Income Tax (Amendment) Bill

Bill No. 29/1998

Read the first time on 29th June 1998.
An Act to amend the Income Tax Act (Chapter 134 of the 1996 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 1998.
(2)  Section 13(a), (e) and (f) shall be deemed to have come into operation on 1st January 1997.
(3)  Section 7 shall be deemed to have come into operation on 27th February 1998.
(4)  Section 10 shall have effect for the years of assessment 1998 and 1999.
(5)  Sections 3(a) to (d) and (f), 4, 5(b), 6, 12, 14, 15, 19 and 20 shall have effect for the year of assessment 1999 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 “67” in the fifth line of the definition of “Comptroller” and substituting “67(1)(a)”.
Amendment of section 10
3.  Section 10 of the principal Act is amended —
(a)by inserting, immediately after the word “be” in the second line of subsection (4)(b), the words “income of a shipping enterprise within the meaning of section 13A or”;
(b)by deleting the words “section 13F” in the fourth line and in the fourteenth line of subsection (4)(b) and substituting in each case the words “section 13A or 13F, as the case may be”;
(c)by inserting, immediately after the word “holder” in the second line of subsection (13A), the words “or by an approved CPF unit trust to any unit holder in respect of any unit purchased with moneys other than those standing to his credit in the Central Provident Fund”;
(d)by inserting, immediately after the word “trust” in the tenth line of subsection (13A), the words “or approved CPF unit trust”;
(e)by deleting the words “only an amount equal to 10% of the distribution shall” in the third and fourth lines of subsection (13B) and substituting the words “the distribution, if made on or after 28th February 1998, shall not”; and
(f)by inserting, immediately before the definition of “designated unit trust” in subsection (13D), the following definition:
“ “approved CPF unit trust” has the same meaning as in section 35(7C);”.
Amendment of section 10G
4.  Section 10G(10) of the principal Act is amended —
(a)by deleting the word “and” at the end of paragraph (e); and
(b)by deleting the full-stop at the end of paragraph (f) and substituting the word “; and”, and by inserting immediately thereafter the following paragraph:
“(g)any gains or profits derived from the disposal of securities which do not form part of the statutory income of any designated unit trust or approved CPF unit trust under section 35(7A).”.
Amendment of section 13
5.  Section 13 of the principal Act is amended —
(a)by inserting, immediately before paragraph (b) of subsection (1), the following paragraph:
“(a)the interest derived from any qualifying debt securities by any person who is not resident in Singapore and who does not have any permanent establishment in Singapore;”;
(b)by inserting, immediately after the word “dividends” in the fifth line of subsection (1)(j), the words “(other than dividends derived from outside Singapore)”;
(c)by deleting paragraph (y) of subsection (1) and substituting the following paragraph:
“(y)such income as may be prescribed by regulations under section 43A or 43C; and”;
(d)by deleting the words “15 years” in subsection (1)(z) and substituting the words “20 years”; and
(e)by inserting, immediately after subsection (2), the following subsection:
“(2A)  For the purposes of subsection (1)(a) —
“financial institution” means an institution licensed or approved by the Monetary Authority of Singapore, and includes an institution approved as an approved Fund Manager under section 43A and an institution approved as a Finance and Treasury Centre under section 43G;
“qualifying debt securities” means bonds, notes, commercial papers and certificates of deposits which are substantially arranged by any financial institution in Singapore and issued during the period from 28th February 1998 to 27th February 2003.”.
