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

Bill No. 26/1994

Read the first time on 31st October 1994.

An Act to amend the Economic Expansion Incentives (Relief from Income Tax) Act (Chapter 86 of the 1994 Revised Edition).

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

Short title and commencement

1.—(1) This Act may be cited as the Economic Expansion Incentives (Relief from Income Tax) (Amendment) Act 1994.

(2) Sections 3, 4, 5 and 13 shall be deemed to have come into operation on 1st January 1994.

(3) Sections 2 and 14 shall come into operation on 1st January 1995.

(4) Sections 6 to 12 shall have effect for the year of assessment 1994 and subsequent years of assessment.

Amendment of section 19F

2. Section 19F(7) of the Economic Expansion Incentives (Relief from Income Tax) Act (referred to in this Act as the principal Act) is amended by deleting the words “within 12 years after the end of that year of assessment” and substituting the words “subject to section 73 of the Income Tax Act”.

Repeal and re-enactment of section 22

3. Section 22 of the principal Act is repealed and the following section substituted therefor:

“Tax relief period of expanding enterprise

22.—(1) The tax relief period of an expanding enterprise shall —

(a)	commence on its expansion day; or
(b)	if the expansion day falls within the tax relief period specified in any certificate previously issued to the enterprise under Part II or Part VI for the same or similar product, commence on the day immediately following the expiry of that tax relief period,

and shall continue for such period, not exceeding 10 years, as the Minister may, in his discretion, determine.

(2) The Minister may, where he is satisfied that it is expedient in the public interest to do so and subject to such terms and conditions as he may impose, extend the tax relief period of an expanding enterprise for such further period or periods, not exceeding 5 years at any one time, as he may determine, except that the tax relief period of the expanding enterprise shall not in the aggregate exceed 20 years.”.

Repeal and re-enactment of section 27

4. Section 27 of the principal Act is repealed and the following section substituted therefor:

“Tax relief period of expanding service company

27.—(1) The tax relief period of an expanding service company shall —

(a)	commence on its expansion day; or
(b)	if the expansion day falls within the tax relief period specified in any certificate previously issued to the company for the same or similar qualifying activity under Part III, commence on the day immediately following the expiry of that tax relief period,

and shall continue for such period, not exceeding 10 years, as the Minister may, in his discretion, determine.

(2) The Minister may, where he is satisfied that it is expedient in the public interest to do so and subject to such terms and conditions as he may impose, extend the tax relief period of an expanding service company for such further period or periods, not exceeding 5 years at any one time, as he may determine, except that the tax relief period of the expanding service company shall not in the aggregate exceed 20 years.”.

Amendment of section 44C

5. Section 44C of the principal Act is amended —

(a)	by deleting the words “a period of 5 years” in subsection (1) and substituting the words “such period, not exceeding 10 years, as the Minister may, in his discretion, determine”; and
(b)	by deleting the words “thinks fit” in the last line of subsection (2) and substituting the words “may determine, except that the tax relief period of the export service company or firm shall not in the aggregate exceed 20 years”.

Amendment of section 59

6. Section 59 of the principal Act is amended —

(a)

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

“(1) Notwithstanding section 43(1)(b) of the Income Tax Act [Cap. 134], the Minister may, subject to subsection (3), if he is satisfied that it is expedient in the public interest to do so, by an endorsement to that effect on the approved foreign loan certificate, exempt from tax or authorise that tax at such concessionary rate as specified in the certificate be levied and paid upon any interest on an approved foreign loan payable to a foreign lender.”;

(b)

by deleting subsection (2); and

(c)

by deleting the words “subsection (2),” in the third line of subsection (3) and substituting the words “subsection (1)”.

Repeal of section 63

7. Section 63 of the principal Act is repealed.

Repeal and re-enactment of section 64

8. Section 64 of the principal Act is repealed and the following section substituted therefor:

“Reduction of tax for approved royalties, fees or contributions

64.—(1) Notwithstanding section 43(1)(b) of the Income Tax Act [Cap. 134], the Minister may, subject to subsection (2), if he is satisfied that it is expedient in the public interest to do so, by an endorsement to that effect on the approved royalties, fees or contributions certificate, exempt from tax or authorise that tax at such concessionary rate as specified in the certificate be levied and paid upon any approved royalties, fees or contributions received by a non-resident person.

(2) Where a company has contravened section 62(2) or any condition imposed by the Minister under section 61(3), the amount of tax which, but for subsection (1), would have been deductible by the company from the royalties, fees or contributions paid by it to the non-resident person under section 45A of the Income Tax Act shall be deemed to have been deducted from the royalties, fees and contributions and shall be a debt due from the company to the Government and shall, with the prior sanction of the Minister, be recoverable in the manner provided by section 90 of the Income Tax Act.”.

