
46F.  Where for any year of assessment an investment allowance account of a company is in credit and the company has for that year of assessment any chargeable income, an amount of the chargeable income, not exceeding the credit in the investment allowance account, shall be exempt from tax and the investment allowance account shall be debited with such amount; and any remaining balance in the investment allowance account shall be carried forward to be used by the company in the first subsequent year of assessment when the company has chargeable income, and so on for subsequent years of assessment until the credit in the investment allowance account has been fully used.
Certain dividends exempted from income tax
46G.  Section 37I shall apply, mutatis mutandis, to a company which has been granted an investment allowance under this Part as it applies to an international trading company and the reference to section 37G in that section shall be read as a reference to section 46F.
Recovery of tax exempted
46H.  Notwithstanding any other provisions of this Part, where it appears to the Comptroller that —
(a)any amount of exempted income of a company; or
(b)any dividend exempted in the hands of any shareholder,
ought not to have been exempted by reason of the revocation under section 48 of the certificate issued under section 46B to the company, the Comptroller may at any time within twelve years from the date of the revocation —
(i)make such assessment or additional assessment upon the company or any such shareholder as may appear to be necessary in order to recover such tax as may have been exempted under this Part; or
(ii)direct the company to debit its tax exempt account with such amount as the circumstances require.
Application of Income Tax Act (Cap. 141)
46I.—(1)  Parts XI and XII of the Income Tax Act (relating to objections and appeals) and any regulations made thereunder shall apply, mutatis mutandis, to any direction given under section 46H as if it were a notice of assessment given under those provisions.
(2)  Section 44 of the Income Tax Act shall not apply in respect of any dividend or part thereof which is exempted from tax under this Part.
PART VIB
WAREHOUSING AND SERVICING INCENTIVES
Interpretation of this Part
46J.  For the purposes of this Part, unless the context otherwise requires —
“commencement day”, in relation to a warehousing company or a servicing company, means the date specified in its certificate as the date from which that company shall be entitled to tax relief under this Part;
“earnings” means —
(a)in relation to a warehousing company, the consideration received or receivable from the sales of goods (including the provision of services connected with or related to such sales) or the commissions received or receivable therefrom; and
(b)in relation to a servicing company, the consideration received or receivable from the provision of services;
“eligible goods or services”, in relation to a warehousing company or a servicing company, means the eligible goods or services specified in the certificate issued to that company under subsection (3) of section 46K;
“export earnings” means —
(a)in relation to a warehousing company, the consideration received or receivable from export sales free on board of eligible goods (including the provision of services connected with or related to such sales) or the commissions received or receivable therefrom; and
(b)in relation to a servicing company, the consideration received or receivable from the provision of eligible services to persons outside Singapore who are not resident in Singapore;
“fixed capital expenditure” means capital expenditure to be incurred on any building (excluding land) and on any new productive equipment (and, subject to the approval of the Minister, on any secondhand productive equipment) to be used in Singapore;
“servicing company” means a company which has been approved as a servicing company under section 46K;
“warehousing company” means a company which has been approved as a warehousing company under section 46K.
Approved warehousing company or servicing company
46K.—(1)  Any company intending to incur fixed capital expenditure of not less than two million dollars for —
(a)the establishment or improvement of warehousing facilities wholly or mainly for the storage and distribution of manufactured goods to be sold and exported by the company, with or without processing or the provision of related services; or
(b)the purpose of providing technical or engineering services (or such other services as the Minister may, by notification in the Gazette, specify) wholly or mainly to persons outside Singapore who are not resident in Singapore,
may apply in the prescribed form to the Minister for approval as a warehousing company or a servicing company.
(2)  Where the Minister considers it expedient in the public interest to do so he may approve the application and issue a certificate to the company subject to such conditions as he thinks fit.
(3)  Every certificate issued 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; and
(b)the eligible goods or services for the purpose of tax relief under this Part.
(4)  The Minister may in his discretion upon the application of a warehousing company or a servicing company amend its certificate by substituting for the commencement day specified therein such earlier or later date as he thinks fit and thereupon the provisions of this Part shall have effect as if the date so substituted were the commencement day in relation to that certificate.
Tax relief period of warehousing company or servicing company
46L.  The tax relief period of a warehousing company or a servicing company shall commence on its commencement day and shall continue for a period of five years.