Amendment of section 13A
6.  Section 13A of the principal Act is amended —
(a)by inserting, immediately after the words “Singapore ships” in subsections (1), (4), (10) (definition of “shipping enterprise”) and (11), the words “or foreign ships”;
(b)by inserting, immediately after the word “exemption” in subsection (1A), the words “in respect of Singapore ships”;
(c)by inserting, immediately after the words “Singapore ship” in subsections (2), (2A) and (3)(b), the words “or foreign ship”;
(d)by inserting, immediately before the definition of “holding company” in subsection (10), the following definition:
“ “foreign ship” has the same meaning as in section 13F;”;
(e)by deleting the definition of “income of a shipping enterprise” in subsection (10) and substituting the following definition:
“ “income of a shipping enterprise” means the income derived by a shipping enterprise from the carriage (other than within the limits of the port of Singapore) of passengers, mails, livestock or goods —
(a)by sea-going Singapore ships, or from towing or salvage operations carried out (other than within the limits of the port of Singapore) by sea-going Singapore ships, and includes the income from the charter of such ships; or
(b)shipped in Singapore by foreign ships, excluding such carriage arising solely from transhipment from Singapore;”;
(f)by deleting the word “of” where it first occurs in the second line of subsection (16)(a) and substituting the words “derived or deemed to be derived from the operation of Singapore ships by”;
(g)by inserting, immediately after the word “income” in the sixth line of subsection (16)(b), the words “(other than income exempt under this section)”; and
(h)by inserting, immediately after the word “income” in the eighth line of subsection (16)(c), the words “(other than income exempt under this section)”.
Amendment of section 13H
7.  Section 13H of the principal Act is amended —
(a)by deleting subsections (1) and (2) and substituting the following subsections:
“(1)  The Minister may by regulations prescribe that any income of an approved venture company derived by it from making approved investments —
(a)shall be exempt from tax; or
(b)notwithstanding section 43, shall be taxed at such concessionary rate, not being more than 10%, as the Minister, or such person as the Minister may appoint, may specify for each year of assessment.
(2)  Regulations made under subsection (1) may provide for the determination of the amount of the income of an approved venture company to be exempted or taxed at a concessionary rate and for the deduction of losses otherwise than in accordance with section 37.
(2A)  The exemption from tax or tax at a concessionary rate of the income of an approved venture company under regulations made under subsection (1) —
(a)shall be for such period, not exceeding 10 years, as the Minister, or such person as the Minister may appoint, may specify; and
(b)in any particular case after the period referred to in paragraph (a), shall be for such further period or periods, not exceeding 5 years at any one time for each period, as the Minister, or such person as the Minister may appoint, may specify.
(2B)  The total period under subsection (2A)(a) and the further period or periods under subsection (2A)(b) shall not in the aggregate exceed 15 years.”;
(b)by inserting, immediately after the word “tax” in the second line of subsection (4), the words “or taxed at a concessionary rate”;
(c)by inserting, immediately after subsection (5), the following subsection:
“(5A)  Where the income of an approved venture company is taxed at a concessionary rate under regulations made under subsection (1) —
(a)any expenses, donations, allowances or losses referred to in subsection (4) shall only be deducted against such income, and any balance of the expenses, donations, allowances or losses for any year of assessment shall, subject to sections 23, 37 and 37B, be available as a deduction against any other income of the company for that year of assessment and for any subsequent year of assessment; and
(b)notwithstanding subsection (5), where the income of the company was exempted from tax immediately before being taxed at a concessionary rate, the balance referred to in subsection (5) shall firstly be deducted against the income taxed at a concessionary rate and thereafter shall be available for deduction against any other income of the company for the year of assessment which relates to the basis period in which the tax exemption ceases, and subsequent years of assessment, in accordance with section 23 or 37, as the case may be.”;
(d)by deleting the words “issue to an” in the second line of subsection (6) and substituting the words “for which the income of an approved venture company is exempt from tax under regulations made under subsection (1) issue to the”;
(e)by deleting subsection (9) and substituting the following subsection:
“(9)  As soon as any amount of the income of an approved venture company has been exempt from tax or subject to tax at a concessionary rate under regulations made under subsection (1), the amount of the income exempted or the net amount of the income after deduction of the tax shall be credited to a special account (referred to in this section as the account) to be kept by the company for the purpose of this section.”;
(f)by inserting, immediately after the word “tax” in subsection (16)(a), the words “or subject to tax at a concessionary rate under regulations made under subsection (1)”;
(g)by deleting the words “, the Comptroller may, at any time within 6 years from the date of the statement referred to in subsection (6)” in the ninth, tenth and eleventh lines of subsection (16) and substituting the words “or taxed at a concessionary rate for any year of assessment, the Comptroller may, at any time within 6 years after the expiration of that year of assessment”; and
(h)by inserting, immediately after the definition of “investments” in subsection (18), the following definition:
“ “tax exempt period” means the period during which any income of an approved venture company is exempt from tax under regulations made under subsection (1);”.
