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

Bill No. 26/1970

Read the first time on 26th June 1970.

An Act to amend the Economc Expansion Incentives (Relief from Income Tax) Act, 1967 (No. 36 of 1967).

Be it enacted by the President with the advice and consent of the Parliament of Singapore, as follows: —

Short title, commencement and application

1.—(1) This Act may be cited as the Economic Expansion Incentives (Relief from Income Tax) (Amendment) Act, 1970, and shall come into operation on such date as the Minister may, by notification in the Gazette, appoint.

(2) This Act shall not apply to any certificate issued under the Economic Expansion Incentives (Relief from Income Tax) Act, 1967, prior to the date of the coming into operation of this Act.

Amendment of section 2

2. Section 2 of the Economic Expansion Incentives (Relief from Income Tax) Act, 1967 (hereinafter in this Act referred to as the “principal Act”) is hereby amended by inserting immediately after the word “shall” appearing in the first line thereof the expression “, unless otherwise expressly provided for in this Act,”.

Amendment of section 3

3. Subsection (1) of section 3 of the principal Act is hereby amended by deleting paragraph (a) of the definition of “royalties or technical assistance fees” appearing therein and substituting therefor the following: —

“(a)	any royalties, rentals or other amounts paid as consideration for the use of, or the right to use, copyrights, scientific works, patents, designs, plans, secret processes, formulae, trademarks licences or other like property or rights;”.

Amendment of section 5

4. Section 5 of the principal Act is hereby amended —

(a)

by inserting immediately after the word “company” appearing in the first line of subsection (1) thereof the words “which has incurred or is intending to incur a fixed capital expenditure of not less than one million dollars and”; and

(b)

by inserting immediately after subsection (4) thereof the following new subsection: —

“(5) For the purposes of subsection (1) of this section, “fixed capital expenditure” means capital expenditure which has been or is intended to be incurred by the pioneer enterprise, in connection with its pioneer product, on its factory building (excluding land) in Singapore, and on any new plant or new machinery used in Singapore and, subject to the approval of the Minister, on any second-hand plant or second-hand machinery used in Singapore.”.

Repeal and re-enactment of section 6

5. Section 6 of the principal Act is hereby repealed and the following substituted therefor: —

“Tax relief period of pioneer enterprise

6. The tax relief period of a pioneer enterprise shall commence on its production day and shall continue for a period of five years.”.

Amendment of section 8

6. Section 8 of the principal Act is hereby amended by deleting subsection (3) thereof.

Repeal and re-enactment of section 10

7. Section 10 of the principal Act is hereby repealed and the following substituted therefor: —

“Ascertainment of income in respect of old trade or business

10.—(1) The income of a pioneer enterprise in respect of its old trade or business shall be ascertained in accordance with the provisions of the Income Tax Ordinance (Cap. 166) after making such adjustments as may be necessary in consequence of any direction given under section 9 of this Act:

Provided that in determining the income of the pioneer enterprise, the allowances provided for in sections 16, 17, 18, 19, 20, 21 and 22 of the Income Tax Ordinance shall be taken into account notwithstanding that no claim for such allowances has been made:

And provided further that 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, then the balance of the allowances shall be added to, and be deemed to form part of, the corresponding allowances, if any, for the next succeeding year of assessment, and, if no such corresponding allowances fall to be made for that year, shall be deemed to constitute the corresponding allowances for that year, and so on for subsequent years of assessment.

(2) Notwithstanding the provisions of subsection (1) of this section, where a pioneer enterprise has incurred or is intending to incur a fixed capital expenditure of —

(a)

not less than one thousand million dollars; or

(b)

not less than one hundred and fifty million dollars but less than one thousand million dollars, and —

(i)	more than fifty per centum of the paid-up capital of the pioneer enterprise is held by persons permanently resident in Singapore; and
(ii)	in the opinion of the Minister the pioneer enterprise will promote or enhance the economic or technological development of Singapore,

and where in either case an asset is used for the purposes of the new trade or business of the pioneer enterprise, any capital expenditure incurred by the pioneer enterprise in respect of such asset within its tax relief period shall, for the purposes of sections 16, 17, 18, 19, 19A, 20, 21 and 22 of the Income Tax Ordinance, be deemed to have been incurred on the day immediately following the last day of its tax relief period:

