Income Tax (Amendment No. 2) Bill

Bill No. 25/1980

Read the first time on 31st October 1980.

An Act to amend the Income Tax Act (Chapter 141 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.—(1) This Act may be cited as the Income Tax (Amendment No. 2) Act, 1980.

(2) Sections 13(b) and 18 of this Act shall have effect for the year of assessment 1980 and subsequent years of assessment.

(3) Sections 7, 8, 13(a), 14 and 19 of this Act shall have effect for the year of assessment 1981 and subsequent years of assessment.

Amendment of section 2

2. Section 2 of the Income Tax Act (hereinafter in this Act referred to as the principal Act) is amended by inserting, immediately after the definition of “replanting”, the following definitions: —

“ “research and development” means any systematic or intensive study carried out in the field of science or technology with the object of using the results of the study for the production or improvement of materials, devices, products or processes, but does not include —

(a)	quality control or routine testing of materials, devices or products;
(b)	research in the social sciences or the humanities;
(c)	routine data collection;
(d)	efficiency surveys or management studies; or
(e)	market research or sales promotion;

“research and development organisation” means a body or organisation which provides research and development services for any manufacturing trade or business;”.

Amendment of section 14

3. Section 14 of the principal Act is amended —

(a)

by deleting the word “and” at the end of sub-paragraph (i)(B) of the proviso to paragraph (e) of subsection (1); and

(b)

by deleting sub-paragraph (i)(C) of the proviso to paragraph (e) of subsection (1) and substituting the following sub-paragraphs: —

“(C)	commencing on or after 1st July, 1978, and before 1st July, 1979, shall not exceed sixteen and a half per cent; and
(D)	commencing on or after 1st July, 1979, shall not exceed twenty and a half per cent,”.

Repeal and re-enactment of section 14D

4. Section 14D of the principal Act is repealed and the following section substituted therefor: —

“Expenditure on research and development

14D.—(1) For the purpose of ascertaining the income of any person carrying on a manufacturing trade or business, the following expenditure incurred on or after 1st April, 1979 (other than any amount which is allowable as a deduction under section 14) by that person shall be allowed as a deduction: —

(a)	expenditure incurred on research and development undertaken directly by him and related to that trade or business (except to the extent that it is capital expenditure on plant, machinery, land or buildings or on alterations, additions or extensions to buildings or in the acquisition of rights in or arising out of research and development); and
(b)	payments made by that person to an approved research and development organisation for undertaking on his behalf research and development related to that trade or business.

(2) For the purposes of this section —

(a)	“approved” means approved by the Minister or such person as he may appoint;
(b)	any expenditure incurred by a person prior to the commencement of his manufacturing trade or business shall be deemed to have been incurred by that person on the first day on which he carries on that trade or business.”.

New section 14E

5. The principal Act is amended by inserting, immediately after section 14D, the following section: —

“Further deduction for expenditure on research and development project

14E.—(1) Subject to this section, where the Comptroller is satisfied that —

(a)	a person carrying on a manufacturing trade or business has incurred expenditure on or after 1st April, 1980, 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; or
(b)	a research and development organisation has incurred expenditure on or after 1st April, 1980, in undertaking an approved research and development project in Singapore and no deduction under this section has been allowed to another person in respect of any expenditure for that project or for another project of which that project forms a part,

there shall be allowed to that person or research and development organisation a further deduction of the amount of such expenditure in addition to the deduction allowed under section 14 or 14D.

(2) The Minister may —

(a)	specify the maximum amount of the expenditure (or any item thereof) incurred to be allowed under subsection (1);
(b)	impose such conditions as he thinks fit when approving the research and development project and may specify the period or periods for which deduction is to be allowed under this section.

(3) No deduction shall be allowed under this section in respect of any expenditure which is not allowed under section 14 or 14D.

(4) For the purposes of this section, “approved” means approved by the Minister or such person as he may appoint.”.

Amendment of section 15

6. Section 15 of the principal Act is amended by inserting, immediately after the words “section 14D” in subsection (2), the words “or 14E”.

Amendment of section 18

7. Section 18 of the principal Act is amended —

(a)

by deleting the comma after the word “Minister” at the end of paragraph (h) of subsection (1) and substituting the word “; or”; and

(b)

by inserting, immediately after paragraph (h) of subsection (1), the following paragraph: —

“(i)	by a research and development organisation in carrying out research and development activities,”.