Amendment of section 14B
8.  Section 14B of the principal Act is amended —
(a)by deleting subsections (1), (2) and (2A) and substituting the following subsections:
“(1)  Subject to this section, where the Comptroller is satisfied that the expenses specified in subsection (2) have been incurred by an approved company or firm resident in or having a permanent establishment in Singapore for the primary purpose of —
(a)promoting the trading of goods or the provision of services; or
(b)the provision of services in connection with the use of any right under a master franchise or master intellectual property licence where the company or firm is the holder of the franchise or licence,
there shall be allowed a further deduction of the amount of such expenses in addition to the amount allowed under section 14.
(2)  The expenses referred to in subsection (1) are —
(a)expenses in establishing, maintaining or otherwise participating in an approved trade fair, trade exhibition, trade mission or trade promotion activity;
(b)expenses in maintaining an approved overseas trade office; or
(c)market development expenditure for the carrying out of any approved marketing project.”;
(b)by renumbering subsection (2B) as subsection (2A);
(c)by deleting paragraph (b) of subsection (3) and substituting the following paragraph:
“(b)travelling, accommodation and subsistence expenses or allowances for more than the approved number of employees taking part in the approved trade fair, trade exhibition, trade mission, trade promotion activity or the approved marketing project;”;
(d)by deleting the words “3 employees” in subsection (3)(d)(ii) and substituting the words “the approved number of employees”;
(e)by deleting the words “first 2 years of” in subsection (3)(d)(iv) and substituting the words “approved number of years from”;
(f)by deleting the words “section 14C, 14E or 14J” in subsections (3A), (3B)(b) and (3E)(a) and substituting in each case the words ``section 14E, 14J or 14L”; and
(g)by inserting, immediately after the definition of “approved” in subsection (4), the following definition:
“ “market development expenditure” means —
(a)approved expenses directly attributable to the carrying out of market research or obtaining of market information, including any feasibility study;
(b)expenses in respect of advertisements placed in approved media;
(c)expenses incurred on approved promotion campaigns; or
(d)approved expenses incurred in the design of packaging, or in the certification of goods or services where such certification is carried out by an approved person;”.
Repeal of section 14C
9.  Section 14C of the principal Act is repealed.
Amendment of section 14I
10.  Section 14I of the principal Act is amended by inserting, immediately after subsection (5), the following subsection:
“(5A)  Subsections (4)(a) and (b) and (5)(a) shall not apply to any bank.”.
New section 14L
11.  The principal Act is amended by inserting, immediately after section 14K, the following section:
“Further deduction for expenses incurred in relocation or recruitment of overseas talent
14L.  The Minister may by regulations provide that, for the purpose of ascertaining the income of any person or class of persons carrying on a trade, profession or business, there shall be allowed to such person or class of persons a further deduction, in addition to the deduction allowed under section 14, of any prescribed expenses incurred in relocating or recruiting any prescribed employee from outside Singapore to be employed in Singapore by the person or class of persons.”.
Amendment of section 15
12.  Section 15(1) of the principal Act is amended —
(a)by deleting the word “and” at the end of paragraph (m); and
(b)by deleting the full-stop at the end of paragraph (n) and substituting the word “; and”, and by inserting immediately thereafter the following paragraph:
“(o)any outgoings and expenses incurred in respect of any approved CPF unit trust as defined in section 35(7C) if the person is a unit holder who has purchased any unit in such trust using moneys other than those standing to his credit in the Central Provident Fund.”.