Provided that where the carrying on of a separate trade or business has been permitted under subsection (1) of section 8 of this Act, and an industrial building, plant or machinery is used both for the purposes of that trade or business and the trade or business relating to the relevant pioneer product, the provisions of this subsection shall apply to such building, plant or machinery:

And provided further that where a pioneer enterprise is the holder of two pioneer certificates in respect of different periods of time, and capital expenditure has been incurred in respect of any industrial building, plant or machinery which is jointly used in carrying on the trade or business of the two pioneer industries, no deduction shall be made in respect of such expenditure under any of the provisions contained in sections 16, 17, 18, 19, 19A, 20, 21 and 22 of the Income Tax Ordinance (Cap. 166) until after the expiration of the tax relief period which is later in time.

(3) For the purposes of subsection (2) of this section, “fixed capital expenditure” shall have the same meaning as is assigned to that expression in subsection (5) of section 5 of this Act.”.

Repeal and re-enactment of section 12

8. Section 12 of the principal Act is hereby repealed and the following substituted therefor: —

“Comptroller to issue statement of income

12. For each year of assessment the Comptroller shall issue to the pioneer enterprise a statement showing the amount of income for that year of assessment, and Parts XI and XII of the Income Tax Ordinance (Cap. 166) (relating to objections and appeals), and of any rules made thereunder, shall apply, mutatis mutandis, as if such statement were a notice of assessment given under those provisions.”.

Amendment of section 14

9. Section 14 of the principal Act is hereby amended —

(a)

by substituting a colon for the full-stop appearing at the end of subsection (3) thereof and by inserting immediately thereafter the following proviso: —

“Provided that where the dividend is paid on any share of a preferential nature, it shall not be so exempt in the hands of the shareholder.”; and

(b)

by substituting a colon for the full-stop appearing at the end of subsection (9) thereof and by inserting immediately thereafter the following proviso: —

“Provided that any holding company may, with the approval of the Minister and subject to such conditions as he may impose, pay such exempt dividends to its shareholders even if it has not held the requisite shareholding in the pioneer enterprise for the whole of the tax relief period.”.

Repeal and re-enactment of section 15

10. Section 15 of the principal Act is hereby repealed and the following substituted therefor: —

“Carry forward of loss and allowance

15.—(1) Where a pioneer enterprise has, during its tax relief period, incurred a loss for any year, such loss shall be available as a deduction as provided for in subsection (2) of section 37 of the Income Tax Ordinance (Cap. 166) but only against the income of the pioneer enterprise as ascertained under section 10 of this Act.

(2) Notwithstanding the provisions of paragraph (a) of section 7 of this Act, the balance of any allowance as provided for in section 10 of this Act which remains unabsorbed at the end of the tax relief period of the pioneer enterprise shall be available to the new trade or business.”.

Amendment of section 17

11. Subsection (1) of section 17 of the principal Act is hereby deleted and the following substituted therefor: —

“(1) Any company intending to incur new capital expenditure for the purpose of the manufacture or increased manufacture of an approved product may, where such expenditure exceeds ten million dollars, make an application in writing to the Minister to be approved as an expanding enterprise, in such form and with such particulars as may be prescribed.”.

Repeal and re-enactment of section 18

12. Section 18 of the principal Act is hereby repealed and the following substituted therefor: —

“Tax relief period of expanding enterprise

18. The tax relief period of an expanding enterprise shall begin on the first day of the accounting period commencing on or after its expansion day or, at its option, on the first day of the accounting period in which the expansion day falls and shall continue for such period, not exceeding five years, as the Minister may, in his discretion, determine.”.

New section 18A

13. The principal Act is hereby amended by inserting immediately after section 18 thereof the following new section: —

“Application of section 9 to expanding enterprise

18A. Section 9 of this Act shall apply, mutatis mutandis, to an expanding enterprise as it applies to a pioneer enterprise.”.

