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Income Tax (Amendment) Bill

Bill No. 7/1992

Read the first time on 14th January 1992.

An Act to amend the Income Tax Act (Chapter 134 of the 1985 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 1992.

(2) Sections 7, 10 and 11 shall have effect for the year of assessment 1992 and subsequent years of assessment.

(3) Sections 13, 14, 16 and 18 shall come into operation on 1st January 1993.

Amendment of section 10

2. Section 10 of the Income Tax Act (referred to in this Act as the principal Act) is amended by deleting subsection (4) and substituting the following subsection:

“(4) Where, under section 17, 20 or 21, a balancing charge falls to be made, the amount thereof shall be deemed to be income chargeable with tax under this Act, except in the case of a balancing charge in respect of —

(a)	a Singapore ship the income derived from the operation of which would be income of a shipping enterprise within the meaning of section 13A; or
(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.”.

Amendment of section 13

3. Section 13 (1) of the principal Act is amended by inserting, immediately after paragraph (n), the following paragraph:

“(o)

payments made on or after 1st April 1991 under any agreement or arrangement approved by the Minister or such other person as he may appoint to a person not resident in Singapore (excluding any permanent establishment in Singapore) by an international shipping enterprise approved under section 13F for the charter of a foreign ship within the meaning of that section, except for any payment attributable to the carriage of passengers, mails, livestock or goods from Singapore.”.

Amendment of section 13B

4. Section 13B of the principal Act is amended by deleting the words “or 43I” in subsections (1), (2) and (8)(a) and substituting in each case the words “, 43I or 43J”.

New sections 13E and 13F

5. The principal Act is amended by inserting, immediately after section 13D, the following sections:

“Exemption of dividends from foreign income

13E.—(1) Where a company resident in Singapore receives income in Singapore from outside Singapore (referred to in this section as the income) for which tax credit has been allowed against the tax payable in respect of such income and pays dividends out of such income, the provisions in this section shall have effect.

(2) As soon as a tax credit has been allowed, an amount of the income computed in accordance with the formula

where A

is the tax credit allowed;

is the tax rate applicable to a company under section 43(1); and

is the foreign tax paid,

shall be credited to a special account (referred to in this section as the account) to be kept by the company for the purposes of this section.

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

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

(5) Section 44 shall not apply to any dividends or part thereof which are exempt from tax under this section.

(6) Where an amount of dividends exempt from tax under subsection (4) has been received by a shareholder, which is a holding company owning, at the time such dividends are received, not less than 50% beneficial interest in the issued capital of the company, any dividends paid 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 shall not apply to any such dividends or part thereof.

(7) Notwithstanding subsections (4) and (6), no dividend paid on any share of a preferential nature shall be exempt from tax in the hands of the shareholder.

(8) A company shall deliver to the Comptroller a statement of the account made up to any date specified by him whenever called upon to do so by notice in writing.

(9) Notwithstanding subsections (1) to (8), where it appears to the Comptroller that any dividend, including a dividend paid by a holding company under subsection (6), which has been exempted from tax in the hands of any shareholder, ought not to have been so exempted, the Comptroller may within the year of assessment or within 12 years after the expiration thereof —

(a)	make such assessment or additional assessment upon any such shareholder as may be necessary in order to make good any loss of tax; or
(b)	direct the company to debit the account with such amount as the circumstances require.

(10) For the purposes of this section —

“foreign tax” means —

(a)	Commonwealth income tax within the meaning of section 48(1);
(b)	foreign tax within the meaning of section 50(1); or
(c)	tax payable under the law of any territory outside Singapore in respect of which credit has been given under section 50 by virtue of any regulations made under section 50A,

as the case may be;

“tax credit” means —

(a)	relief from tax under section 48(1);
(b)	credit under section 50(1); or
(c)	credit under section 50 by virtue of any regulations made under section 50A,

as the case may be.

(11) This section shall —

(a)	only apply to income received on or after 1st January 1991;
(b)	not apply to income on which tax has been levied at the rate of 10% or such other concessionary rate as may be prescribed under section 43A, 43C, 43D, 43E, 43F, 43G, 43H, 43I or 43J or section 19B of the Economic Expansion Incentives (Relief from Income Tax) Act (Cap. 86); and
(c)	not apply to a company resident in Singapore receiving in Singapore income which is derived from Malaysia where the company in paying any dividend out of such income declares itself to be a resident of Malaysia under paragraph 3 of Article VII of the Income Tax (Singapore-Malaysia) (Avoidance of Double Taxation Agreement) Order 1968 [G.N. No. S 349/68].

