Income Tax (Qualifying Debt Securities) (Amendment) Regulations 2006

No. S 52

Income Tax Act

(Chapter 134)

Income Tax (Qualifying Debt Securities) (Amendment) Regulations 2006

In exercise of the powers conferred by sections 13 (1)(a), (aa) and (ab) and (16) and 45A(2A) of the Income Tax Act, the Minister for Finance hereby makes the following Regulations:

Citation and commencement

1.—(1) These Regulations may be cited as the Income Tax (Qualifying Debt Securities) (Amendment) Regulations 2006 and shall, with the exception of regulation 4(b) and (c), be deemed to have come into operation on 1st January 2005.

(2) Regulation 4(b) and (c) shall be deemed to have come into operation on 26th January 2006.

Amendment of regulation 2

2. Regulation 2 of the Income Tax (Qualifying Debt Securities) Regulations (Rg 35) (referred to in these Regulations as the principal Regulations) is amended by inserting, immediately after the definition of “funds from Singapore operations”, the following definition:

“ “Islamic debt securities” has the same meaning as in section 43N(4) of the Act;”.

Amendment of regulation 3

3. Regulation 3 of the principal Regulations is amended —

(a)

by deleting sub-paragraphs (a) and (b) of paragraph (1) and substituting the following sub-paragraph:

“(a)

the exemption from tax shall not apply —

(i)	to any interest derived by a permanent establishment in Singapore;
(ii)	if the issuer of the qualifying debt securities does not include in all offering documents a statement to the effect that where interest is derived from any qualifying debt securities issued during the period from 27th February 1999 to 31st December 2008 by any person who is not resident in Singapore and who carries on any operation in Singapore through a permanent establishment in Singapore, the tax exemption shall not apply if such person acquires such securities using funds from Singapore operations; or
(iii)	if the issuer of the qualifying debt securities, or such other person as the Comptroller may direct, has not furnished to the Comptroller a return on the debt securities within such period as the Comptroller may specify and such other particulars in connection with those securities as the Comptroller may require; and”;

(b)

by inserting, immediately after the words “directly or indirectly, to investors” in paragraph (1)(c), the words “, the exemption from tax shall apply only if”;

(c)

by deleting the word “; and” at the end of paragraph (1)(c)(iii) and substituting a full-stop;

(d)

by deleting sub-paragraph (d) of paragraph (1); and

(e)

by deleting the words “paragraph (1)(a)” in paragraph (2) and substituting the words “paragraph (1)(a)(i)”.

Amendment of regulation 3A

4. Regulation 3A of the principal Regulations is amended —

(a)

by deleting sub-paragraphs (a) and (b) of paragraph (1) and substituting the following sub-paragraph:

“(a)

the exemption from tax shall not apply —

(i)

to any discount derived by a permanent establishment in Singapore; or

(ii)

if the issuer of the qualifying debt securities does not include in all offering documents a statement to the effect that where any discount is derived from any qualifying debt securities which —

(A)	mature within one year from the date of their issue; and
(B)	are issued during the period from 27th February 2004 to 31st December 2008,

by any person who is not resident in Singapore and who carries on any operation in Singapore through a permanent establishment in Singapore, the tax exemption shall not apply if such person acquires such securities using funds from Singapore operations; and”;

(b)

by deleting the word “or” at the end of paragraph (1)(a)(i);

(c)

by deleting the word “and” at the end of sub-paragraph (ii) of paragraph (1)(a) and substituting the word “or”, and by inserting immediately thereafter the following sub-paragraph:

“(iii)

if the issuer of the qualifying debt securities which mature within one year from the date of issue of the securities and are issued during the period from 27th February 2004 to 31st December 2008, or such other person as the Comptroller may direct, has not furnished to the Comptroller a return on the debt securities within such period as the Comptroller may specify and such other particulars in connection with those securities as the Comptroller may require; and”;

(d)

by inserting, immediately after the words “directly or indirectly, to investors” in paragraph (1)(c), the words “, the exemption from tax shall apply only if”; and

(e)

by deleting the words “paragraph (1)(a)” in paragraph (2) and substituting the words “paragraph (1)(a)(i)”.