Prohibition of acquisition without approval
46M.—(1)  During its tax relief period a warehousing company shall not acquire any sales and a servicing company shall not acquire any services from any other person in connection with its trade or business without the written approval of the Minister.
(2)  Where the Minister permits a warehousing company or a servicing company to acquire such sales or services he may vary the base export earnings as determined under subsection (3) of section 46P and impose such conditions as he thinks fit.
Application of certain sections of this Act to warehousing company or servicing company
46N.—(1)  Sections 37D and 37F shall apply, mutatis mutandis, to a warehousing company or a servicing company as they apply to an international trading company, and the reference in section 37F to relevant export sales shall be read as a reference to export of eligible goods or provision of eligible services.
(2)  Sections 28, 29, 34, 35, 36 and 37 shall apply, mutatis mutandis, to a warehousing company as they apply to an export enterprise and the reference to export product or export produce in those sections shall be read as a reference to eligible goods.
Application of Part X of Income Tax Act (Cap. 141)
46O.—(1)  Part X of the Income Tax Act (relating to returns of income) shall apply in all respects as if the whole of the income of a warehousing company or a servicing company were chargeable to tax.
(2)  The annual return of income shall be accompanied by such evidence as, in the opinion of the Comptroller, is necessary to verify the income derived by a warehousing company or a servicing company.
Computation of export earnings and exemption from tax
46P.—(1)  The total income of a warehousing company or a servicing company in respect of its trade or business which includes its export of eligible goods or provision of eligible services shall be ascertained (after making such adjustments as may be necessary in consequence of any direction given under section 37D as made applicable by section 46N), for any accounting period during its tax relief period in accordance with the provisions of the Income Tax Act (Cap. 141), and in particular the following provisions shall apply: —
(a)income from other non-trading sources shall be excluded and separately assessed;
(b)the allowances provided for in sections 16, 17, 18, 19, 20, 21 and 22 (where applicable) of the Income Tax Act shall be taken into account notwithstanding that no claim for such allowances has been made, and where in any year of assessment full effect cannot, by reason of an insufficiency of profits for that year of assessment, be given to such allowances, the provisions of section 23 of the Income Tax Act shall apply;
(c)the amount of any unabsorbed allowances in respect of any year of assessment immediately preceding the tax relief period which would otherwise be available under subsections (2) and (3) of section 23 of the Income Tax Act shall be taken into account;
(d)the provisions of section 37 of the Income Tax Act shall apply in respect of any loss incurred prior to or during its tax relief period;
(e)any unabsorbed allowances granted under sections 16, 17, 19, 20 and 21 of the Income Tax Act and losses incurred in respect of any distinct trade or business shall be brought into the computation;
(f)any unabsorbed allowances granted under sections 16, 17, 19, 20 and 21 of the Income Tax Act and losses incurred in respect of the trade or business referred to in this subsection shall, during the tax relief period, only be deducted against the income derived from that trade or business;
(g)subject to the provisions of sections 23 and 37 of the Income Tax Act, any allowances and losses which remain unabsorbed at the end of the tax relief period shall be available for deduction in its post tax relief period.
(2)  The amount of the export income of a warehousing company or a servicing company which will qualify for the relief for any year of assessment shall be deemed to be such amount which bears to the total income ascertained under subsection (1) the same proportion as the excess of the total amount of the export earnings of that company over its base export earnings bears to the total amount of its earnings; and one-half of the amount of the export income which qualifies for the relief as ascertained in this subsection shall not form part of the chargeable income of the company for that year of assessment and shall be exempt from tax.
(3)  The base export earnings referred to in subsection (2) shall be —
(a)where a warehousing company or a servicing company has been carrying on its trade or business for three or more years immediately preceding the date of its application under this Part, an amount equal to one-third of the export earnings for the three years immediately preceding the date of its application under this Part; and
(b)where a warehousing company or a servicing company has been carrying on its trade or business for less than three years immediately preceding the date of its application under this Part, such amount as the Minister may specify having regard to the export earnings of other warehousing companies or servicing companies, as the case may be.
Certain dividends exempted from income tax
46Q.  Section 37I shall apply, mutatis mutandis, to a warehousing company or a servicing company as it applies to an international trading company and the reference to section 37G in subsection (1) of that section shall be read as a reference to section 46P.
