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Income Tax (Amendment) Bill

Bill No. 9/1979

Read the first time on 5th March 1979.

An Act to amend the Income Tax Act (Chapter 141 of the Revised Edition).

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

Short title

1.—(1) This Act may be cited as the Income Tax (Amendment) Act, 1979.

(2) Sections 8(a), 11, 12, 13, 14, 15, 18 and 20 of this Act shall have effect for the year of assessment 1978 and subsequent years of assessment.

(3) Sections 2, 3(b), 6 and 7 of this Act shall have effect for the year of assessment 1979 and subsequent years of assessment.

(4) Sections 8(b) and 10 of this Act shall have effect for the year of assessment 1980 and subsequent years of assessment.

New section 13B

2. The Income Tax Act (hereinafter in this Act referred to as the principal Act) is amended by inserting, immediately after section 13A thereof, the following section: —

“Exemption of certain dividends paid by financial institutions and insurance companies

13B.—(1) Where a financial institution or an insurance company derives income which is subject to tax in accordance with regulations prescribed under section 43A or 43C of this Act, the following provisions shall have effect.

(2) As soon as any amount of income of the financial institution or insurance company has been subject to tax at the rate of ten per cent or such other concessionary rate as may be prescribed under section 43A or 43C of this Act, the net amount of that income after deduction of the tax shall be credited to a special account (in this section referred to as “the account”) to be kept by the financial institution or insurance 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 financial institution or insurance company out of the net amount of that income after deduction of the tax, an amount equal to those dividends or to that credit, 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 financial institution or insurance 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 of this Act shall not apply to any dividends or part thereof debited to the account.

(6) Where an amount of dividends debited to the account has been received by a shareholder, which is a holding company owning, at the time such dividends are received, not less than fifty per cent beneficial interest in the issued capital of the financial institution or insurance 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 of this Act shall not apply to any such dividends or part thereof.

(7) A financial institution or an insurance company shall deliver to the Comptroller a copy of the account made up to any date specified by him whenever called upon to do so by notice in writing.

(8) Notwithstanding the foregoing provisions of this section, where it appears to the Comptroller that —

(a)	any income of a financial institution or an insurance company which has been subject to tax at the rate of ten per cent or such other concessionary rate prescribed under section 43A or 43C of this Act; or
(b)	any dividend, including a dividend paid by a holding company under subsection (6) of this section, which has been exempted from tax in the hands of any shareholder,

ought not to have been so taxed or exempted, as the case may be, the Comptroller may within the year of assessment or within twelve years after the expiration thereof —

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

Amendment of section 14

3. Section 14 of the principal Act is amended —

(a)

by deleting paragraph (i) of the proviso to paragraph (e) of subsection (1) thereof and substituting therefor the following: —

“(i)

a deduction in respect of any such contribution by an employer in respect of an employee for any period —

(A)	before 1st July, 1977, shall not exceed fifteen per cent;
(B)	commencing on or after 1st July, 1977, and before 1st July, 1978, shall not exceed fifteen and a half per cent; and
(C)	commencing on or after 1st July, 1978, shall not exceed sixteen and a half per cent,

of the remuneration paid by the employer to the employee for that period, and “remuneration” in this proviso means that part of an employee’s emoluments by reference to which his employer’s contributions are calculated;”; and

(b)

by deleting subsection (3) thereof and substituting therefor the following: —

“(3) Notwithstanding the provisions of subsection (1) of this section where outgoings and expenses falling within that subsection are incurred, whether directly or in the form of reimbursements, in respect of a motor car (whether or not owned by the person incurring the outgoings and expenses) to which this subsection applies, the sum to be allowed as a deduction shall be limited to the amount which bears to such outgoings and expenses the same proportion as fifteen thousand dollars bear to the capital expenditure incurred by the owner in respect of the motor car, where such capital expenditure exceeds fifteen thousand dollars:

Provided that any deduction for the cost of renewal of a motor car to which this subsection applies shall not exceed fifteen thousand dollars.”.

