Income Tax (Amendment) Bill

Bill No. 28/1995

Read the first time on 7th August 1995.

An Act to amend the Income Tax Act (Chapter 134 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 Income Tax (Amendment) Act 1995.

(2) Sections 7(c), 8 and 25 shall be deemed to have come into operation on 1st March 1995.

(3) Sections 3(a), 7(b), 17, 22 and 24 shall have effect for the year of assessment 1995 and subsequent years of assessment.

(4) Sections 2, 3(b), 4, 6, 7(a), 12, 13, 14, 15, 18, 19, 20, 21 and 23 shall have effect for the year of assessment 1996 and subsequent years of assessment.

Amendment of section 2

2. Section 2(1) of the Income Tax Act (referred to in this Act as the principal Act) is amended by deleting the definition of “employee” and substituting the following definition:

“ “employee” —

(a)	in relation to a company, includes a director of the company; and
(b)	in relation to a statutory board, includes the chairman and any member of the statutory board,

and “employer” and other cognate expressions shall be construed accordingly;”.

Amendment of section 10

3. Section 10 of the principal Act is amended —

(a)

by deleting paragraphs (a) and (b) of subsection (4) and substituting the following paragraphs:

“(a)

a Singapore ship which is owned by a shipping enterprise within the meaning of section 13A at the time the balancing charge falls to be made in respect of the Singapore ship, but only up to the amount ascertained in accordance with the formula

where A

is the amount of allowances under section 19 made to the enterprise in respect of the Singapore ship against any income exempt from tax under section 13A;

is the total amount of allowances under section 19 or 19A which have been made in respect of the ship during the period it is owned by the enterprise; and

is the amount of balancing charge;

(b)

a foreign ship the income derived from the operation of which would be income of an approved international shipping enterprise within the meaning of section 13F, but only up to the amount ascertained in accordance with the formula

where X

is the amount of allowances under section 19 or 19A made to the enterprise in respect of the foreign ship against any income exempt from tax under section 13F;

is the total amount of allowances under section 19 or 19A which have been made in respect of the ship during the period it is owned by the enterprise; and

is the amount of balancing charge.

”;

(b)

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

“(11A) Any distribution made by a designated unit trust to any unit holder out of —

(a)	gains or profits derived from Singapore or elsewhere from the disposal of securities;
(b)	interest (other than interest for which tax has been deducted under section 45); and
(c)	dividends derived from outside Singapore and received in Singapore,

which do not form part of the statutory income of the designated unit trust by virtue of section 35(7A) shall, subject to subsection (11B), be deemed to be income of the unit holder if he is not a foreign investor.

(11B) Where any distribution made out of gains or profits referred to in subsection (11A)(a) is made to a unit holder who is an individual resident in Singapore, only an amount equal to 10% of the distribution shall be deemed to be income of that unit holder.

(11C) Where a designated unit trust had also been approved under section 10B, any distribution made by the designated unit trust out of any income (including gains or profits from the disposal of securities) derived by it during the period the designated unit trust was approved under section 10B shall be treated as income of a unit holder in accordance with sections 10(11) and 35 (7) and (8).

(11D) For the purpose of subsections (11A), (11B) and (11C) —

“designated unit trust” means any unit trust designated under section 35(7C);

“foreign investor” —

(a)

in relation to an individual, means an individual who is not resident in Singapore;

(b)

in relation to a company, means a company which is not resident in Singapore and —

(i)	in the case of a company with not more than 50 shareholders, the whole of its issued capital is beneficially owned, directly or indirectly, by persons who are not citizens of Singapore and not resident in Singapore; and
(ii)	in the case of a company with more than 50 shareholders, not less than 80% of its issued capital is beneficially owned, directly or indirectly, by persons who are not citizens of Singapore and not resident in Singapore; and

(c)

in relation to a trust fund, means a trust fund where at least 80% of the value of the fund is beneficially held, directly or indirectly, by foreign investors referred to in paragraph (a) or (b) and, unless waived by the Minister or such other person as he may appoint, where —

(i)	the fund is created outside Singapore; and
(ii)	the trustees of the fund are neither citizens of Singapore nor resident in Singapore.”; and

