Income Tax (Amendment) Bill

Bill No. 16/1991

Read the first time on 7th May 1991.

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 1991.

(2) Section 17(a) and (c) shall be deemed to have come into operation on 1st January 1990.

(3) Sections 3(b), 4, 5, 8, 10, 11(a), 13(a), 15, 16 and 18(a) shall have effect for the year of assessment 1991 and subsequent years of assessment.

New section 10D

2. The Income Tax Act (referred to in this Act as the principal Act) is amended by inserting, immediately after section 10C, the following section:

“Income from finance lease

10D.—(1) Notwithstanding any other provisions of this Act, the Minister may by regulations provide for the circumstances in which the Comptroller may direct that allowances under section 19, 19A, 20, 21, 22 or 23 in respect of any machinery or plant which is leased under a finance lease entered into on or after 1st April 1990 shall not be made to the lessor but to the lessee as though the machinery or plant had been sold by the lessor to the lessee.

(2) In determining the income of a lessor from the leasing of any machinery or plant under any finance lease, other than those which have been treated as though they had been sold pursuant to regulations made under subsection (1) —

(a)

the Comptroller shall determine —

(i)	the manner and extent to which allowances under section 19, 19A, 20, 21, 22 or 23 and any expenses and donations allowable under this Act are to be deducted;
(ii)	the manner and extent to which any loss may be deducted under section 37(2);

(b)

the allowances under section 19, 19A, 20, 21, 22 or 23 shall only be available as a deduction against such income and the balance of the allowances shall not be available as a deduction against any other income.

(3) For the purposes of this section, “finance lease” means a lease of any machinery or plant (including any arrangement or agreement in connection with the lease) which has the effect of transferring substantially the obsolescence, risks or rewards incidental to ownership of such machinery or plant to the lessee.”.

Amendment of section 13A

3. Section 13A of the principal Act is amended —

(a)	by deleting the words “on or after 1st January 1969” in subsection (1)(a); and
(b)	by inserting, immediately after the words “Singapore ships” in the fifth line of the definition of “income of a shipping enterprise” in subsection (10), the words “, or from towing or salvage operations carried out (other than within the limits of the port of Singapore) by sea-going Singapore ships,”.

Amendment of section 13B

4. Section 13B of the principal Act is amended by deleting the words “or 43F” in subsections (1), (2) and (8)(a) and substituting in each case the words “, 43F, 43G, 43H or 43I”.

Repeal and re-enactment of section 13C

5. Section 13C of the principal Act is repealed and the following section substituted therefor:

“Exemption of income of non-resident arising from funds managed by Asian Currency Unit, etc.

13C. There shall be exempt from tax such income as the Minister may by regulations prescribe of a person not resident in Singapore arising from —

(a)	funds managed by any Asian Currency Unit of a financial institution or other fund manager approved in either case by the Minister or such other person as he may appoint;
(b)	funds managed by a headquarters company approved under section 43E; and
(c)	funds managed by a Finance and Treasury Centre approved under section 43G.”.

Amendment of section 15

6. Section 15(2) of the principal Act is amended by deleting the words “or 14G” and substituting the words “, 14G or 14H”.

Amendment of section 19A

7. Section 19A of the principal Act is amended —

(a)

by deleting subsection (1B) and substituting the following subsection:

“(1B) Notwithstanding section 19, where a person proves to the satisfaction of the Comptroller that he has, for the purposes of a trade, business or profession carried on by him, installed a generator in any office or factory for the supply of electrical power to that office or factory in the event of a disruption in the normal supply of electrical power, he shall, in lieu of the allowances provided by subsection (1) or by section 19, be entitled, if he so elects, to an allowance of 100% in respect of the capital expenditure incurred during or after the basis period for the year of assessment 1990 on the provision of that generator.”;

(b)

by inserting, immediately after subsection (1C), the following subsection:

“(1D) Where at the end of the basis period for the year of assessment 1990 a person has in use any prescribed automation equipment or any generator referred to in subsection (1B) in respect of which capital allowances have been made under subsection (1) or under section 19, there shall be made to him, on due claim, an allowance of an amount equal to the capital expenditure then remaining unallowed under subsection (1) or under section 19 in respect of that equipment or generator.”; and

(c)

by deleting the words “subsection (1B)” in the first line of subsection (6) and substituting the words “subsection (1D)”.