Repeal and re-enactment of section 14B

4. Section 14B of the principal Act is repealed and the following substituted therefor: —

“Further deduction for expenses relating to approved trade fairs, exhibitions or trade missions or to maintenance of overseas trade office

14B.—(1) Where the Comptroller is satisfied that expenses have been incurred —

(a)	on or after 4th June, 1977, by a manufacturer, trader, or bank resident in or having a permanent establishment in Singapore in establishing, maintaining or otherwise participating in an approved overseas trade fair, exhibition or trade mission which is for the primary purpose of promoting the export of goods manufactured in Singapore;
(b)	on or after 13th September, 1977, by a manufacturer resident in or having a permanent establishment in Singapore in establishing, maintaining or otherwise participating in an approved local trade fair or exhibition which is for the primary purpose of promoting the export of goods manufactured in Singapore; or
(c)	on or after 1st January, 1978, by a company resident in Singapore which is engaged in the manufacture of goods in Singapore or the export of goods manufactured in Singapore, in maintaining an approved overseas trade office established exclusively for the purpose of promoting the export of such goods,

there shall be allowed a further deduction of the amount of such expenses in addition to the deduction allowed under section 14 of this Act, subject to the following provisions of this section.

(2) In respect of the deduction allowable to a manufacturer under paragraph (b) of subsection (1) of this section, if the export sales of the manufacturer do not exceed fifty per cent of his total sales in the basis period for the year of assessment, the amount of deduction to be allowed shall be determined in accordance with the formula

where A

is the amount of expenses incurred;

is the export sales in the basis period for the year of assessment; and

is the total sales in the basis period for the year of assessment.

(3) No deduction shall be allowed under this section in respect of —

(a)

any expenses which are not allowed as deductions under section 14 of this Act;

(b)

travelling, accommodation and subsistence expenses or allowances for more than two employees taking part in the approved overseas trade fair, exhibition or trade mission;

(c)

any expenses incurred by an export enterprise under Part IV of the Economic Expansion Incentives (Relief from Income Tax) Act (Cap. 135);

(d)

any expenses relating to an approved overseas trade office —

(i)	which are incurred in the establishment of the approved overseas trade office;
(ii)	by way of remuneration, travelling, accommodation and subsistence expenses or allowances for more than three employees of the approved overseas trade office;
(iii)	which are specifically excluded as a condition for the approval of the overseas trade office under this section;
(iv)	which are incurred after the end of the first two years of the date of establishment of the approved overseas trade office; and
(v)	which are incurred by a company having a permanent establishment subject to tax in the country in which the approved trade office is established.

(4) In this section, “approved” means approved by the Minister or such person as he may appoint for the purpose of this section.”.

Amendment of section 15

5. Section 15 of the principal Act is amended —

(a)

by deleting the words “Subject to” in the first line thereof and substituting therefor the word “Notwithstanding”;

(b)

by inserting, immediately after the word “expenses” at the end of paragraph (a) thereof, the words “except as provided by paragraph (f) of subsection (1) of section 14 of this Act”;

(c)

by inserting, immediately after the word “capital” at the end of paragraph (c) thereof, the words “except as provided by paragraph (g) of subsection (1) of section 14 of this Act”; and

(d)

by deleting the full-stop at the end of paragraph (i) thereof and substituting therefor a semi-colon and by inserting immediately thereafter the following paragraph: —

“(j)

any outgoings and expenses, whether directly or in the form of reimbursements, and any claim for the cost of renewal incurred on or after 1st April, 1979, in respect of a motor car within the meaning of subsection (4) of section 14 of this Act (whether owned by him or any other person) which is not registered as a business service passenger vehicle for the purposes of the Road Traffic Act (Cap. 92) and the rules made thereunder.”.

Amendment of section 16

6. Section 16 of the principal Act is amended —

(a)

by deleting the word “one-tenth” in the ninth line of subsection (1) thereof and substituting therefor the words “twenty-five per cent”;

(b)

by deleting the word “one-fiftieth” in the seventh line of subsection (2) thereof and substituting therefor the words “three per cent”;

(c)

by deleting subsection (3) thereof and substituting therefor the following: —

“(3) Where at any time in or after the basis period for the first year of assessment under this Act the interest in a building or structure which is the relevant interest in relation to any expenditure is sold while the building or structure is an industrial building or structure, the annual allowance, in the years of assessment the basis periods for which end after the time of that sale, shall be computed by reference to the residue of that expenditure immediately after the sale and shall be —