Exemption of international shipping profits

13F.—(1) Subject to subsection (2), there shall be exempt from tax the income of an approved international shipping enterprise derived on or after 1st April 1991 from —

(a)	the carriage of passengers, mails, livestock or goods from outside the limits of the port of Singapore by any foreign ship;
(b)	the charter of any foreign ship to a person not resident in Singapore (excluding any permanent establishment in Singapore) where such ship is used by that person for the carriage (other than within the limits of the port of Singapore) of passengers, mails, livestock or goods.

(2) The exemption shall be for such period not exceeding 10 years as the Minister may specify in approving each case, except that the Minister may extend the period so specified for such further periods, not exceeding 10 years at any one time, as he thinks fit.

(3) In determining the amount of the income of an approved international shipping enterprise which is exempted under this section, the allowances provided for in sections 16, 17, 18, 19, 19A, 20, 21, 22 and 23 —

(a)

shall be taken into account notwithstanding that no claim for those allowances has been made;

(b)

shall only be deducted against the income referred to in subsection (1), and the balance of those allowances shall not be available as a deduction against any other income, except that any balance remaining unabsorbed at the end of the tax exempt period shall be available as a deduction against any other income for the year of assessment which relates to the basis period in which the tax exemption ceases and for any subsequent year of assessment in accordance with section 23.

(4) Where an approved international shipping enterprise incurs a loss during the tax exempt period in respect of the business of carriage or charter referred to in subsection (1), that loss —

(a)

shall be deducted in accordance with section 37;

(b)

shall only be deducted against the income referred to in subsection (1), and the balance of the loss shall not be available as a deduction against any other income, except that any balance remaining unabsorbed at the end of the tax exempt period shall be available as a deduction against any other income for the year of assessment which relates to the basis period in which the tax exemption ceases and for any subsequent year of assessment in accordance with section 37.

(5) Section 13A(2), (4), (5), (6), (7), (8) and (9) shall apply to an approved international shipping enterprise, except that —

(a)	any reference to a shipping enterprise shall be read as a reference to an approved international shipping enterprise;
(b)	any reference to a Singapore ship shall be read as a reference to a foreign ship; and
(c)	the reference to a holding company in section 13A(6)(f) means a company which holds not less than 50% beneficial interest in the issued shares of an approved international shipping enterprise.

(6) For the purposes of this section —

“approved” means approved by the Minister subject to such conditions as he may impose;

“foreign ship” means a sea-going ship other than a Singapore ship within the meaning of section 13A(10);

“international shipping enterprise” means any company resident in Singapore owning or operating foreign ships.”.

Amendment of section 14

6. Section 14 of the principal Act is amended —

(a)

by inserting, immediately after the words “1st July 1990” in sub-paragraph (i)(K) of the proviso to subsection (1)(e), the words “and before 1st July 1991”; and

(b)

by deleting the comma at the end of sub-paragraph (i)(K) of the proviso to subsection (1)(e) and substituting a semicolon, and by inserting immediately thereafter the following sub-paragraph:

“(L)	commencing on or after 1st July 1991 shall not exceed 17¹/₂%,”.

New section 14I

7. The principal Act is amended by inserting, immediately after section 14H, the following section:

“Provisions by banks for doubtful debts and diminution in value of investments

14I.—(1) Subject to this section, for the purpose of ascertaining the income for the basis period for any year of assessment of a bank, there shall be allowed as a deduction an amount in respect of the provision for doubtful debts arising from its loans and the provision for diminution in the value of its investments in securities, made in that basis period.

(2) Where in the basis period for any year of assessment —

(a)	any amount of the provisions is written back, that amount shall be treated as having been allowed as a deduction under this section and shall be deemed to be a trading receipt of the bank for that basis period;
(b)	the bank permanently ceases to carry on business in Singapore, any provisions in the account of the bank as at the date of the cessation shall be deemed to be a trading receipt of the bank for that basis period:

Provided that the total amount deemed as trading receipts under this subsection shall not exceed the total amount of all deductions previously allowed under this section.

(3) Where in a scheme of amalgamation involving two or more banks whereby the whole or substantially the whole of the undertaking of any bank (referred to in this subsection as the transferor bank) is transferred to another bank (referred to in this subsection as the transferee bank), the Minister may, if he thinks fit and on such conditions as he may impose, by order declare that any provisions in the account of the transferor bank which have been transferred to the transferee bank shall not be deemed under subsection (2)(b) to be a trading receipt of the transferor bank; and the provisions so declared shall for the purposes of this section be treated as having been allowed to the transferee bank as a deduction under this section.