Amendment of section 19

8. Section 19 of the principal Act is amended by deleting subsection (2) and substituting the following subsection: —

“(2) Where at the end of the basis period for any year of assessment a person has in use machinery or plant for the purpose of his trade, profession or business, there shall be made to him, on due claim, in respect of that year of assessment an allowance for depreciation by wear and tear of those assets (to be known as an annual allowance) which shall be calculated in accordance with the following provisions: —

(a)

the annual allowance in respect of any machinery or plant acquired in or after the basis period for the year of assessment 1981 shall —

(i)	in the case of an asset, other than an asset acquired under a hire-purchase agreement, be the amount ascertained by dividing the excess of the original cost of the asset over any initial allowance granted under subsection (1) by the number of years of working life of the asset as specified in the Sixth Schedule to this Act;
(ii)	in the case of an asset acquired under a hire-purchase agreement, be the amount ascertained by dividing the excess of the original cost of the asset over the total amount of initial allowance allowable in respect of the asset under subsection (1) by the number of years of working life of the asset as specified in the Sixth Schedule to this Act;

(b)

the annual allowance in respect of any machinery or plant acquired before the basis period for the year of assessment 1981 shall be the amount ascertained by the formula

where A

is the amount of the capital expenditure still unallowed under this section in respect of that asset as at the end of the basis period for the year of assessment 1980;

is the number of years of working life of the asset as specified in the Sixth Schedule to this Act reduced by the number of whole years the asset has been put into use as at the end of the basis period for the year of assessment 1980, and if the result is less than 1, B shall be deemed to be 1; and

where A or B

cannot be ascertained, such amount as the Comptroller may determine;

(c)

notwithstanding paragraphs (a) and (b), the annual allowance in respect of any asset for any year of assessment may, at the election of a person to whom a certificate has been issued before 1st January, 1981, (or after 1st January, 1981, where application for the certificate has been approved before that date) under Part II, III, IV, IVA, VIB or VIC of the Economic Expansion Incentives (Relief from Income Tax) Act (Cap. 135), be ascertained during his tax relief period as determined in accordance with that certificate at the rates applicable immediately before the commencement of the Income Tax (Amendment No. 2) Act, 1980, and shall be computed on the reducing value of the asset, which shall be the original cost of the asset reduced by any initial allowance and annual allowances granted under this section;

(d)

where an election under paragraph (c) has been made by a person with respect to any asset, the annual allowance in respect of the same asset to be made to the person for any year of assessment after his tax relief period shall be computed in accordance with the formula

where C

is the amount of the capital expenditure still unallowed under this section in respect of that asset after the end of his tax relief period;

is the number of years of working life of the asset as specified in the Sixth Schedule to this Act reduced by the number of whole years the asset has been put into use as at the end of the basis period in which his tax relief ends and if the result is less than 1, D shall be deemed to be 1;

(e)

the annual allowance in respect of any asset for any year of assessment shall not exceed the amount of the capital expenditure of the asset still unallowed under this section as at the beginning of the basis period for that year of assessment;

(f)

for the purposes of the Sixth Schedule to this Act, where any question arises as to the classification of an asset under any item of that Schedule, the asset shall be treated as falling under such item as the Comptroller considers proper.”.

Amendment of section 19A

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

(a)

by inserting, immediately after the word “machinery” in the marginal note, the words “, and for computer”;

(b)

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

“(1) Notwithstanding section 19 where a person proves to the satisfaction of the Comptroller that —

(a)	he is carrying on an industrial enterprise as defined in subsection (5);
(b)	he has installed any equipment or device for the purpose of preventing, controlling or reducing air pollution or water pollution;
(c)	he has installed a computer for the purposes of a trade, profession or business carried on by him; or
(d)	he is carrying on business as a research and development organisation,

he shall, in lieu of the allowances provided by section 19, be entitled for a period of three years to an annual allowance of thirty-three and one-third per cent in respect of the capital expenditure incurred —

(i)	on or after 1st January, 1965, on the provision of machinery or plant for the purposes of that industrial enterprise;
(ii)	on or after 1st January, 1973, on the provision of that equipment or device for the purpose of preventing, controlling or reducing air pollution or water pollution;
(iii)	on or after 1st January, 1980, on the provision of that computer; and
(iv)	on or after 1st January, 1980, on the provision of machinery or plant for use in his business of providing research and development services for any manufacturing trade or business.”; and

(c)

by deleting subsection (4) and substituting the following subsection: —

“(4) For the purposes of this section —

(a)

“computer” means —

(i)	a stored programme digital computer; or
(ii)	an analogue computer,

used for automatic data processing and includes part of such a computer;

(b)

machinery or plant shall be deemed not to include motor vehicles designed primarily and principally for the carriage of persons.”.

