Income Tax (Amendment) Bill

Bill No. 25/1986

Read the first time on 27th October 1986.

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) Act 1986.

(2) Section 12(a) shall be deemed to have come into operation on 1st January 1986.

(3) Sections 4, 6, 7, 8(a), 9, 15 and 16 shall have effect for the year of assessment 1987 and subsequent years of assessment.

Amendment of section 2

2. Section 2 of the Income Tax Act (referred to in this Act as the principal Act) is amended by deleting the definition of “prescribed” and substituting the following definition:

“ “prescribed” means prescribed by rules or regulations made under this Act;”.

New section 13C

3. The principal Act is amended by inserting, immediately after section 13B, the following section:

“Exemption of income of nonresident arising from funds managed by Asian Currency Unit

13C.—(1) There shall be exempt from tax such income as the Minister may by regulations prescribe of a person not resident in Singapore arising from 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.

(2) The Minister may apply any regulations made under subsection (1) to income derived after 1st May 1983.”.

Amendment of section 14

4. Section 14(1)(e) of the principal Act is amended —

(a)

by deleting paragraph (i) of the proviso and substituting the following paragraphs:

“(i)

a deduction for any such contributions for any period commencing on or after 1st April 1986 by the employer in respect of the employee shall not exceed the prescribed amount; and in this paragraph “prescribed amount” means the amount of contributions prescribed to be payable by the employer in respect of the employee under the Central Provident Fund Act (Cap. 121) which is not recoverable from the employee, and in relation to any fund or society other than the Central Provident Fund the equivalent amount that would have been so payable if the contributions had been made to the Central Provident Fund;

(ii)

where the employer has made such contributions to more than one approved fund or society, the total deduction shall not exceed the prescribed amount in respect of one fund;”; and

(b)

by renumbering the existing paragraph (ii) of the proviso as paragraph (iii).

Amendment of section 35

5. Section 35 of the principal Act is amended by inserting, immediately after subsection (2), the following subsection:

“(2A) Notwithstanding any other provisions of this Act, where any dividend derived from Singapore by any person is assessed to tax on a basis period ending on a date other than 31st December, any such dividend derived during the period from 1st January 1985 to 31st December 1985 shall be treated as his statutory income for the year of assessment 1986 and be charged to tax at the rate applicable to him for that year of assessment.”.

Amendment of section 37

6. Section 37 of the principal Act is amended —

(a)

by inserting, immediately after paragraph (a) of subsection (2), the following paragraph:

“(b)	an amount equivalent to the value, to be determined by the Minister, of any gift made to the National Museum in the year preceding the year of assessment which has been approved by the Minister;”;

(b)

by deleting the words “, not exceeding the statutory income, if any, remaining after the deduction authorised by paragraph (a) has been made,” in subsection (2)(c); and

(c)

by inserting, immediately after subsection (2), the following subsection:

“(2A) A deduction under this section to any person in respect of any sum allowable under subsection (2)(b) and (c) shall only be allowed to the extent that it is not in excess of the statutory income, if any, remaining after the deduction authorised by subsection (2)(a).”.

Amendment of section 39

7. Section 39 (2) of the principal Act is amended by inserting, immediately after paragraph (e), the following paragraph:

“(ea)

has carried on a trade, business, profession or vocation and has made contributions to the Central Provident Fund on his own account, there shall be allowed a deduction, in respect of such contributions made on or after 1st August 1986, of an amount not exceeding 10% of his assessable income for that year of assessment derived from such trade, business, profession or vocation or $7,200 whichever is the less:

Provided that —

(i)	where the contributions to any approved pension or provident fund or society under paragraph (e) and this paragraph do not exceed $5,000, the total deductions allowable under paragraph (e) and this paragraph shall not exceed $5,000, and where such contributions exceed $5,000 no deduction shall be allowed in respect of premiums for life insurance;
(ii)	the total deductions allowable under paragraph (e) and this paragraph in respect of contributions to any approved pension or provident fund or society shall not exceed $7,200 where the deduction allowable under paragraph (e) is less than $7,200 in respect of such contributions;
(iii)	no deduction shall be allowed under this paragraph where a deduction of $7,200 or more has been allowed under paragraph (e) in respect of contributions to any approved pension or provident fund or society;”.