(a)

the fraction of the said residue the numerator of which is one and the denominator of which is the number of years of assessment comprised in the period which begins with the first year of assessment for which the buyer is entitled to an annual allowance or would be so entitled if the building or structure had at all material times continued to be an industrial building or structure, and ends with the fiftieth year after that in which the building or structure was first used; or

(b)

three per cent of the said residue,

whichever is the greater, and so on for any subsequent sales:

Provided that no annual allowance shall be made to any person for any year of assessment after the end of the fiftieth year after that in which the building or structure was first used.”;

(d)

by inserting, immediately after subsection (3) thereof, the following subsection: —

“(3A) For the purposes of application to any industrial building or structure occupied for the purposes of a trade in intensive pig and poultry production and approved by the Minister under subsection (1) of section 18 of this Act, the reference to “three per cent” in subsections (2) and (3) of this section and in the sixteenth line of subsection (5) of section 18 of this Act shall be read as a reference to “five per cent”; and”

(e)

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

“(5) For the purposes of subsection (1) of this section where a person has incurred capital expenditure on the purchase of an industrial building or structure (including the purchase of a leasehold interest therein of not less than twenty-five years) which has not previously been used by any person, he shall be deemed to have incurred expenditure on the construction of that industrial building or structure equal to the cost of construction of that industrial building or structure or to the net price paid by him for that industrial building or structure or the interest therein, whichever is the less, if —

(a)	the person claiming the initial allowance by virtue of this subsection purchased the industrial building or structure or acquired the leasehold interest therein from the person who constructed that building or structure; and
(b)	no initial allowance has been granted under subsection (1) of this section in respect of that industrial building or structure to the person who constructed that building or structure.”.

Amendment of section 18

7. Section 18 of the principal Act is amended by deleting the word “one-fiftieth” in the sixteenth line of subsection (5) thereof and substituting therefor the words “three per cent”.

Amendment of section 19

8. Section 19 of the principal Act is amended —

(a)

by inserting, immediately after the word “prescribed” in the ninth line of subsection (1) thereof, the words “either generally or for any person or class of persons in respect of any machinery or plant or class of machinery or plant”; and

(b)

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

“(2D) No allowance under this section shall be made in respect of a motor car within the meaning of subsection (2C) of this section, which is not, at the end of the basis period for any year of assessment, registered as a business service passenger vehicle for the purposes of the Road Traffic Act (Cap. 92) and the rules made thereunder.”.

Amendment of section 26

9. Section 26 of the principal Act is amended —

(a)

by inserting, immediately after subsection (1) thereof, the following subsection: —

“(1A) An insurance company shall maintain separate accounts for the income derived by it from carrying on the business (other than the business of life assurance) of reinsuring offshore risks.”;

(b)

by deleting the full-stop at the end of subsection (2) thereof and substituting therefor a colon and by inserting immediately thereafter the following proviso: —

“Provided that in ascertaining the gains or profits derived by an insurance company from carrying on the business (other than the business of life assurance) of reinsuring offshore risks for the purposes of any concessionary rate of tax prescribed by regulations made under section 43C of this Act —

“(i)	no income other than income from premiums, dividends and interest shall be included;
(ii)	income in respect of dividends and interest shall be apportioned in such manner as may be prescribed by those regulations; and
(iii)	any item of expenditure not directly attributable to that business shall be apportioned in such manner as may be prescribed by those regulations.”; and

(c)

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

“(5) For the purposes of this section and section 43C of this Act, “offshore risks” means any risk outside Singapore and —

(a)

in relation to facultative general reinsurance —

(i)	the insured is not a person resident in Singapore or is not a permanent establishment in Singapore; and
(ii)	the insurer who issues the original policy of insurance is not a resident or a permanent establishment in Singapore;

(b)

in relation to treaty general reinsurance —

(i)	the insurer who issues the original policy of insurance is not a resident or a permanent establishment in Singapore; and
(ii)	not less than seventy-five per cent of the total risk is outside Singapore,

and where any such risk is in transit in Singapore it shall be deemed to be outside Singapore.”.