Recovery of tax exempted
46R.  Notwithstanding any other provisions of this Part, where it appears to the Comptroller that —
(a)any amount of exempted income of a warehousing company or a servicing company; or
(b)any dividend exempted in the hands of any shareholder,
ought not to have been exempted by reason of a direction made under section 37D (as made applicable by section 46N) or the revocation under section 48 of the certificate issued under section 46K to the warehousing company or the servicing company, the Comptroller may at any time within twelve years from the date of the direction or revocation —
(i)make such assessment or additional assessment upon the company or any such shareholder as may appear to be necessary in order to recover such tax as may have been exempted under this Part; or
(ii)direct the company to debit its tax exempt account with such amount as the circumstances may require.
Application of Income Tax Act
46S.—(1)  Parts XI and XII of the Income Tax Act (Cap. 141) (relating to objections and appeals) and any regulations made thereunder shall apply, mutatis mutandis, to any direction given under section 46R as if it were a notice of assessment given under those provisions.
(2)  Section 44 of the Income Tax Act shall not apply in respect of any dividend or part thereof which is exempted from tax under this Part.
PART VIC
INTERNATIONAL CONSULTANCY SERVICES
Interpretation of this Part
46T.  For the purposes of this Part, unless the context otherwise requires —
“approved overseas project”, in relation to a consultancy company or a consultancy firm, means an overseas project of the kind specified in the certificate issued to that company or firm under subsection (3) of section 46U;
“commencement day”, in relation to a consultancy company or a consultancy firm, means the date specified in the certificate issued to that company or firm as the date from which that company or firm shall be entitled to tax relief under this Part;
“consultancy company” means a company which has been approved as a consultancy company under section 46U;
“consultancy firm” means a firm which has been approved as a consultancy firm under section 46U;
“consultancy revenue” means the gross revenue (excluding costs in respect of materials used or sub-contracts made) derived by a consultancy company or a consultancy firm from its profession or business;
“consultancy services” means any of the following services: —
(a)advisory services relating to any technical, construction or engineering matter;
(b)design and engineering;
(c)fabrication of machinery and equipment;
(d)procurement of materials and equipment;
(e)management and supervision of the installation or construction of any project;
(f)data processing, programming and other computer services;
(g)any other services which the Minister may, by notification in the Gazette, declare to be consultancy services for the purposes of this Part;
“eligible consultancy revenue” means the gross revenue (excluding costs in respect of materials used or sub-contracts made) derived by a consultancy company or a consultancy firm from the provision of consultancy services in respect of approved overseas projects.
Approved consultancy company or consultancy firm
46U.—(1)  Any company or firm intending to provide consultancy services in connection with or in respect of any overseas project or projects may, where that part of its consultancy revenue which is attributable to such services exceeds or is expected to exceed one million dollars per annum, apply in the prescribed form to the Minister for approval as a consultancy company or a consultancy firm.
(2)  Where the Minister considers it expedient in the public interest to do so he may approve the application and issue a certificate to the company or firm subject to such conditions as he thinks fit.
(3)  Every certificate issued under this section shall specify —
(a)a date as the commencement day from which the company or firm shall be entitled to tax relief under this Part; and
(b)the kinds of projects for the purposes of tax relief under this Part.
(4)  The Minister may in his discretion upon the application of a consultancy company or a consultancy firm amend its certificate by substituting for the commencement day specified therein such earlier or later date as he thinks fit and thereupon the provisions of this Part shall have effect as if the date so substituted were the commencement day in relation to that certificate.
Tax relief period of consultancy company or consultancy firm
46V.  The tax relief period of a consultancy company or a consultancy firm shall commence on its commencement day and shall continue for a period of five years.
Application of certain sections of this Act to consultancy company or consultancy firm
46W.  Sections 37D, 37E and 37F shall apply, mutatis mutandis, to a consultancy company or a consultancy firm as they apply to an international trading company and for the purposes of such application —
(a)the reference in subsection (2) of section 37E to the export sales of qualifying manufactured goods, Singapore domestic produce and qualifying commodities shall be read as a reference to the provision of consultancy services on approved overseas projects; and
(b)in section 37F the reference to trade or business shall be read as a reference to profession or business and the reference to relevant export sales shall be read as a reference to consultancy services on approved overseas projects.