New section 19B

10. The principal Act is amended by inserting, immediately after section 19A, the following section: —

“Writing-down allowances for approved know-how or patent rights

19B.—(1) Subject to this section, where on or after 1st April, 1980, a person carrying on a manufacturing trade or business has incurred capital expenditure in acquiring any approved know-how or any approved patent rights for use in that trade or business (hereinafter in this section referred to as the relevant trade or business), writing-down allowances in respect of that expenditure shall be made to him during a writing-down period of five years beginning with the year of assessment relating to the basis period in which that expenditure is incurred.

(2) The writing-down allowance to be made to a person under this section for any year of assessment shall be an amount equal to twenty per cent of the expenditure incurred by him on the acquisition of the approved know-how or patent rights, as the case may be.

(3) Any expenditure incurred on the acquisition of any approved know-how or patent rights by a person before the commencement of his trade or business shall be treated for the purpose of this section as if it had been incurred by him on the first day he commences that trade or business.

(4) Where writing-down allowances have been made to any person under this section in respect of any approved patent rights and, before the end of the writing-down period, any of the following events occurs, that is to say: —

(a)	the rights come to an end without being subsequently revived;
(b)	he sells all those rights or so much thereof as he still owns; or
(c)	he sells part of those rights and the net proceeds of the sale (so far as they consist of capital sums) are not less than the amount of the expenditure remaining unallowed,

no writing-down allowance in respect of the approved patent rights shall be made to that person for the year of assessment relating to the basis period in which the event occurs or for any subsequent year of assessment.

(5) Where writing-down allowances have been made to any person under this section in respect of any approved patent rights and, before the end of the writing-down period, either of the following events occurs, that is to say: —

(a)	the rights come to an end without being subsequently revived; or
(b)	he sells all those rights, or so much thereof as he still owns, and the net proceeds of the sale (so far as they consist of capital sums) are less than the amount of the expenditure remaining unallowed,

there shall be made to him for the year of assessment relating to the basis period in which the event occurs a balancing allowance equal, if the event is the rights coming to an end, to the amount of the expenditure remaining unallowed, and, if the event is a sale, to the amount of the expenditure remaining unallowed less the net proceeds of the sale.

(6) Where a person to whom writing-down allowances have been made under this section in respect of any approved patent rights —

(a)

sells all or any part of those rights and the net proceeds of the sale (so far as they consist of capital sums) exceed the amount of the expenditure remaining unallowed, if any, there shall be made on him for the year of assessment relating to the basis period in which the sale occurs a charge (hereinafter in this section referred to as a balancing charge) on an amount equal to the excess or, where the amount of the expenditure remaining unallowed is nil, to the said net proceeds;

(b)

sells a part of those rights and paragraph (a) does not apply, the amount of any writing-down allowance made in respect of the capital expenditure incurred in acquiring the approved patent rights for the year of assessment relating to the basis period in which the sale occurs or any subsequent year of assessment shall be the amount arrived at by —

(i)	subtracting the net proceeds of the sale (so far as they consist of capital sums) from the amount of the expenditure remaining unallowed at the time of the sale; and
(ii)	dividing the result by the number of complete years of the writing-down period remaining at the beginning of the year of assessment relating to the basis period in which the sale occurs,

and so on for any subsequent sales.

(7) References in subsections (5) and (6) to the amount of any expenditure remaining unallowed shall, in relation to any event, be construed as references to the amount of that expenditure less any writing-down allowances made in respect thereof for the years of assessment before the year of assessment relating to the basis period in which the event occurs, and less also the net proceeds of any previous sale by the person who incurred the expenditure of any part of the rights acquired by the expenditure, so far as those proceeds consist of capital sums.