New section 37A

10. The principal Act is amended by inserting, immediately after section 37 thereof, the following section: —

“Restriction on deduction of trading losses against dividends

37A.—(1) Notwithstanding anything contained in this Act, in computing the assessable income of any company for any year of assessment, no deduction shall be allowed for any loss incurred by that company (hereinafter referred to as “the loss company”) against any dividends received by it from an associated company:

Provided that the Comptroller may allow such deduction if he is satisfied, having regard to all the circumstances of the case, that the object or one of the main objects of the declaration of dividends by the associated company to the loss company is not for the purpose of receiving any benefit or obtaining any advantage in relation to the application of this Act.

(2) Subsection (1) of this section shall not apply —

(a)	in respect of any loss incurred by the loss company after the end of its accounting period during which the relevant date occurs; and
(b)	in respect of any dividends paid by the associated company out of the profits of the associated company derived after the end of its accounting period during which the relevant date occurs.

(3) For the purposes of this section —

(a)

a company shall be deemed to be an associated company of a loss company if —

(i)	in the case of a private company at least twenty-five per cent of its issued capital is beneficially owned directly or indirectly by the loss company;
(ii)	in the case of a public company at least fifty per cent of its issued capital is beneficially owned directly or indirectly by the loss company;

(b)

“the relevant date” means the date when the associated company first became an associated company of the loss company;

(c)

any dividends received by the loss company from an associated company, being dividends which are paid by the associated company out of income representing, wholly or in part, dividends paid by another associated company of the loss company to the first-mentioned associated company shall be deemed to be dividends received by the loss company from the second-mentioned associated company; and this provision shall apply notwithstanding any company or companies interposed between the first-mentioned associated company and the second-mentioned associated company.

(4) For the purposes of paragraph (a) of subsection (3) of this section —

(a)

“private company” “public company” have the same meaning as in the Companies Act (Cap. 185);

(b)

where a loss company beneficially owns directly or indirectly a fraction of the issued capital of a second company which in turn beneficially owns directly or indirectly a fraction of the issued capital of a third company, the loss company shall be deemed to have a beneficial ownership of the issued capital of the third company equal to such fraction as results from the multiplication of those two fractions; and where the third company beneficially owns directly or indirectly a fraction of the issued capital of a fourth company, the loss company shall be deemed to have a beneficial ownership of the issued capital of the fourth company equal to such fraction as results from the multiplication of those three fractions, and so on.”.

Amendment of section 40

11. Section 40 of the principal Act is amended by deleting the full-stop at the end of subsection (1) thereof and substituting therefor a colon and by inserting immediately thereafter the following proviso: —

“Provided that the amount of tax which would be so payable if he were resident in Singapore for the purposes of this section shall be ascertained in accordance with the rates of tax specified in Part B of the Second Schedule.”.

Repeal and re-enactment of section 42

12. Section 42 of the principal Act is repealed and the following substituted therefor: —

“Rates of tax upon individuals

42.—(1) Subject to subsection (2) of this section, there shall be levied and paid for each year of assessment upon the chargeable income of every person (other than a company, a person not resident in Singapore, a trustee who is not the trustee of an incapacitated person, or an executor) tax in accordance with the rates specified in —

Second Schedule

(a)	Part A of the Second Schedule to this Act in respect of the chargeable income of an individual or Hindu joint family;
(b)	Part B of the Second Schedule to this Act in respect of the chargeable income of a person other than an individual or Hindu joint family.

(2) Without prejudice to section 50 of this Act, the rate of tax applicable to the income of an individual or Hindu joint family received in Singapore from outside Singapore shall be determined by reference to that income together with all other income and shall be deemed to be the highest rate applicable to his total income; and where such rate exceeds forty per cent it shall be reduced to forty per cent.”.

Repeal and re-enactment of section 43A

13. Section 43A of the principal Act is repealed and the following substituted therefor: —

“Concessionary rate of tax for specified Asian Currency Unit income

43A. Notwithstanding the provisions of section 43 of this Act, the Minister may by regulations provide that tax at the rate of ten per cent or such other concessionary rate be levied and paid for each year of assessment upon such income as the Minister may specify of a financial institution derived by it from the operation of its Asian Currency Unit approved by the Minister.”.