Amendment of section 26

8. Section 26 of the principal Act is amended —

(a)

by inserting, immediately after the words “carrying on” in subsection (1A), the words “offshore life business or”;

(b)

by deleting the words “dividends and interest” in paragraph (a) of the proviso to subsection (2) and substituting the words “or from such dividends and interest as may be specified in those regulations”;

(c)

by inserting, immediately after subsection (3), the following subsection:

“(3A) In the case of a life insurance company which has income subject to the concessionary rate of tax prescribed by regulations made under section 43C, in ascertaining the income for the purposes of those regulations —

(a)	no income other than such dividends and interest as may be specified in those regulations shall be included;
(b)	income in respect of such dividends and interest shall be apportioned in such manner as may be prescribed by those regulations; and
(c)	any item of expenditure not directly attributable to that business shall be apportioned in such manner as may be prescribed in those regulations.”; and

(d)

by deleting subsection (5) and substituting the following subsection:

“(5) For the purposes of this section and section 43C —

“offshore life business” means the business of insuring or reinsuring the liability under any of the following life policies:

(a)

in relation to direct life insurance, a life policy where, at the date of issue of the policy, the policy owner is not resident in Singapore nor a permanent establishment in Singapore and does not have any address in Singapore for communicating with the insurance company about the policy;

(b)

in relation to facultative life reinsurance, a policy issued to reinsure liability under any life policy referred to in paragraph (a); and

(c)

in relation to treaty life reinsurance —

(i)	a reinsurance policy where the ceding party is a company incorporated outside Singapore and not resident in Singapore, or is not a permanent establishment in Singapore; or
(ii)	a reinsurance policy where liabilities in respect of policies referred to in paragraph (a) are ceded by a party which is a company incorporated and resident in Singapore or a permanent establishment in Singapore;

“offshore risks” means any risk outside Singapore and —

(a)	in relation to direct general insurance or facultative general reinsurance, the insured is not a person resident in Singapore or a permanent establishment in Singapore; and
(b)	in relation to treaty general reinsurance, not less than 75% of the total risk in terms of gross premiums is outside Singapore,

and where any such risk is in transit in Singapore, it shall be deemed to be outside Singapore.”.

Amendment of section 35

9. Section 35 (2A) of the principal Act is amended by deleting the full-stop at the end of paragraph (b) and substituting a semi-colon, and by inserting immediately thereafter the following paragraph:

“(c)	derived during the period from 1st January 1989 to 31st December 1989 shall be treated as his statutory income for the year of assessment 1990 and be charged to tax at the rate applicable to him for that year of assessment.”.

Amendment of section 39

10. Section 39 of the principal Act is amended —

(a)

by deleting “$2,500” wherever it appears in the proviso to subsection (2)(d) and substituting in each case “$3,500”;

(b)

by deleting the words “made on or after 1st August 1986, of an amount not exceeding 10%” in the fifth and sixth lines of subsection (2)(ea) and substituting the words “, of an amount not exceeding 15%”;

(c)

by deleting “$7,200” wherever it appears in subsection (2)(ea) and substituting in each case “$10,800”;

(d)

by deleting “$2,500” in the fifteenth line of subsection (2)(f) and substituting “$3,500”;

(e)

by deleting “$2,500” in the thirteenth line of subsection (2)(g) and substituting “$3,500”; and

(f)

by inserting, immediately after subsection (6), the following subsection:

“(7) In the case of a woman resident in Singapore who, in the year immediately preceding the year of assessment, is —

(a)	living with her husband and who has elected to be charged in her own name under section 51(4);
(b)	married and her husband is not resident in Singapore; or
(c)	married but separated from her husband, a divorcee or a widow and who, in the year immediately preceding the year of assessment, has any unmarried child or children living with her in the same household in Singapore in respect of whom she may be allowed a deduction under subsection (2)(d),

there shall be allowed a deduction against her earned income equal to twice the amount of levy imposed on or after 1st January 1990 under the Employment of Foreign Workers Act [Cap. 91A] or the written law repealed by that Act (excluding any amount paid by way of penalty) and paid in the year immediately preceding the year of assessment in respect of one domestic servant employed by her or her husband.”.

Amendment of section 42

11. Section 42 of the principal Act is amended —

(a)

by deleting “32%” in the fifth and in the eighth lines of subsection (5) and substituting in each case “31%”; and

(b)

by deleting the proviso to subsection (5) and substituting the following proviso:

“Provided that the reference to 31% in this subsection shall —

(a)	for the years of assessment 1988 and 1989, be read as a reference to 33%; and
(b)	for the year of assessment 1990, be read as a reference to 32%.”.