(4) Subject to subsection (5), the total amount of the provisions to be allowed as a deduction under this section for any year of assessment shall not exceed the lowest of —

(a)	25% of the qualifying profits for the basis period for that year of assessment;
(b)	¹/₄% of the prescribed value of the loans and investments in securities in the basis period for that year of assessment; or
(c)	2% of the prescribed value of the loans and investments in securities in the basis period for that year of assessment, less the total amount of all deductions previously allowed under this section which have not been deemed to be trading receipts under subsection (2).

(5) No deduction shall be allowed for any year of assessment —

(a)	where there are no qualifying profits in the basis period for that year of assessment; or
(b)	where the total amount of all deductions previously allowed under this section, which have not been deemed to be trading receipts under subsection (2), is in excess of 2% of the prescribed value of the loans and investments in securities for the relevant basis period for that year of assessment.

(6) For the purposes of this section —

“bank” means a bank licensed under the Banking Act (Cap. 19) or a merchant bank approved by the Monetary Authority of Singapore;

“loan” means any loan or advance made or granted by a bank, including an overdraft except for —

(a)	loans to and placements with financial institutions in Singapore or any other country;
(b)	loans to the Government of Singapore or the government of any other country;
(c)	loans to and placements with the Monetary Authority of Singapore or the central bank or other monetary authority of any other country;
(d)	loans to statutory bodies or corporations guaranteed by the Government of Singapore or the government of any other country; and
(e)	such other loans or advances as may be prescribed;

“prescribed value” of loans and investments in securities in relation to the basis period for any year of assessment means the value (ascertained in such manner as the Comptroller may determine) of the loans and investments in securities (excluding any loan or investment in respect of which any deduction has been allowed under any other section of this Act) as at the last day of each month in that basis period added together and divided by the number of months in that basis period;

“provisions” means the provision for doubtful debts arising from the loans of a bank and the provision for diminution in the value of its investments in securities;

“qualifying profit” means the net profit (excluding any extraordinary gain which is not subject to tax) as shown in the audited accounts of the bank before deducting provision for taxation, tax paid, any extraordinary loss not allowed as a deduction, provision for doubtful debts arising from loans and provision for diminution in value of investments in securities;

“securities” means —

(a)

debentures, stocks, shares, bonds or notes excluding —

(i)	those issued or guaranteed by the Government of Singapore or the government of any other country;
(ii)	stocks and shares held by a bank and issued by any company in which 5% or more of its issued capital is beneficially owned, directly or indirectly, by the bank at any time during the basis period for the relevant year of assessment;

(b)

any right or option in respect of any debentures, stocks, shares, bonds or notes referred to in paragraph (a); or

(c)

units in any unit trust within the meaning of section 10B.”.

Amendment of section 15

8. Section 15 (2) of the principal Act is amended by deleting the words “or 14H” and substituting the words “, 14H or 14I”.

Amendment of section 18

9. Section 18 (1) of the principal Act is amended by inserting, immediately after the word “Minister” in paragraphs (h), (j) and (k), in each case the words “or such other person as he may appoint”.

Amendment of section 39

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

(a)

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

“(ca)

maintained a spouse or previous spouse, as the case may be —

(i)	who was incapacitated by reason of physical or mental infirmity;
(ii)	whose income was not more than $1,500 in that year; and
(iii)	in respect of whom no deduction has been claimed by another person under paragraph (f) or (g),

there shall be allowed in respect of —

(iv)	such spouse a deduction of $3,500; or
(v)	such spouse from whom he was separated by an order of court or deed of separation, a deduction of the amount of payments made in accordance with such order or deed or $3,500, whichever is the less; or
(vi)	such previous spouse whose marriage with him has been dissolved by any court of competent jurisdiction, a deduction of the amount of alimony paid to the previous spouse or $3,500, whichever is the less:

Provided that the total deductions allowed to the individual under this paragraph and paragraph (a), (b) or (c) shall not exceed $3,500.”;

(b)

by deleting “15%” in the sixth line of paragraph (ea) and substituting “16 ¹/₂%”;

(c)

by deleting “$10,800” wherever it appears in paragraph (ea) and substituting in each case “$11,880”;

(d)

by inserting, immediately after the word “Singapore” in the second line of paragraph (f), the words “or living in a hospital or nursing home in Singapore if a registered medical practitioner certifies that the hospitalisation or nursing care is necessary,”; and

(e)

by inserting, immediately after the word “Singapore” in the second line of paragraph (g), the words “or living in a hospital or nursing home in Singapore if a registered medical practitioner certifies that the hospitalisation or nursing care is necessary”.