Computation of eligible consultancy revenue and exemption from tax
46X.—(1)  The total income of a consultancy company in respect of its profession or business which includes its consultancy services on approved overseas projects shall be ascertained (after making such adjustments as may be necessary in consequence of any direction given under section 37D as made applicable by section 46W), for any accounting period during its tax relief period in accordance with the provisions of the Income Tax Act (Cap. 141), and in particular the following provisions shall apply: —
(a)income from sources other than the consultancy services shall be excluded and separately assessed;
(b)the allowances provided for in sections 16, 17, 18, 19, 20, 21 and 22 (where applicable) of the Income Tax Act shall be taken into account notwithstanding that no claim for such allowances has been made, and where in any year of assessment full effect cannot, by reason of an insufficiency of profits for that year of assessment, be given to such allowances, the provisions of section 23 of the Income Tax Act shall apply;
(c)the amount of any unabsorbed allowances in respect of any year of assessment immediately preceding the tax relief period which would otherwise be available under subsections (2) and (3) of section 23 of the Income Tax Act shall be taken into account;
(d)the provisions of section 37 of the Income Tax Act (Cap. 141) shall apply in respect of any loss incurred prior to or during its tax relief period;
(e)any unabsorbed allowances granted under sections 16, 17, 19, 20 and 21 of the Income Tax Act and losses incurred in respect of any distinct trade or business shall be brought into the computation;
(f)any unabsorbed allowances granted under sections 16, 17, 19, 20 and 21 of the Income Tax Act and losses incurred in respect of the profession or business referred to in this subsection shall, during the tax relief period, only be deducted against the income derived from that profession or business;
(g)subject to the provisions of sections 23 and 37 of the Income Tax Act, any allowances and losses which remain unabsorbed at the end of the tax relief period shall be available for deduction in its post tax relief period.
(2)  The amount of the income of a consultancy company which will qualify for the relief for any year of assessment shall be deemed to be such amount which bears to the total income ascertained under subsection (1) the same proportion as the excess of the total amount of the eligible consultancy revenue of that company over its base eligible consultancy revenue bears to the total amount of its consultancy revenue; and one-half of the amount of the income which qualifies for the relief as ascertained in this subsection shall not form part of the chargeable income of the company for that year of assessment and shall be exempt from tax.
(3)  The base eligible consultancy revenue referred to in subsection (2) shall be —
(a)where a consultancy company has been carrying on such consultancy services for three or more years immediately preceding the date of its application under this Part, an amount equal to one-third of its consultancy revenue in respect of overseas projects which are in the opinion of the Minister of the same kind as that specified in its certificate for approved overseas projects for the three years immediately preceding the date of its application under this Part; and
(b)where a consultancy company has been carrying on such consultancy services for less than three years immediately preceding the date of its application under this Part, such amount as the Minister may specify having regard to the consultancy revenue of other consultancy companies.
(4)  This section shall apply to a consultancy firm subject to such provisions as the Minister may by regulations prescribe for the purpose of ascertaining the amount of income which qualifies for the relief.
Certain dividends exempted from income tax
46Y.  Section 37I shall apply, mutatis mutandis, to a consultancy company as it applies to an international trading company and the reference to section 37G in subsection (1) of that section shall be read as a reference to section 46X.
Recovery of tax exempted
46Z.  Notwithstanding any other provisions of this Part, where it appears to the Comptroller that —
(a)any amount of exempted income of a consultancy company or a consultancy firm; or
(b)any dividend exempted in the hands of any shareholder,
ought not to have been exempted by reason of a direction made under section 37D (as made applicable by section 46W) or the revocation under section 48 of the certificate issued under section 46U to the consultancy company or the consultancy firm, the Comptroller may at any time within twelve years from the date of the direction or revocation —
(i)make such assessment or additional assessment upon the company or firm or any such shareholder or partner as may appear to be necessary in order to recover such tax as may have been exempted under this Part; or
(ii)direct the company to debit its tax exempt account with such amount as the circumstances may require.
Application of Income Tax Act (Cap. 141)
46AA.—(1)  Parts XI and XII of the Income Tax Act (relating to objections and appeals) and any regulations made thereunder shall apply, mutatis mutandis, to any direction given under section 46Z as if it were a notice of assessment given under those provisions.
(2)  Section 44 of the Income Tax Act shall not apply in respect of any dividend or part thereof which is exempted from tax under this Part.”.
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Last updated 17 Apr 2024
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