Amendment of section 19

14. Section 19 of the principal Act is hereby amended —

(a)

by deleting subsection (2) thereof and substituting therefor the following: —

“(2) The income of the expanding enterprise in respect of its trade or business to which its expansion certificate relates (hereinafter in this Part referred to as the “expansion income”) shall be ascertained, for any accounting period during its tax relief period, in accordance with the provisions of the Income Tax Ordinance (Cap. 166):

Provided that in determining the income of the expanding enterprise, the allowances provided for in sections 16, 17, 18, 19, 19A, 20, 21 and 22 of the Income Tax Ordinance shall be taken into account notwithstanding that no claim for such allowances has been made.”; and

(b)

by deleting subsections (5) and (6) thereof and substituting therefor the following: —

“(5) The expansion income so ascertained shall be compared with the corresponding income of the expanding enterprise for the accounting period immediately preceding the tax relief period (hereinafter in this Part referred to as the “pre-relief income”) and relief shall be given to the following extent: —

(a)

where the pre-relief income equals or exceeds the expansion income, no relief shall be given;

(b)

where the expansion income exceeds the pre-relief income, the amount of excess shall not form part of the statutory income of the expanding enterprise for any year of assessment and shall be exempt from tax:

Provided that the amount of exempt income shall not, unless the Minister in his discretion otherwise decides, exceed the sum which bears the same proportion to the expansion income as the new capital expenditure on productive equipment bears to the total of such new capital expenditure and the value at original cost of the productive equipment owned or used by the expanding enterprise prior to its expansion.

(6) Where an expanding enterprise has been approved as a pioneer enterprise or as an export enterprise or as both, the total amount of income exempted under this section and Part II or Part IV of this Act shall not exceed one hundred per centum of the expansion income.”.

New section 19A

15. The principal Act is hereby amended by inserting immediately after section 19 thereof the following new section: —

“Exemption from income tax of dividends from expanding enterprise

19A.—(1) As soon as any amount of expansion income has become exempted under the provisions of section 19 of this Act, such amount shall be credited to an account to be kept by the expanding enterprise for the purposes of this section.

(2) Where such account is in credit at the date on which any dividends are paid by the expanding enterprise out of income which has been exempted, an amount equal to such dividends or to such credit, whichever is the less, shall be debited to such account.

(3) So much of the amount of any dividends so debited to such account as are received by a shareholder in the expanding enterprise shall, if the Comptroller is satisfied with the entries in such account, be exempt from tax in the hands of such shareholder:

Provided that where the dividend is paid on any share of a preferential nature, it shall not be so exempt in the hands of the shareholder.

(4) Any dividends debited to such account shall be treated as having been distributed to the shareholders of the expanding enterprise or any particular class of such shareholders in the same proportions as such shareholders were entitled to payment of the dividends giving rise to the debit.

(5) The expanding enterprise shall deliver to the Comptroller a copy of such 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 such account.

(6) Notwithstanding the provisions of section 19 of this Act and the foregoing provisions of this section, where it appears to the Comptroller that —

(a)	any amount of exempted income of an expanding enterprise; or
(b)	any dividend exempted in the hands of any shareholder, including any dividend paid by a holding company to which subsection (9) of this section applies,

ought not to have been exempted by reason of a direction under section 9 of this Act (as applied to this Part by section 18A of this Act) or the revocation under section 46 of this Act of an expansion certificate issued to such expanding enterprise, the Comptroller may, at any time within twelve years of the date of any such direction or revocation —

(i)	make such assessment or additional assessment upon the expanding enterprise or any such shareholder as may appear to be necessary in order to counteract any profit obtained from any such amount; or
(ii)	direct such expanding enterprise to debit its account, kept in accordance with subsection (1) of this section, with such amount as the circumstances require.

(7) Parts XI and XII of the Income Tax Ordinance (Cap. 166) (relating to objections and appeals), and of any rules made thereunder, shall apply, mutatis mutandis, to any direction given under subsection (6) of this section as if it were a notice of assessment given under those provisions.

(8) Section 44 of the Income Tax Ordinance shall not apply in respect of any dividend or part thereof which is debited to the account required to be kept for the purposes of this section.

(9) Where an amount has been received by way of dividend from an expanding enterprise by a shareholder and such amount is exempt from tax under this section, if that shareholder is a company (in this section referred to as the “holding company”) which holds, at the time any dividend is declared, the beneficial interest in all the issued shares of the expanding enterprise (or in not less than such proportion of those shares as the Minister may require at the time when the expansion certificate is issued to that expanding enterprise), any dividends paid on or after the 1st day of January 1970, by the holding company to its shareholders, to the extent that the Comptroller is satisfied that those dividends are paid out of such amount, shall be exempt from tax in the hands of those shareholders; and section 44 of the Income Tax Ordinance shall not apply in respect of any dividend or part thereof so exempt.”.