Repeal and re-enactment of section 42A

12. Section 42A of the principal Act is repealed and the following section substituted therefor:

“Rebate for second, third and fourth child of the family

42A.—(1) Where an individual resident in Singapore in the year of assessment has a legitimate second child of the family born to him on or after 1st January 1990, there shall, in respect of that child, be allowed for the year of assessment immediately following the year of birth of that child a rebate of —

(a)	$20,000 if at the time of birth the mother is below 28 years of age;
(b)	$15,000 if at the time of birth the mother is below 29 years of age;
(c)	$10,000 if at the time of birth the mother is below 30 years of age; and
(d)	$5,000 if at the time of birth the mother is below 31 years of age,

against the tax payable by that individual; but where more than one individual is entitled to claim such rebate in respect of that child, the rebate shall be apportioned between them in such proportion as they may agree, or, in the absence of any agreement, in such manner as appears to the Comptroller to be reasonable.

(2) Where an individual resident in Singapore in the year of assessment has a legitimate third child of the family born to him on or after 1st January 1987 or a legitimate fourth child of the family born to him on or after 1st January 1988, there shall, in respect of each child, be allowed for the year of assessment immediately following the year of birth of each child —

(a)	a rebate of $20,000 against the tax payable by that individual; but where more than one individual is entitled to claim such rebate in respect of that child, the rebate shall be apportioned between them in such proportion as they may agree, or, in the absence of any agreement, in such manner as appears to the Comptroller to be reasonable;
(b)	a rebate against the tax payable by a married woman, who has elected to be charged in her own name under section 51(4), of a sum equal to 15% of her earned income assessed for that year of assessment.

(3) For the purposes of subsections (1) and (2) —

(a)	where full effect cannot be given to the rebate in respect of each child by reason of an insufficiency of the tax payable for that year of assessment, the balance of the unabsorbed rebate shall be available for deduction against the tax payable for the year of assessment immediately following that year of assessment and so on for the next 5 subsequent years of assessment;
(b)	where the third child is born within 7 years of the birth of the second child or the fourth child is born within 7 years of the birth of the third child and full effect cannot be given to the rebate in respect of the third child or fourth child, as the case may be, by reason of an insufficiency of the tax payable for that year of assessment, the rebate or balance, if any, of the unabsorbed rebate shall be available for deduction against the tax payable for up to 7 years of assessment immediately following the last year of assessment in which the rebate in respect of the second or third child, as the case may be, may be allowed under paragraph (a);
(c)	where the third child and the fourth child are born within 7 years of the birth of the second child and full effect cannot be given to the rebate in respect of the third or fourth child by reason of an insufficiency of the tax payable for that year of assessment, the rebate or balance, if any, of the unabsorbed rebate shall be available for deduction in the case of the third child, against the tax payable for up to 7 years of assessment immediately following the last year of assessment in which the rebate in respect of the second child may be allowed under paragraph (a) and in the case of the fourth child, against the tax payable for up to 7 years of assessment immediately following the last year of assessment in which the rebate in respect of the third child may be allowed under this paragraph;
(d)	where the second, third or fourth child in respect of whom a rebate is allowable under this section is adopted by another person within 7 years of his birth, the rebate or balance, if any, of the unabsorbed rebate shall not be available for deduction against the tax payable for any year of assessment following the year in which the child is adopted;
(e)	where a person is entitled to a rebate under subsection (1) or (2) and his marriage is dissolved by divorce or annulment within 7 years of the birth of the second, third or fourth child, the rebate or balance, if any, of the unabsorbed rebate shall not be available for deduction against the tax payable for any year of assessment following the year of the order of divorce or annulment.

(4) For the purposes of this section —

“second child of the family” means a child of the family being a citizen of Singapore at the time of his birth or within 12 months thereafter and who has at the time of his birth one other sibling who is a member of the same household and who is a citizen of Singapore at that time or within 12 months thereafter;

“third child of the family” means a child of the family being a citizen of Singapore at the time of his birth or within 12 months thereafter and who has at the time of his birth two other siblings who are members of the same household and who are citizens of Singapore at that time or within 12 months thereafter;

“fourth child of the family” means a child of the family being a citizen of Singapore at the time of his birth or within 12 months thereafter and who has at the time of his birth 3 other siblings who are members of the same household and who are citizens of Singapore at that time or within 12 months thereafter;

“sibling” means a brother or sister and includes a step-brother or step-sister, or a brother or sister adopted in accordance with any written law relating to adoption.