(c)

by inserting, immediately after subsection (12), the following subsection:

“(13) It is hereby declared for the avoidance of doubt that the amounts described in the following paragraphs shall be income received in Singapore from outside Singapore whether or not the source from which the income is derived has ceased:

(a)	any amount from any income derived from outside Singapore which is remitted to, transmitted or brought into, Singapore;
(b)	any amount from any income derived from outside Singapore which is applied in or towards satisfaction of any debt incurred in respect of a trade or business carried on in Singapore; and
(c)	any amount from any income derived from outside Singapore which is applied to purchase any movable property which is brought into Singapore.”.

Amendment of section 10A

4. Section 10A(2) of the principal Act is amended by inserting, immediately after the words “section 10B” in paragraph (c) of the definition of “securities”, the words “or in any unit trust designated under section 35(7C)”.

Amendment of section 10C

5. Section 10C of the principal Act is amended by inserting, immediately after subsection (1A), the following subsections:

“(1B) Notwithstanding subsection (1)(a), where on or after 1st January 1995 contributions are made by any employer in any month to the medisave account of an employee maintained under the Central Provident Fund Act [Cap. 36] in lieu of hospitalisation benefits which the employer is obliged to provide by reason of a contract of employment, such contributions up to 1% of his ordinary wages for that month or $60, whichever is the less, shall subject to subsection (1C) not be deemed to be income accruing to the employee.

(1C) Where contributions referred to in subsection (1B) are made in respect of an employee by two or more employers in any month, the amount of such contributions not deemed to be income accruing to the employee shall not exceed 1% of his total ordinary wages from his employers for that month or $60, whichever is the less.”.

New section 10E

6. The principal Act is amended by inserting, immediately after section 10D, the following section:

“Ascertainment of income of investment holding company

10E.—(1) Notwithstanding any other provisions of this Act, in determining the income of a company derived from any business of the making of investments the following provisions shall apply:

(a)	any outgoings and expenses incurred by the company in respect of investments of that business which do not produce any income shall not be allowed as a deduction under section 14 for that business or other income of the company;
(b)	any outgoings and expenses incurred by the company in respect of investments of that business which produce any income shall only be available as a deduction under section 14 against the income derived from such investments and any excess of such outgoings and expenses over such income in any year shall be disregarded; and
(c)	the allowances under sections 19, 19A, 20 and 21 relating to that business shall only be available as a deduction against the income derived from investments of that business which produce any income and the balance of the allowances in any year shall be disregarded.

(2) For the purpose of this section —

“business of the making of investments” includes the business of letting immovable properties;

“investments” means securities and immovable properties.”.

Amendment of section 13

7. Section 13 of the principal Act is amended —

(a)

by inserting, immediately after the words “80% of” in the fourth line of paragraph (ii) of the proviso to subsection (1)(g), the words “donations (in money or money’s worth) it received and of”;

(b)

by inserting, immediately after the word “therefrom” at the end of subsection (1)(j), the words “except for sums in respect of dividends credited to his Investment Account maintained under the Central Provident Fund Act [Cap. 36]”; and

(c)

by deleting subsection (9) and substituting the following subsection:

“(9) Where any income is exempt from tax by virtue of an order made under subsection (7) and the income is received by a company which is resident in Singapore —

(a)	an amount equal to the income shall be credited to an account to be kept by the company for the purpose of this subsection; and
(b)	subsections (3) to (10), (12) and (13) of section 13E shall apply, mutatis mutandis, to the company in respect of a distribution of dividends from the income as if the company were a company referred to in section 13E(3).”.

Amendment of section 13E

8. Section 13E of the principal Act is amended —

(a)

by inserting, immediately after subsection (4), the following subsections:

“(4A) Where an amount of dividends exempt from tax under subsection (4) has been received by a shareholder which is a holding company, such amount shall be credited to a designated account to be kept by the holding company for the purposes of this section.

(4B) Where the designated account is in credit at the date on which any dividends are paid by the holding company out of the income which has been credited to the designated account, an amount equal to such dividends or to the credit in that account, whichever is the less, shall be debited to the designated account.