Amendment of section 19A
13.  Section 19A of the principal Act is amended —
(a)by deleting the word “approved” in the seventh line and in the last line of subsection (1E) and substituting in each case the word “certified”;
(b)by inserting, immediately after subsection (1E), the following subsections:
“(1F)  Notwithstanding section 19, where a person proves to the satisfaction of the Comptroller that he has, on or after 1st January 1998, installed any new —
(a)certified low-decibel machine, equipment or system;
(b)certified effective noise control device which is a distinct entity or an accessory of any new or existing machine, equipment or system; or
(c)certified effective engineering noise control measure for any existing machine, equipment or process,
for the purposes of a trade, business or profession carried on by him, he shall, in lieu of the allowances provided by subsection (1) or section 19, be entitled, if he so elects, to an allowance of 100% in respect of the capital expenditure incurred on the provision of the certified machine, equipment or system, or the certified effective noise control device or measure.
(1G)  Notwithstanding section 19, where a person proves to the satisfaction of the Comptroller that he has, on or after 1st January 1998, installed any new —
(a)certified machine, equipment or system which reduces or eliminates exposure to chemical risk;
(b)certified effective chemical hazard control device which is a distinct entity or an accessory of any new or existing machine, equipment or process; or
(c)certified effective chemical hazard control measure for any existing machine, equipment or process,
for the purposes of a trade, business or profession carried on by him, he shall, in lieu of the allowances provided by subsection (1) or section 19, be entitled, if he so elects, to an allowance of 100% in respect of the capital expenditure incurred on the provision of the certified machine, equipment or system, or the certified effective chemical hazard control device or measure.”;
(c)by renumbering the existing subsections (1F) and (1G) as subsections (1H) and (1J), respectively;
(d)by deleting “(1G)” in the first line of subsection (5) and substituting “(1J)”;
(e)by deleting the word “approved” in the first line of subsection (6)(e) and substituting the word “certified”;
(f)by deleting the words “approved by the Minister or such person as he may appoint” at the end of subsection (6)(e) and substituting the words “which has been certified by the Singapore Productivity and Standards Board to be an energy-saving equipment”; and
(g)by deleting the full-stop at the end of subsection (6)(e) and substituting a semicolon, and by inserting immediately thereafter the following paragraphs:
“(f)“certified low-decibel machine, equipment or system” means —
(i)any concrete crusher or splitter;
(ii)any plastic granulator or crusher;
(iii)any automatic sawing machine;
(iv)any metal press or stamping machine;
(v)any machine with active noise control feature; or
(vi)any other machine, equipment or system,
which has been certified by the Singapore Productivity and Standards Board or the National University of Singapore to have satisfied the prescribed criteria;
(g)“certified effective noise control device” means —
(i)any acoustic enclosure for machine, equipment or process;
(ii)any acoustic silencer or muffler;
(iii)any vibration absorption, isolation or damping device; or
(iv)any active noise control device,
which has been certified by the Singapore Productivity and Standards Board or the National University of Singapore to have satisfied the prescribed criteria;
(h)“certified effective engineering noise control measure” means —
(i)any detachable personnel acoustic enclosure;
(ii)any acoustic barrier or shield;
(iii)any acoustic absorption device; or
(iv)any modification to machine, equipment or process,
which has been certified by the Singapore Productivity and Standards Board or the National University of Singapore to have satisfied the prescribed criteria;
(i)“certified machine, equipment or system which reduces or eliminates exposure to chemical risk” means —
(i)any water-based degreasing machine or system;
(ii)any automated bagging or packing machine or system;
(iii)any automated degreasing machine or system; or
(iv)any other machine, equipment or system,
which has been certified by the Singapore Productivity and Standards Board or the National University of Singapore to have satisfied the prescribed criteria;
(j)“certified effective chemical hazard control device” means —
(i)any local exhaust ventilation system;
(ii)any fugitive emission control equipment or system; or
(iii)any dilution ventilation system,
which has been certified by the Singapore Productivity and Standards Board or the National University of Singapore to have satisfied the prescribed criteria;
(k)“certified effective chemical hazard control measure” means —
(i)any enclosed or automated system; or
(ii)any modification to machine, equipment or process,
which has been certified by the Singapore Productivity and Standards Board or the National University of Singapore to have satisfied the prescribed criteria.”.
Amendment of section 35
14.  Section 35 of the principal Act is amended —
(a)by inserting, immediately after the words “designated unit trust” in subsections (7A) and (7B), the words “or any approved CPF unit trust”; and
(b)by inserting, immediately before the definition of “designated” in subsection (7C), the following definition:
“ “approved CPF unit trust” means any unit trust scheme approved for the purposes of any investment scheme under the Central Provident Fund Act (Cap. 36);”.