New section 43C

14. The principal Act is amended by inserting, immediately after section 43B thereof, the following section: —

“Concessionary rate of tax for reinsurance of risks outside Singapore

43C. Notwithstanding the provisions of section 43 of this Act, the Minister may by regulations provide that tax at the rate of ten per cent or such other concessionary rate shall be levied and paid for each year of assessment upon the income of an insurance company derived by it from carrying on the business (other than the business of life assurance) of reinsuring offshore risks.”.

Amendment of section 44

15. Section 44 of the principal Act is amended by inserting, immediately after the word “company” in the eighth line of subsection (3) thereof, the words “(excluding tax payable at the rate of ten per cent or such other concessionary rate as may be prescribed under section 43A or 43C of this Act)”.

New section 45B

16. The principal Act is amended by inserting. immediately after section 45A thereof, the following section: —

“Application of section 45 to non-resident director’s remuneration

45B. The provisions of section 45 of this Act shall apply in relation to the payment of any remuneration by a company to any director of the company who is not resident in Singapore as those provisions apply to any interest paid by a person to another person not known to him to be resident in Singapore and, for the purpose of such application, any reference in those provisions to interest shall be construed as a reference to such remuneration.”.

Repeal and re-enactment of section 46

17. Section 46 of the principal Act is repealed and the following substituted therefor: —

“Tax deducted from dividends, interests, etc.

46. Any tax —

(a)	which a person has deducted or is entitled to deduct from any dividend under the provisions of section 44 of this Act or has deducted from any interest or other payment under the provisions of section 45 or 45A of this Act or has deducted from any remuneration under the provisions of section 45B of this Act;
(b)	applicable to the share to which any person is entitled in the income of a body of persons or trust,

shall, when the income from which the tax has been deducted or when the share referred to in paragraph (b) is included in the chargeable income of any person, be set off for the purpose of collection against the tax charged on that chargeable income.”.

Amendment of section 50

18. Section 50 of the principal Act is amended by inserting, immediately after the word “income” at the end of subsection (3) thereof, the words “; and in any case where the rate exceeds forty per cent it shall be regarded as forty per cent”.

Repeal of section 74

19. Section 74 of the principal Act is repealed.

Amendment of section 79

20. Section 79 of the principal Act is amended —

(a)	by inserting, immediately after the word “object” in the proviso to subsection (2) thereof, the words “to the Chairman of the Board and”; and
(b)	by inserting, immediately after the word “that” in the first line of the proviso to subsection (3) thereof, the words “the Comptroller shall not be entitled to object to the Chairman of the Board and”.

Repeal and re-enactment of Second Schedule

21. The Second Schedule to the principal Act is repealed and the following substituted therefor: —

“SECOND SCHEDULE

Section 42.

Part A

Rates of Income Tax on Chargeable Income of An Individual or Hindu Joint Family

Chargeable Income.

Rate of Tax.

For every dollar of the first

2,500

5 per cent

For every dollar of the next

2,500

8 per cent

For every dollar of the next

2,500

10 per cent

For every dollar of the next

2,500

12 per cent

For every dollar of the next

5,000

15 per cent

For every dollar of the next

5,000

20 per cent

For every dollar of the next

5,000

25 per cent

For every dollar of the next

10,000

30 per cent

For every dollar of the next

15,000

35 per cent

For every dollar of the next

50,000

40 per cent

For every dollar of the next

100,000

45 per cent

For every dollar of the next

200,000

50 per cent

For every dollar exceeding

400,000

55 per cent

Part B

Rates of Tax on Chargeable Income of A Person Other Than An Individual or Hindu Joint Family

Chargeable Income.

Rate of Tax.

For every dollar of the first

2,500

6 per cent

For every dollar of the next

2,500

9 per cent

For every dollar of the next

2,500

12 per cent

For every dollar of the next

2,500

15 per cent

For every dollar of the next

5,000

20 per cent

For every dollar of the next

5,000

23 per cent

For every dollar of the next

5,000

25 per cent

For every dollar of the next

10,000

30 per cent

For every dollar of the next

15,000

40 per cent

For every dollar of the next

50,000

50 per cent

For every dollar exceeding

100,000

55 per cent

”.