(4C) So much of the amount of any dividends debited to the designated account as is received by a shareholder of the holding company shall, if the Comptroller is satisfied with the entries in the designated account, be exempt from tax in the hands of the shareholder.”;

(b)

by deleting subsection (6) and substituting the following subsection:

“(6) Where an amount of dividends exempt from tax under subsection (4C) has been received on or after 1st March 1995 by a shareholder which is a relevant holding company, any dividends paid by the relevant 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.”;

(c)

by deleting the words “subsections (4)” in subsection (7) and substituting the words “subsections (4), (4C)”;

(d)

by inserting, immediately after the word “account” in subsections (8) and (9)(b), the words “or designated account, as the case may be,”;

(e)

by deleting the words “subsection (6),” in the third line of subsection (9) and substituting the words “subsection (4A) and a relevant holding company under subsection (6),”;

(f)

by inserting, immediately after the definition of “foreign tax” in subsection (10), the following definitions:

“ “holding company” means a company which owns not less than 50% beneficial interest in the issued share capital of the company paying the dividends at the time such dividends are received, and includes a company approved under subsection (13);

“relevant holding company” means any holding company of another holding company;”; and

(g)

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

“(12) Subsections (4A) to (11) shall apply, mutatis mutandis, to any dividends received by a relevant holding company where the Comptroller is satisfied that such dividends are paid out of any income exempt under this section.

(13) For the purposes of this section, the Minister or such person as he may appoint may approve as a holding company any company which owns less than 50% beneficial interest in the issued share capital of the company paying the dividends at the time such dividends are received by the company.”.

Amendment of section 14

9. Section 14 of the principal Act is amended —

(a)

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

“(ea)

any sum contributed by an employer in any month to the medisave account maintained under the Central Provident Fund Act [Cap. 36] in respect of any of his employees engaged in activities relating to the production of the income of the employer and which is not deemed to be the income of the employee under section 10C(1B), subject to a maximum deduction of 1% of the ordinary wages of the employee for that month or $60, whichever is the less, for each employee;”;

(b)

by deleting the word “and” at the end of paragraph (c) of the definition of “medical expenses” in subsection (8); and

(c)

by inserting, immediately at the end of paragraph (d) of the definition of “medical expenses” in subsection (8), the word “and”, and by inserting immediately thereafter the following paragraph:

“(e)	contributions which are deductible under subsection (1)(ea);”.

Amendment of section 14B

10. Section 14B of the principal Act is amended —

(a)

by deleting the word “or” at the end of subsection (1)(d);

(b)

by deleting the comma at the end of paragraph (e) of subsection (1) and substituting a semi-colon, and by inserting immediately thereafter the following paragraphs:

“(f)

on or after 1st April 1995 by an approved firm or company resident in or having a permanent establishment in Singapore which is the holder of a master franchise or master intellectual property licence in establishing, maintaining or otherwise participating in an approved local or overseas trade fair or exhibition, trade mission or trade promotion activity for the primary purpose of promoting the provision of services overseas in connection with the use overseas of any right under the franchise or licence; or

(g)

on or after 1st April 1995 by an approved firm or company resident in Singapore which is the holder of a master franchise or master intellectual property licence in maintaining an approved overseas trade office established exclusively for the purpose of promoting the provision of services overseas in connection with the use overseas of any right under the franchise or licence,”; and

(c)

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

“(4) For the purposes of this section —

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

“master franchise” means any agreement under which the franchisor authorises or permits the franchisee to use in Singapore or overseas a business system owned or controlled by the franchisor, including the sub-franchising of the business system;

“master intellectual property licence” means any licence under which the licensor authorises or permits the licensee to use in Singapore or overseas the rights under a patent, copyright, trademark, design or know-how, including the sublicensing of the same.”.

Amendment of section 14C

11. Section 14C of the principal Act is amended —

(a)

by deleting the word “overseas,” in the fifteenth line of subsection (1) and substituting the words “overseas; or on or after 1st April 1995 by an approved firm or company resident in Singapore which is the holder of a master franchise or master intellectual property licence principally for promoting the provision of services overseas in connection with the use overseas of any right under the franchise or licence,”; and

(b)

by deleting the full-stop at the end of the definition of “export market development expenditure” in subsection (4) and substituting a semi-colon, and by inserting immediately thereafter the following definition:

“ “master franchise” and “master intellectual property licence” have the same meanings as in section 14B.”.