(8) Notwithstanding anything in subsection (6), the total amount on which a balancing charge is made in respect of any expenditure shall not exceed the total writing-down allowances actually made in respect of that expenditure, less, if a balancing charge has previously been made in respect of that expenditure, the amount on which that charge was made.

(9) Where a person to whom writing-down allowances have been made under this section in respect of any approved know-how disposes of the approved know-how, the amount or value of any consideration received by him for the disposal shall, so far as it is not chargeable to tax as a revenue or income receipt, be treated for all purposes as a trading receipt of the relevant trade or business.

(10) Where a person to whom writing-down allowances have been made under this section ceases to carry on the relevant trade or business, an allowance equal to the amount of the expenditure remaining unallowed in respect of the approved know-how or patent rights, as the case may be, shall be made to him in computing his income for the year of assessment relating to the basis period in which the cessation occurs.

(11) In this section —

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

“know-how” means any industrial information and techniques likely to assist in the manufacture or processing of goods or materials;

“patent rights” means the right to do or authorise the doing of anything which would, but for that right, be an infringement of a patent.

(12) For the purposes of this section —

(a)	any reference to the sale of part of patent rights includes a reference to the grant of a licence in respect of the patent in question, and any reference to the acquisition of patent rights includes a reference to the acquisition of a licence in respect of a patent;
(b)	any disposal or sale which occurs after the date on which the relevant trade or business permanently ceases, shall be deemed to have occurred immediately before the cessation.”.

Amendment of section 23

11. Section 23 of the principal Act is amended by deleting the words “or 20” in subsection (1) and substituting the words “, 19B or 20”.

Amendment of section 37

12. Section 37 of the principal Act is amended —

(a)

by deleting the word “or” at the end of sub-paragraph (vi) of paragraph (c) of subsection (2); and

(b)

by deleting the full-stop at the end of sub-paragraph (vii) of paragraph (c) of subsection (2) and substituting a semi-colon, and by inserting immediately thereafter the following sub-paragraphs: —

“(viii)	a charitable institution or a body of persons or a trust established for charitable purposes only; or
(ix)	an organisation not operated or conducted primarily for profit which is engaged in or connected with the promotion of culture or the arts or with the promotion of sports.”.

Amendment of section 39

13. Section 39 of the principal Act is amended —

(a)

by deleting the semi-colon at the end of paragraph (d) of subsection (2) and substituting a colon, and by inserting immediately thereafter the following proviso: —

“Provided that in the case of any unmarried child incapacitated from maintaining himself by reason of physical or mental infirmity whose income was not more than seven hundred and fifty dollars in that year and in respect of whom —

(i)	the deduction allowable under the Fifth Schedule to this Act is less than seven hundred and fifty dollars, the deduction shall be increased to seven hundred and fifty dollars;
(ii)	no deduction is allowable under the Fifth Schedule to this Act, there shall be allowed a deduction of seven hundred and fifty dollars;”; and

(b)

by deleting the full-stop at the end of paragraph (f) of subsection (2) and substituting a semi-colon, and by inserting immediately thereafter the following paragraph: —

“(g)

maintained any dependant living with him in the same household in Singapore —

(i)	who is his or his spouse’s brother or sister;
(ii)	who was incapacitated from maintaining himself by reason of physical or mental infirmity;
(iii)	whose income was not more than seven hundred and fifty dollars in that year; and
(iv)	in respect of whom no deduction has been claimed by another person under paragraph (d),

there shall be allowed in respect of each such dependant a deduction of seven hundred and fifty dollars; and where more than one individual is entitled to claim a deduction in respect of the same dependant the deduction shall be apportioned in such manner as appears to the Comptroller to be reasonable.”.

New section 43D

14. The principal Act is amended by inserting, immediately after section 43C, the following section: —

“Concessionary rate of tax for offshore gold transactions

43D.—(1) Notwithstanding section 43, the Minister may by regulations provide that tax at the rate of ten per cent or such other concessionary rate be levied and paid for each year of assessment upon such income as the Minister may specify of an approved member (but not an associate member) of the Gold Exchange of Singapore derived from transactions in gold bullion (as a broker or trading on its own account) in any gold exchange or market with —

(a)	an Asian Currency Unit of a financial institution;
(b)	another member (but not an associate member) of the Gold Exchange of Singapore;
(c)	a person who is neither a resident of nor a permanent establishment in Singapore; or
(d)	a branch office outside Singapore of a company resident in Singapore.