Repeal and re-enactment of section 23

16. Section 23 of the principal Act is hereby repealed and the following substituted therefor: —

“Tax relief period

23.—(1) Except as provided in subsection (2) of this section, the tax relief period of an export enterprise shall —

(a)	where the export enterprise is not a pioneer enterprise, commence from its export year and continue for a period of five years inclusive of such export year; and
(b)	where the export enterprise is a pioneer enterprise, commence from its export year or, if the export year falls within the period of its old trade or business, from the commencement of its new trade or business, and shall continue for such period as together with its tax relief period as a pioneer enterprise will extend in the aggregate to eight years.

(2) Notwithstanding the provisions of subsection (1) of this section, where an export enterprise has incurred or is intending to incur a fixed capital expenditure of —

(a)

not less than one thousand million dollars; or

(b)

not less than one hundred and fifty million dollars but less than one thousand million dollars, and —

(i)	more than fifty per centum of the paid-up capital of the export enterprise is held by persons permanently resident in Singapore; and
(ii)	in the opinion of the Minister the export enterprise will promote or enhance the economic or technological development of Singapore,

its tax relief period shall —

(A)	where the export enterprise is not a pioneer enterprise, commence from its export year and continue for a period of fifteen years inclusive of such export year; and
(B)	where the export enterprise is a pioneer enterprise, commence from its export year or, if the export year falls within the period of its old trade or business, from the commencement of its new trade or business, and shall continue for such period as together with its tax relief period as a pioneer enterprise will extend in the aggregate to fifteen years.

(3) The Minister may, where he is satisfied that it is expedient in the public interest to do so, extend the tax relief period of any export enterprise for such further period as he thinks fit.

(4) For the purposes of subsection (2) of this section, “fixed capital expenditure” means capital expenditure which has been or is intended to be incurred by the export enterprise, in connection with its export product, on its factory building (excluding land) in Singapore, and on any new plant or new machinery used in Singapore and, subject to the approval of the Minister, on any second-hand plant or second-hand machinery used in Singapore.”.

Amendment of section 28

17. Subsections (3), (4) and (5) of section 28 of the principal Act are hereby deleted and the following substituted therefor: —

“(3) Where a company exports any products or produce to which its export enterprise certificate relates, the amount of its export profit arising from the export of such products or produce which will qualify for the relief provided by section 30 of this Act shall be the excess of such profit over a fixed sum to be determined in the following manner: —

(a)

in the case of a company which has previously exported such products or produce, the average annual export profit of the company shall be ascertained in the manner provided by subsection (4) of this section; and

(b)

in the case of a company which has not prior to its application under section 21 of this Act exported such products or produce for three years immediately preceding its application, the fixed sum shall be such an amount as the Minister may determine having regard to the total sales of such company and the percentage of the total sales of other major export enterprises exporting like articles:

Provided that where such a company is a pioneer enterprise, this subsection shall apply notwithstanding that such company was deemed to commence a new trade or business at the end of its tax relief period as a pioneer enterprise.

(4) For the purposes of this section, “average annual export profit” means a sum equal to one-third of the total export profits of the company from the export of such products or produce ascertained in the manner provided by subsection (2) of this section during the three years immediately preceding the date of its application under section 21 of this Act:

Provided that where the company concerned has adopted an accounting period ending on a date other than 31st December, the Comptroller may make such adjustment on a time basis as appears to him to be reasonable in ascertaining the total export profits of such period.”.

Amendment of section 29

18. Subsection (1) of section 29 of the principal Act is hereby amended —

(a)	by inserting immediately after the semicolon appearing at the end of paragraph (b) thereof the word “and”;
(b)	by deleting the expression “; and” appearing at the end of paragraph (c) thereof and substituting therefor a full-stop; and
(c)	by deleting paragraph (d) thereof.

Amendment of section 31

19. Subsection (3) of section 31 of the principal Act is hereby amended by substituting a colon for the full-stop appearing at the end thereof and by inserting immediately thereafter the following proviso: —

“Provided that where the dividend is paid on any share of a preferential nature, it shall not be so exempt in the hands of the shareholder.”.

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