New section 43J

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

“Concessionary rate of tax for trustee company

43J.—(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 trustee company derived by it from such services as may be prescribed; and those regulations may provide for exemption from tax of any such income and for the deduction of losses otherwise than in accordance with section 37(2).

(2) For the purposes of this section —

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

“trustee company” means —

(a)	a company registered as a trust company under the Trust Companies Act (Cap. 336); or
(b)	a non-resident company incorporated outside Singapore having a branch in Singapore which provides services as a trustee or custodian.”.

Amendment of section 44

12. Section 44 (12) of the principal Act is amended by deleting the words “or 43I” in paragraph (f) (i) and substituting the words “, 43I or 43J”.

Repeal and re-enactment of section 63

13. Section 63 of the principal Act is repealed and the following section substituted therefor:

“Notice of chargeability and returns

63.—(1) The Comptroller may, by notice published in the Gazette, require every person to furnish to the Comptroller in such form and manner as the Comptroller may determine, within a reasonable time specified in the notice or such extended time as the Comptroller may allow, a return of income for the year of assessment specified in the notice and such particulars as may be required for the purpose of ascertaining the income, if any, for which the person is chargeable under this Act, and in the case of —

(a)	a married woman for which her husband is chargeable;
(b)	a precedent partner or such other person referred to in section 71, for which each partner in the partnership is chargeable.

(2) The Comptroller may, in any notice made under subsection (1), exempt from liability to furnish returns such classes of persons not liable to pay tax as he thinks fit, and any person so exempted need not furnish a return under that subsection unless he is required by the Comptroller to do so under subsection (3).

(3) Notwithstanding subsection (1), the Comptroller may, by notice in writing, require any person to furnish to the Comptroller in such form and manner and within such reasonable time as the Comptroller may determine, with a return of income and such particulars as may be required for the purpose of ascertaining the income, if any, for which such person is chargeable under this Act, and in the case of a married woman for which her husband is chargeable under this Act.

(4) For the purposes of subsections (1) and (3), the Comptroller may require a married woman who has not furnished a separate return of her income to verify the return furnished by her husband in so far as it relates to her income and to sign such return.

(5) Every person chargeable with tax for any year of assessment who has not been required within 3 months after the commencement of such year of assessment to make a return of his income for that year as provided in subsection (1) or (3) shall, within 14 days after the end of that period, give notice to the Comptroller that he is so chargeable:

Provided that any individual who arrives in Singapore during any year of assessment shall give such notice within one month of the date of his arrival.

(6) Subsection (5) shall apply to a married woman in respect of any income derived by her for which her husband is chargeable.

(7) Any person who fails or neglects without reasonable excuse to comply with any of the provisions of this section shall be guilty of an offence.”.

Amendment of section 71

14. Section 71 (1) of the principal Act is amended by inserting, immediately after the word “Comptroller” in the eleventh line, the words “by notice in writing or by notice published in the Gazette under section 63 (1)”.

Amendment of section 73A

15. Section 73A of the principal Act is amended by deleting “$5” and substituting the words “$15 or such other amount as the Minister may by order prescribe”.

Amendment of section 76

16. Section 76 (1) of the principal Act is amended by deleting the word “registered” in the second line.

Amendment of section 90

17. Section 90 (3) of the principal Act is amended by inserting, immediately after the word “tax” in the third line, the words “or penalty”.

Amendment of section 94

18. Section 94 (2) of the principal Act is amended by inserting, immediately after the word “section” in the second line of the proviso, the words “63 (1) or”.

Repeal and re-enactment of section 98A

19. Section 98A of the principal Act is repealed and the following section substituted therefor:

“Provisions relating to penalty

98A.—(1) Any penalty imposed under this Act shall not be deemed to be part of the tax paid for the purposes of claiming relief under any of the provisions of this Act.

(2) Any penalty imposed on or after 1st January 1992 under section 44(10), 45 (3), 88 (1) or 91 (2A) shall be deemed to be interest on tax for the purposes of section 33(1) of the Limitation Act (Cap. 163).”.

Remission of tax

20. There shall be remitted 5% of the tax payable for the year of assessment 1991 by an individual or Hindu joint family resident in Singapore and the amount of such remission shall be determined by the Comptroller.