(5) For the purposes of subsection (4), any sibling who is deceased shall be taken into account in determining the number of siblings a child has at the time of his birth.

(6) No rebate shall be allowed under this section in respect of a child who has, at the time of his birth, more than 3 other siblings who are members of the same household.”.

Amendment of section 43

13. Section 43 of the principal Act is amended —

(a)

by deleting “32%” in subsection (1)(a) and (b) and substituting in each case “31%”; and

(b)

by deleting subsection (2) and substituting the following subsection:

“(2) The reference in subsection (1) to 31% shall —

(a)	for the years of assessment 1987 to 1989, be read as a reference to 33%; and
(b)	for the year of assessment 1990, be read as a reference to 32%.”.

Amendment of section 43C

14. Section 43C of the principal Act is amended by inserting, immediately after the words “carrying on” in the fifth line, the words “offshore life business within the meaning of section 26 or”.

Amendment of section 43E

15. Section 43E of the principal Act is amended —

(a)

by inserting, immediately after the words “outside Singapore” in the ninth line of subsection (1), the words “or derived by it from such qualifying treasury, investment or financial activities as may be prescribed”;

(b)

by deleting the word “and” at the end of paragraph (a) of subsection (2), and by inserting immediately thereafter the following paragraph:

“(b)	in respect of any qualifying treasury, investment or financial activity only where the qualifying activity has been approved in relation to that headquarters company for such concessionary rate; and”; and

(c)

by re-lettering the existing paragraph (b) as paragraph (c).

New sections 43G, 43H and 43I

16. The principal Act is amended by inserting, immediately after section 43F, the following sections:

“Concessionary rate of tax for Finance and Treasury Centre

43G.—(1) Notwithstanding section 43, the Minister may by regulations provide that tax at the rate of 10% or such other concessionary rate be levied and paid for each year of assessment upon such income as he may specify of a company derived from the operation of its approved Finance and Treasury Centre in respect of such qualifying activities carried out on its own account as may be prescribed or such prescribed qualifying services as may be provided to its offices and associated companies where such offices and associated companies are outside Singapore; and those regulations may provide for the deduction of losses otherwise than in accordance with section 37(2).

(2) The concessionary rate of tax referred to in subsection (1) shall apply to an approved Finance and Treasury Centre —

(a)	in respect of any qualifying service only where the qualifying service and the office or associated company to whom the service is rendered have been approved in relation to that Centre for such concessionary rate;
(b)	in respect of any qualifying activity only where the qualifying activity has been approved in relation to that Centre for such concessionary rate; and
(c)	subject to such conditions as the Minister or such person appointed by him may impose.

(3) For the purposes of this section —

“approved” means approved by the Minister or such person as he may appoint;

“associated company”, in relation to a company with an approved Finance and Treasury Centre, means a company —

(a)	the operations of which are or can be controlled, directly or indirectly, by the company with the approved Centre;
(b)	which controls or can control, directly or indirectly, the operations of the company with the approved Centre; or
(c)	the operations of which are or can be controlled, directly or indirectly, by a person or persons who control or can control, directly or indirectly, the operations of the company with the approved Centre:

Provided that a company shall be deemed to be an associated company in relation to a company with an approved Finance and Treasury Centre if —

(i)	at least 25% of its issued capital is beneficially owned, directly or indirectly, by the company with the approved Centre;
(ii)	at least 25% of the issued capital of the company with the approved Centre is beneficially owned, directly or indirectly, by the first-mentioned company;

“Finance and Treasury Centre” means a division or department of a company which provides treasury, investment or financial services in Singapore for its offices outside Singapore or its associated companies outside Singapore.

Concessionary rate of tax for international commodity trading company

43H.—(1) Notwithstanding section 43, the Minister may by regulations provide that tax at the rate of 10% or such other concessionary rate shall be levied and paid for each year of assessment upon such income as the Minister may specify of an approved international commodity trading company derived by it from such qualifying transactions in commodities or commodity futures as may be prescribed, and those regulations may provide for the deduction of losses otherwise than in accordance with section 37(2).