Amendment of section 66

9. Section 66(1) of the principal Act is amended —

(a)

by inserting, immediately after the definition of “approved project”, the following definitions:

“ “chargeable concessionary income” means concessionary income after deducting expenses, donations, allowances or losses allowable under the Income Tax Act [Cap. 134] against the concessionary income;

“chargeable normal income” means normal income after deducting expenses, donations, allowances or losses allowable under the Income Tax Act against the normal income;

“concessionary income” means income subject to tax at the concessionary rate of tax under section 43A, 43C, 43D, 43E, 43F, 43G, 43H, 43I, 43J, 43K or 43L of the Income Tax Act, as the case may be;

“concessionary investment allowance” means an investment allowance given to a company for an approved project from which the concessionary income of the company is derived;

“concessionary investment allowance account” means an account kept by a company for the purpose of calculating the amount of concessionary investment allowance granted under this Part;”;

(b)

by deleting the definition of “investment allowance account”;

(c)

by inserting, immediately after the definition of “investment day”, the following definitions:

“ “normal income” means income subject to tax at the rate of tax under section 43(1)(a) of the Income Tax Act;

“normal investment allowance” means an investment allowance given to a company for an approved project from which the normal income of the company is derived;

“normal investment allowance account” means an account kept by a company for the purpose of calculating the amount of normal investment allowance granted under this Part;”.

Amendment of section 69

10. Section 69 of the principal Act is amended by deleting subsection (2) and substituting the following subsections:

“(2) Where any investment allowance is given to a company for an approved project from which only normal income of the company is derived, the investment allowance shall be credited to an account to be called a “normal investment allowance account” which shall be kept by the company for the purposes of this Part.

(3) Where any investment allowance is given to a company for an approved project from which only concessionary income of the company is derived, the investment allowance shall be credited to an account to be called a “concessionary investment allowance account” which shall be kept by the company for the purposes of this Part.

(4) Where a company derives both normal income and concessionary income at the same time from an approved project, the investment allowance shall be credited wholly to the normal investment allowance account or wholly to the concessionary investment allowance account as the Minister, or such person as he may appoint, may direct.

(5) Notwithstanding section 71, as from the relevant date, where the income of a company which is derived from an approved project is subject to tax as concessionary income instead of as normal income —

(a)	subject to paragraph (d), any balance in the normal investment allowance account at the end of the basis period for the year of assessment before the transitional year shall only be used for deduction against the chargeable normal income of the company for the transitional year;
(b)	where the company has incurred any fixed capital expenditure before the relevant date, any investment allowance given to the company for the fixed capital expenditure shall be credited to the normal investment allowance account;
(c)	where the company has incurred any fixed capital expenditure on or after the relevant date, any investment allowance given to the company for the fixed capital expenditure shall be credited to the concessionary investment allowance account; and
(d)	the normal investment allowance account for the transitional year shall be debited with the amount of chargeable normal income for the transitional year not exceeding the credit in that account; and any remaining balance in that account for that year shall be debited from that account and credited to the concessionary investment allowance account for use against the chargeable concessionary income of the company for the transitional year and subsequent years of assessment.

(6) Notwithstanding section 71, as from the relevant date, where the income of a company which is derived from an approved project is subject to tax as normal income instead of as concessionary income —

(a)	subject to paragraph (d), any balance in the concessionary investment allowance account at the end of the basis period for the year of assessment before the transitional year shall only be used for deduction against the chargeable concessionary income of the company for the transitional year;
(b)	where the company has incurred any fixed capital expenditure before the relevant date, any investment allowance given to the company for the fixed capital expenditure shall be credited to the concessionary investment allowance account;
(c)	where the company has incurred any fixed capital expenditure on or after the relevant date, any investment allowance given to the company for the fixed capital expenditure shall be credited to the normal investment allowance account; and
(d)	the concessionary investment allowance account for the transitional year shall be debited with the amount of chargeable concessionary income for the transitional year not exceeding the credit in that account; and any remaining balance in that account for that year shall be debited from that account and credited to the normal investment allowance account for use against the chargeable normal income of the company for the transitional year and subsequent years of assessment.

(7) Notwithstanding section 71(4), where the Comptroller is satisfied that a company has permanently ceased to derive any concessionary income in the basis period for any year of assessment —

(a)

the concessionary investment allowance account shall be debited with the amount of chargeable concessionary income of the company for that year of assessment not exceeding the credit in that account;

(b)

any remaining balance in the concessionary investment allowance account shall be debited from that account; and

(c)

an adjusted amount of any remaining balance referred to in paragraph (b) shall be credited to the normal investment allowance account for use against the chargeable normal income of the company for that year of assessment and subsequent years of assessment, and for this purpose

“adjusted amount” means the amount ascertained in accordance with the formula

where A

is the amount of any remaining balance referred to in paragraph (b);

is the concessionary rate of tax for that year of assessment at which the concessionary income is subject to tax; and

is the rate of tax under section 43(1)(a) of the Income Tax Act [Cap. 134] for that year of assessment.