Amendment of section 14F

12. Section 14F(4) of the principal Act is amended by inserting, immediately after the words “section 1OB”, the words “or any unit trust designated under section 35(7C)”.

Amendment of section 14I

13. Section 14I(4) of the principal Act is amended by deleting “¹/₄%” in paragraph (b) and substituting “¹/₂%”.

Amendment of section 14J

14. Section 14J(1)(a) of the principal Act is amended by inserting, immediately after the word “employment” in the second line, the words “(excluding director’s fees)”.

Amendment of section 15

15. Section 15(1) of the principal Act is amended —

(a)

by inserting, immediately after the words “sections 14(1)(e)” in paragraph (h), the words “and (ea)”; and

(b)

by deleting the word “and” at the end of paragraph (j), and by inserting immediately thereafter the following paragraphs:

“(ja)	any outgoings and expenses incurred in respect of any unit trust designated under section 35(7C) if the person is a unit holder of such trust;
(jb)	any amount of output tax paid or payable under the Goods and Services Tax Act which is borne by the person if he is registered as a taxable person under that Act [Cap. 117A]; and”.

Amendment of section 19

16. Section 19(2) of the principal Act is amended —

(a)

by inserting, immediately after the words “Sixth Schedule” in paragraph (a)(i) and (ii), the words “unless otherwise provided under paragraph (aa)”; and

(b)

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

“(aa)

for the purposes of paragraph (a), in the case of any aircraft which is acquired on or after 1st March 1995 by a leasing company carrying on the business of offshore leasing within the meaning of section 43I, the number of years of working life of the aircraft specified in the Sixth Schedule may, on the application of the leasing company, be extended irrevocably for such period not exceeding 20 years as approved by the Minister or such person as he may appoint;”.

Amendment of section 29

17. Section 29 of the principal Act is amended by inserting, immediately after the word “dividend” in the first line, the words “(other than a dividend paid by virtue of section 44(2A))”.

Amendment of section 35

18. Section 35 of the principal Act is amended by inserting, immediately after subsection (7), the following subsections:

“(7A) The following income shall not form part of the statutory income of any designated unit trust for any year of assessment:

(a)	gains or profits derived from Singapore or elsewhere from the disposal of securities;
(b)	interest (other than interest for which tax has been deducted under section 45); and
(c)	dividends derived from outside Singapore and received in Singapore.

(7B) No deduction under section 14 shall be allowed in respect of any outgoings and expenses (including any expenses arising from the management of investments) incurred by any designated unit trust against any income derived by the unit trust from —

(a)	dividends paid by any company resident in Singapore; and
(b)	interest for which tax has been deducted under section 45.

(7C) In subsections (7A) and (7B) —

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

“securities” has the same meaning as in section 10A;

“unit” and “unit trust” have the same meanings as in section 10B.”.

Amendment of section 39

19. Section 39(2) of the principal Act is amended —

(a)	by deleting “18¹/₂%” in the tenth line of paragraph (ea) and substituting “20%”; and
(b)	by deleting “$13,320” wherever it appears in paragraph (ea) and substituting in each case “$14,400”.

Amendment of section 43C

20. Section 43C of the principal Act is amended by inserting, immediately after the word “company” in the fourth line, the words “approved by the Minister or such person as he may appoint”.

Amendment of section 43L

21. Section 43L of the principal Act is amended by deleting the words “through any approved auctioneer in Singapore” in the eighth and ninth lines of subsection (1).

Amendment of section 44

22. Section 44 of the principal Act is amended —

(a)

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

“(2A) The Minister may, if he is satisfied that it is expedient in the public interest to do so, authorise the Comptroller to pay such company in respect of such classes of its shareholders as the Minister may designate, a sum equal to the amount of tax which the designated company would be entitled to deduct under subsection (1) from dividends to be paid to the designated shareholders so as to enable the designated company to pay the dividends to those shareholders as if no tax had been deducted under that subsection.”;

(b)

by inserting, immediately after the word “assessment” in the second line of subsection (8), the words “or such longer period as the Comptroller may allow”; and

(c)

by inserting, immediately after the word “dividend” in the first line of subsection (12)(a), the words “(other than any dividend paid by virtue of subsection (2A))”.