(2) For the purposes of this section —

“approved” means approved by the Minister or such person as he may appoint;

“international commodity trading company” means a company carrying on the business of international trading of commodities other than petroleum or petroleum products.

Concessionary rate of tax for offshore leasing of machinery and plant

43I.—(1) Notwithstanding section 43, tax at the rate of 10% or such other concessionary rate as the Minister may by order prescribe shall be levied and paid for each year of assessment upon the income of a leasing company accruing in or derived from Singapore in respect of offshore leasing of any machinery or plant.

(2) In determining the income of a leasing company from offshore leasing —

(a)	the allowances under section 19, 19A, 20, 21, 22 or 23 shall be taken into account notwithstanding that no claim for such allowances has been made;
(b)	the allowances under section 19, 19A, 20, 21, 22 or 23 shall only be available against that income, and the balance of such allowances shall not be available as a deduction against any other income;
(c)	the Comptroller shall determine the manner and extent to which allowances under section 19, 19A, 20, 21, 22 or 23 and any expenses and donations allowable under this Act are to be deducted.

(3) Where in any year a leasing company incurs a loss in respect of offshore leasing, that loss shall be deducted in accordance with section 37 but only against the income of the leasing company from offshore leasing.

(4) Where a leasing company permanently ceases to carry on its offshore leasing business, the balance of any allowance or loss attributable to that business which remains unabsorbed at the date of such cessation shall be reduced to such proportion of the balance as the concessionary rate of tax referred to in subsection (1) bears to the rate of tax for every company under section 43(1)(a) applicable for the year of assessment which relates to the basis period in which the cessation occurs; and the amount so reduced shall be available as a deduction against any other income of the leasing company for that year of assessment, and any balance of that amount shall be available as a deduction for any subsequent year of assessment in accordance with section 23 or 37, as the case may be.

(5) For the purposes of this section —

“leasing company” means any company carrying on a business of leasing machinery or plant;

“offshore leasing” means the leasing of any machinery or plant, other than those which have been treated as though they had been sold pursuant to regulations made under section 10D(1), where such machinery or plant is used outside Singapore, and the payments under the lease —

(a)	are in currencies other than Singapore dollars; and
(b)	are not deductible against any income accruing in or derived from Singapore.”.

Amendment of section 44

17. Section 44 of the principal Act is amended —

(a)

by deleting “32%” in subsection (1) and substituting “31%”;

(b)

by inserting, immediately after subsection (11), the following subsection:

“(11A) Notwithstanding anything in this Act, where tax on any dividend paid in 1990 has been deducted at the rate of 32% —

(a)	the amount of such dividend received by a shareholder shall be deemed to have been paid without deduction of tax and to be a dividend of such a gross amount as after deduction of tax at the rate of 31% would be equal to the net amount paid; and a sum equal to the difference between such gross amount and the net amount paid shall be deemed to have been deducted from the dividend as tax; and
(b)	the difference between the amount of the tax deducted at 32% from such dividend and the amount deemed to have been so deducted under paragraph (a) shall be added to the balance on the 1st day of the year of assessment 1991 and deemed to be a part thereof.”; and

(c)

by deleting the words “or 43F” in subsection (12)(f)(i) and substituting the words “, 43F, 43G, 43H or 43I”.

Amendment of section 45

18. Section 45 of the principal Act is amended —

(a)

by deleting “32%” wherever it appears in subsection (1) and substituting in each case “31%”; and

(b)

by deleting subsections (7) and (8) and substituting the following subsection:

“(7) Notwithstanding subsection (1), tax shall be deducted —

(a)	at the rate of 40% on every payment made on or after 1st January 1986 which would be assessable on the person receiving the payment for any year of assessment before the year of assessment 1987;
(b)	at the rate of 33% on every payment made on or after 1st January 1989 which would be assessable on the person receiving the payment for the year of assessment 1987, 1988 or 1989;
(c)	at the rate of 32% on every payment made on or after 1st January 1990 which would be assessable on the person receiving the payment for the year of assessment 1990.”.

Amendment of section 46

19. Section 46 of the principal Act is amended by inserting, immediately after subsection (2), the following subsection:

“(2A) Notwithstanding subsection (1), where tax on any dividend paid in 1990 has been deducted at the rate of 32%, the tax to be set off under subsection (1) shall be the sum deemed to be the tax deducted from such dividend under section 44(11A).”.

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