(8) In this section —

“relevant date” means the date in the basis period relating to any transitional year on which the income of an approved project is subject to tax as concessionary income instead of as normal income, or vice versa;

“transitional year” means any year of assessment relating to the basis period in which the income of an approved project is from the relevant date subject to tax as concessionary income instead of as normal income, or vice versa.

(9) As from the date of commencement of the Economic Expansion Incentives (Relief from Income Tax) (Amendment) Act 1994 —

(a)	any remaining balance in the investment allowance account kept by a company at the end of the basis period relating to the year of assessment 1993 in respect of an approved project from which normal income of the company is derived shall be transferred to the normal investment allowance account; and
(b)	any remaining balance in the investment allowance account kept by a company at the end of the basis period relating to the year of assessment 1993 in respect of an approved project from which concessionary income of the company is derived shall be transferred to the concessionary investment allowance account.”.

Amendment of section 70

11. Section 70 of the principal Act is amended by deleting subsection (2) and substituting the following subsections:

“(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 asset in respect of which an investment allowance has been given, an amount equal to the aggregate of the investment allowance given in respect of that asset shall be recovered in the following manner:

(a)

where the investment allowance given had been credited to the normal investment allowance account —

(i)	the amount shall be deducted from that account; and
(ii)	where that 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 53 (as made applicable by section 72), shall be debited accordingly; and

(b)

where the investment allowance given had been credited to the concessionary investment allowance account —

(i)	the amount shall be deducted from that account; and
(ii)	where that 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 53 (as made applicable by section 72), shall be debited accordingly.

(3) Notwithstanding subsection (2), the Minister may waive wholly or partly the recovery of the investment allowance.”.

Repeal and re-enactment of section 71

12. Section 71 of the principal Act is repealed and the following section substituted therefor:

“Exemption from income tax

71.—(1) Subject to subsection (2), where for any year of assessment a normal investment allowance account of a company is in credit and the company has for that year of assessment any chargeable normal income —

(a)	an amount of the chargeable normal income, not exceeding the credit in the normal investment allowance account, shall be exempt from tax and the normal investment allowance account shall be debited with such amount; and
(b)	any remaining balance in the normal 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 normal income, and so on for subsequent years of assessment until the credit in the normal investment allowance account has been fully used.

(2) Where, for any year of assessment, a company has any chargeable concessionary income and the normal investment allowance account is in credit, the company may elect for any amount of the chargeable concessionary income, not exceeding the credit in the normal investment allowance account, to be exempt from tax and the normal investment allowance account to be debited with such amount.

(3) A company shall make the election under subsection (2) for any year of assessment at the time of lodgment of the return of income for that year of assessment, except that the election for the year of assessment 1994 shall be made before 1st April 1995.

(4) Where, for any year of assessment, a concessionary investment allowance account of a company is in credit and the company has for that year of assessment any chargeable concessionary income —

(a)	an amount of the chargeable concessionary income, not exceeding the credit in the concessionary investment allowance account, shall be exempt from tax and the concessionary investment allowance account shall be debited with such amount; and
(b)	any remaining balance in the concessionary 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 concessionary income, and so on for subsequent years of assessment until the credit in the concessionary investment allowance account has been fully used.

(5) Any amount of chargeable normal income of a company debited from the normal investment allowance account under section 69(5)(d) or any amount of chargeable concessionary income of a company debited from the concessionary investment allowance account under section 69(6)(d) or (7)(a) shall be exempt from tax.”.

Repeal and re-enactment of section 77

13. Section 77 of the principal Act is repealed and the following section substituted therefor:

“Tax relief period of warehousing company or servicing company

77.—(1) The tax relief period of a warehousing company or a servicing company shall commence on its commencement day and shall continue for such period, not exceeding 10 years, as the Minister may, in his discretion, determine.

(2) The Minister may, where he is satisfied that it is expedient in the public interest to do so and subject to such terms and conditions as he may impose, extend the tax relief period of any warehousing company or servicing company for such further period or periods, not exceeding 5 years at any one time, as he may determine, except that the tax relief period of the warehousing company or servicing company shall not in the aggregate exceed 20 years.”.

Miscellaneous amendments

14. The principal Act is amended —

(a)

by deleting the words “at any time within 12 years from the date of any such direction or revocation” in the following provisions and substituting in each case the words “subject to section 73 of the Income Tax Act [Cap. 134]”:

Sections 14(6) and 97;

(b)

by deleting the words “at any time within 12 years of the date of any such direction or revocation” in the following provisions and substituting in each case the words “subject to section 73 of the Income Tax Act [Cap. 134]”:

Sections 25(6), 40(6) and 97Q(6);

(c)

by deleting the words “at any time within 12 years from the date of the direction or revocation” in the following provisions and substituting in each case the words “subject to section 73 of the Income Tax Act [Cap. 134]”:

Sections 54, 83 and 91; and

(d)

by deleting the words “at any time within 12 years from the date of the revocation” in the following provisions and substituting in each case the words “subject to section 73 of the Income Tax Act [Cap. 134]”:

Sections 73, 97F and 97G(11).

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