Amendment of section 42

8. Section 42 of the principal Act is amended —

(a)

by deleting “40%” wherever it appears in subsection (2) and substituting in each case “33%”; and

(b)

by deleting subsection (3) and substituting the following subsection:

“(3) The tax payable by any individual or Hindu joint family resident in Singapore shall be reduced —

(a)	for the year of assessment 1986 by 10% of the tax payable on the first $10,000 of the chargeable income; and
(b)	for the year of assessment 1987 and subsequent years of assessment by 15% of the tax payable on the first $10,000 of the chargeable income.”.

Amendment of section 43

9. Section 43 of the principal Act is amended by deleting “40%” wherever it appears and substituting in each case “33%”.

Amendment of section 43A

10. The principal Act is amended by renumbering section 43A as subsection (1) of that section, and by inserting immediately thereafter the following subsection:

“(2) The Minister may extend the application of any regulations made under this section to any fund manager approved by him or such other person as he may appoint.”.

New section 43E

11. The principal Act is amended by inserting, immediately after section 43D, the following section:

“Concessionary rate of tax for headquarters company

43E.—(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 headquarters company derived by it on or after 1st September 1986 from the provision of such qualifying services as may be prescribed to its offices, associated companies and other persons where such offices, associated companies and persons 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 headquarters company —

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

(3) For the purposes of this section —

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

“associated company”, in relation to an approved headquarters company, means a company —

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

Provided that a company shall be deemed to be an associated company in relation to an approved headquarters company if —

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

“headquarters company” means a company carrying on the business in Singapore of providing management, technical or other supporting services to its offices outside Singapore or to its associated companies outside Singapore.”.

Amendment of section 44

12. Section 44 of the principal Act is amended —

(a)

by deleting “40%” in subsection (1) and substituting “33%”; and

(b)

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

“(6A) Notwithstanding anything in this Act, where tax on any dividend paid in 1986 has been deducted at the rate of 40% —

(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 33% 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 40% from such dividend and the amount deemed to have been so deducted under paragraph (a) shall be carried forward as a balance in accordance with subsection (5).”.

Amendment of section 45

13. Section 45 of the principal Act is amended —

(a)

by deleting “40%” wherever it appears in subsection (1) and substituting in each case “33%”; and

(b)

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

“(7) Notwithstanding subsection (1), tax shall be deducted at the rate of 40% on every dollar of every payment made on or after 1st January 1986 which would be assessable for any year of assessment before the year of assessment 1987 on the person receiving the payment.”.

Amendment of section 46

14. The principal Act is amended by renumbering section 46 as subsection (1) of that section, and by inserting immediately thereafter the following subsection:

“(2) Notwithstanding subsection (1), where tax on any dividend paid in 1986 has been deducted at the rate of 40% 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(6A).”.

Amendment of section 50

15. Section 50(3) of the principal Act is amended by deleting “40%” wherever it appears and substituting in each case “33%”.

Amendment of Second Schedule

16. The principal Act is amended by deleting Part A of the Second Schedule 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

5,000

3.5%

For every dollar of the next

2,500

6.0%

For every dollar of the next

7,500

8.0%

For every dollar of the next

5,000

9.0%

For every dollar of the next

5,000

12.0%

For every dollar of the next

10,000

14.0%

For every dollar of the next

15,000

17.0%

For every dollar of the next

25,000

21.0%

For every dollar of the next

25,000

24.0%

For every dollar of the next

50,000

26.0%

For every dollar of the next

50,000

28.0%

For every dollar of the next

200,000

31.0%

For every dollar exceeding

400,000

33.0%

”.

Remission of tax

17. There shall be remitted 25% of the tax payable for the year of assessment 1986 by an individual or Hindu joint family resident in Singapore and the amount of such remission shall be determined by the Comptroller.

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