Amendment of section 45C

23. Section 45C of the principal Act is amended by inserting, immediately after the words “section 10(11)”, the words “, (11A) and (11B)”.

Amendment of section 46

24. Section 46 of the principal Act is amended by inserting, immediately after subsection (3), the following subsection:

“(4) No set off shall be allowed under subsection (1) in respect of any dividend paid to any person by virtue of section 44(2A).”.

Amendment of section 50A

25. Section 50A of the principal Act is amended by inserting, immediately after subsection (6), the following subsection:

“(7) The Minister may in any particular case waive the requirement of 25% share ownership referred to in subsections (3) and (4).”.

Amendment of section 57

26. Section 57 of the principal Act is amended by inserting, immediately after subsection (5), the following subsection:

“(5A) For the purposes of payment of any tax due from any immoneys referred to in subsection (1) in a joint account at any bank or from the proceeds of sale of any movable property owned by two or more persons as joint owners, the following provisions shall apply:

(a)

the person declared by the Comptroller under subsection (1) to be the agent of any person who is an owner of such moneys shall —

(i)	within 14 days of the receipt of the notice under subsection (1), send a notice by registered post addressed to every owner of such moneys at the address last known to the agent informing the owner of such declaration; and
(ii)	retain such amount of the moneys as is presumed under paragraph (b) to be owned by the person from whom tax is due and subject to paragraph (e) within 42 days of the receipt of the notice under subsection (1) pay over the tax due from such amount to the Comptroller;

(b)

it shall be presumed, until the contrary is proved, that the holders of a joint account at any bank shall have equal share of the moneys in the account as at the date of receipt of the notice under subsection (1) and that the joint owners of any immovable property shall share the proceeds of sale of the property equally;

(c)

any owner of such moneys who objects to the share presumed under paragraph (b) shall give notice of his objection in writing to the person declared to be the agent under subsection (1) within 28 days of the receipt of the notice of the agent under paragraph (a)(i), or within such further period as the Comptroller in his discretion may allow, and furnish proof as to his share of the moneys;

(d)

where an objection under paragraph (c) has been received, the person declared to be the agent shall —

(i)	retain the amount of such moneys referred to in paragraph (a)(ii) until such time as the Comptroller by notice under paragraph (e) informs him of his decision on the objection; and
(ii)	inform the Comptroller of the objection within 7 days of the receipt of the objection;

(e)

the Comptroller shall consider the objection and shall by notice in writing inform the person declared to be the agent of his decision and the agent shall, notwithstanding any appeal under paragraph (f), pay over any tax due from the share of moneys decided by the Comptroller as the amount, not exceeding the amount presumed under paragraph (b) to be the share of the person by whom the tax is payable, held by him for or due by him to the person;

(f)

any owner of such moneys aggrieved by the decision of the Comptroller under paragraph (e) may appeal against the decision to the Board of Review and the provisions of Part XII shall apply, mutatis mutandis, to the appeal; and

(g)

for the purpose of this subsection, “joint account” means any account in the names of two or more persons but excludes any partnership account, trust account and any account where a minor is one of the joint account holders.”.

Amendment of section 68

27. Section 68(2) of the principal Act is amended —

(a)	by inserting, immediately after the word “deliver” in the second line, the words “to the Comptroller or any person specified in the notice”; and
(b)	by deleting the words “the prescribed form” in the fourth line and substituting the words “such form as the Comptroller may determine”.

Remission of tax

28.—(1) There shall be remitted the tax payable for the year of assessment 1995 by an individual or Hindu joint family resident in Singapore a sum equal to the aggregate of —

(a)	10% of the tax payable for that year of assessment; and
(b)	an amount not exceeding $650 as determined by the Comptroller.

(2) The remission under subsection (1)(a) shall be given before the remission under subsection (1)(b).

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