Amendment of section 37
15.  Section 37 (2) of the principal Act is amended by deleting the words “or research” in the fifth and sixth lines of paragraph (d) and substituting the words “, research or other”.
Amendment of section 43A
16.  Section 43A of the principal Act is amended by inserting, immediately after subsection (2), the following subsection:
“(3)  Regulations made under subsection (1) may provide for exemption from tax of such income as the Minister may specify of —
(a)a bank licensed under the Banking Act (Cap. 19) or a merchant bank approved by the Monetary Authority of Singapore; and
(b)a company approved under subsection (1)(c),
derived by it from any approved syndicated offshore credit or guarantee facility and for deduction of losses otherwise than in accordance with section 37(2).”.
Amendment of section 43C
17.  The principal Act is amended by renumbering section 43C as subsection (1) of that section, and by inserting immediately thereafter the following subsection:
“(2)  Regulations made under subsection (1) may provide for exemption from tax of any income of an approved insurance company referred to in that subsection and for deduction of losses otherwise than in accordance with section 37(2).”.
Amendment of section 43D
18.  Section 43D(2) of the principal Act is amended by deleting the words “43E, 43F, 43G, 43H, 43J, 43L and 43M” and substituting the words “43A(3), 43E, 43F, 43G, 43H, 43J, 43L, 43M and 43O”.
Amendment of section 43I
19.  Section 43I of the principal Act is amended —
(a)by inserting, immediately after the word “plant” at the end of subsection (1), the words “or such other activity as may be prescribed by regulations”; and
(b)by inserting, immediately after subsection (2), the following subsection:
“(2A)  Subsection (2) shall apply, with the necessary modifications, in determining the income of a leasing company from any activity prescribed by regulations made under subsection (1) as if such income were income from offshore operating leasing.”.
New sections 43N and 43O
20.  The principal Act is amended by inserting, immediately after section 43M, the following sections:
“Concessionary rate of tax for income derived from debt securities
43N.—(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 —
(a)interest derived by any company from any qualifying debt securities; and
(b)income derived by any financial institution from trading in any debt securities during the period from 28th February 1998 to 27th February 2003.
(2)  Regulations made under subsection (1) may provide for exemption from tax of income derived by any financial institution from arranging, underwriting or distributing any qualifying debt securities and for deduction of losses otherwise than in accordance with section 37(2).
(3)  In this section —
“debt securities” means bonds, notes, commercial papers and certificates of deposits;
“financial institution” and “qualifying debt securities” have the same meanings as in section 13(2A).
Concessionary rate of tax for cyber trading
43O.—(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 company derived by it from such qualifying electronic commerce transactions as may be prescribed.
(2)  Regulations made under subsection (1) may provide for the deduction of losses of an approved company otherwise than in accordance with section 37(2).”.
Amendment of section 45C
21.  The principal Act is amended by renumbering section 45C as subsection (1) of that section, and by inserting immediately thereafter the following subsection:
“(2)  Subsection (1) shall not apply to any distribution which is made on or after 28th February 1998 by a designated unit trust or an approved CPF unit trust referred to in section 35(7A).”.
Miscellaneous amendments
22.  The principal Act is amended —
(a)by deleting the words “section 43A” in sections 13E(11)(b), 37B(7) (definition of “concessionary income”) and 44(17)(f)(ii) and substituting in each case the words “section 13H, 43A”; and
(b)by deleting the words “or 43M” in the following provisions and substituting in each case the words “, 43M, 43N or 43O”:
Sections 13B(1), (2) and (8)(a), 13E(11)(b), 37B(7) (definition of “concessionary income”) and 44(17)(f)(ii).
Remission of tax
23.—(1)  There shall be remitted the tax payable for the year of assessment 1998 by an individual or Hindu joint family resident in Singapore a sum equal to the aggregate of —
(a)5% of the tax payable for that year of assessment; and
(b)an amount not exceeding $500 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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