(2) In this section, “approved” means approved by the Minister or such person as he may appoint.”.

Amendment of section 68

15. Section 68 of the principal Act is amended —

(a)	by inserting, immediately after the word “individual” in the second line of subsection (5), the words “who is not a citizen of Singapore and”; and
(b)	by inserting, immediately after the word “intervals” in the last line of subsection (6), the words “or who is a citizen of Singapore”.

Amendment of section 76

16. Section 76 of the principal Act is amended by deleting the words “whose name appears on the assessment lists” in the third line of subsection (1) and substituting the words “assessed to tax”.

Amendment of section 106

17. Section 106 of the principal Act is amended by deleting the words “and Fourth” in subsection (3) and substituting the words “, Fourth and Sixth”.

Amendment of Second Schedule

18. The Second Schedule to the principal Act is amended by deleting Part A and substituting the following Part: —

“Part A

Rates of Income Tax on Chargeable Income
of An Individual or A Hindu Joint Family

Chargeable Income

Rate of Tax

For every dollar of the first

2,500

4 per cent

For every dollar of the next

2,500

7 per cent

For every dollar of the next

2,500

9 per cent

For every dollar of the next

2,500

11 per cent

For every dollar of the next

5,000

14 per cent

For every dollar of the next

5,000

17 per cent

For every dollar of the next

5,000

21 per cent

For every dollar of the next

10,000

26 per cent

For every dollar of the next

15,000

32 per cent

For every dollar of the next

25,000

34 per cent

For every dollar of the next

25,000

36 per cent

For every dollar of the next

100,000

40 per cent

For every dollar of the next

200,000

45 per cent

For every dollar of the next

200,000

50 per cent

For every dollar exceeding

600,000

55 per cent

”.

New Sixth Schedule

19. The principal Act is amended by inserting, immediately after the Fifth Schedule, the following Schedule: —

“SIXTH SCHEDULE

Section 19(2).

Item

Number of years of working life of asset

Aircraft

...

Bank Vaults

...

Building and Construction Equipment (including assets such as rollers, mixers, piling and drilling plants, loaders, dumpers, excavators, bull-dozers and support structure)

...

Cable Cars and Equipment

...

Cables and Related Assets

...

Containers used for the carriage of goods by any mode of transportation

...

Electric, Gas, Water and Steam, Utility Plant (including tanks and generators)

...

Electrical Equipment (including assets such as electrical and industrial apparatus, domestic and commercial appliances, airconditioning and ventilating equipment)

...

Electronic Equipment (including assets such as electronic detection, guidance, control, radiation, computation, test and navigation equipment)

...

10.

Equipment used in Personal and Professional Services (including assets used in the provision of personal and professional services which are not elsewhere classified)

...

11.

Farming Equipment

...

12.

Fire Safety Device

...

13.

Floating and Dry Docks

...

14.

Gas Cylinders

...

15.

Manufacturing and Industrial Processing Plant and Machinery

...

16.

Materials and Passenger Handling Equipment (including assets such as lifts, escalators, weighing machines, conveyor belts, forklifts, lifting gears, trolleys and cranes)

...

17.

Motion Picture Films

...

18.

Musical Instruments and Other Related Assets

...

19.

Office Equipment:

...

Furniture and Fixtures (including furniture and fixtures which are not a structural component of a building)

...

Data Handling Equipment (including typewriters, calculators, adding and accounting machines, copiers and duplicating equipment)

...

Telecommunication Equipment

...

20.

Plant for Recreation and Amusement Purposes (including assets used in the provision of entertainment services on payment of a fee or admission charge, as in the operation of bowling alleys, billiard and pool establishments, theatres, cinemas, concert halls, amusement parks and miniature golf courses)

...

21.

Railway Wagons, Lines and Related Equipment

...

22.

Transport Equipment:

...

Buses

...

Business Service Passenger Vehicles

...

Taxis

...

Trucks, Lorries, Trailers and Vans

...

Motorcycles and Bicycles

...

23.

Vessels, Barges, Tugs and similar Water Transportation Equipment

...

24.

Wholesale and Retail Trade Service Assets (including assets used in such activities as the operation of restaurants and cafes)

...

”.

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