New regulation 3B

5. The principal Regulations are amended by inserting, immediately after regulation 3A, the following regulation:

“Prescribed conditions for tax exemption on any amount payable from Islamic debt securities which are qualifying debt securities

3B.—(1) The conditions referred to in section 13(1)(ab) of the Act are —

(a)

the exemption from tax shall not apply —

(i)	to any amount that is payable to a permanent establishment in Singapore from Islamic debt securities which are qualifying debt securities;
(ii)	if the issuer of the Islamic debt securities which are qualifying debt securities, and issued during the period from 1st January 2005 to 31st December 2008, does not include in all offering documents a statement to the effect that the tax exemption shall not apply where any amount from those Islamic debt securities is payable to any person who is not resident in Singapore and who carries on any operation in Singapore through a permanent establishment in Singapore, if such person acquires such securities using funds from its Singapore operations; or
(iii)	if the issuer of the Islamic debt securities which are qualifying debt securities, and issued during the period from 1st January 2005 to 31st December 2008, or such other person as the Comptroller may direct, has not furnished to the Comptroller a return on the Islamic debt securities within such period as the Comptroller may specify and such other particulars in connection with those securities as the Comptroller may require; and

(b)

where the issuer of the Islamic debt securities which are qualifying debt securities, and issued during the period from 1st January 2005 to 31st December 2008, is a person who is a resident of or a permanent establishment in Singapore and where such securities are issued to a person who is not a resident of Singapore (referred to in this sub-paragraph as a non-resident person) in connection with or for the purpose of enabling that non-resident person to issue securities (referred to in this sub-paragraph as the relevant securities), directly or indirectly, to investors, the exemption from tax shall apply only if —

(i)	the relevant securities are qualifying debt securities;
(ii)	the relevant securities contain restrictions against the acquisition of such relevant securities by any investor who is a resident of or a permanent establishment in Singapore; and
(iii)	the relevant securities are not acquired by any investor using funds from its Singapore operations.

(2) For the purposes of paragraph (1)(a)(i) —

(a)	where a fund manager has invested the funds of a foreign investor, as defined in the Income Tax (Income from Funds Managed for Foreign Investors) Regulations 2003 (G.N. No. S 640/2003) in the Islamic debt securities as part of the management of those funds on behalf of the foreign investor, and the amount from the Islamic debt securities is payable to the foreign investor through the fund manager;
(b)	where a headquarters company approved under section 43E of the Act has invested the funds of its associated company outside Singapore approved under that section in the Islamic debt securities as part of the management of those funds on behalf of the associated company, and the amount from the Islamic debt securities is payable to the associated company through the headquarters company; or
(c)	where a Finance and Treasury Centre approved under section 43G of the Act has invested the funds of its associated company outside Singapore approved under that section in the Islamic debt securities as part of the management of those funds on behalf of the associated company, and the amount from the Islamic debt securities is payable to the associated company through the Finance and Treasury Centre,

the fund manager, headquarters company or Finance and Treasury Centre shall not be regarded as a permanent establishment of the foreign investor or approved associated company (as the case may be) solely by virtue of its management of funds on behalf of the foreign investor or approved associated company.”.

Amendment of regulation 4

6. Regulation 4 of the principal Regulations is amended —

(a)

by deleting the words “sub-paragraphs (c) and (d)” in paragraph (1)(e) and substituting the words “sub-paragraph (c) or (d)”;

(b)

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

“(1A) The arrangements referred to in paragraph (c) of the definition of “qualifying debt securities” in section 13(16) of the Act are —

(a)

where the Islamic debt securities are not issued under a programme —

(i)	the lead manager is a financial sector incentive (bond market) company; or
(ii)	the staff of the financial institution arranging the issue who are based in Singapore have a leading and substantial role in originating and structuring the issue and its distribution;

(b)

where the Islamic debt securities are issued under a programme —

(i)	the programme as a whole is arranged by an approved bond intermediary, the arrangement of which is completed on or before 31st December 2003;
(ii)	the programme as a whole is arranged by an approved bond intermediary, the arrangement of which is not completed on or before 31st December 2003 by the approved bond intermediary and the arrangement is completed by a financial sector incentive (bond market) company; or
(iii)	the programme as a whole is arranged by a financial sector incentive (bond market) company;

(c)

where the Islamic debt securities are issued by a new issuer who joins an existing programme which does not satisfy the requirement in sub-paragraph (b) —

(i)	the participation of the new issuer in the programme is arranged by a financial sector incentive (bond market) company, and that programme as a whole was previously arranged by any approved bond intermediary or an affiliate of any approved bond intermediary, the arrangement of which is completed on or before 31st December 2003; or
(ii)	the participation of the new issuer in the programme is arranged by a financial sector incentive (bond market) company, and that programme as a whole was previously arranged by a financial sector incentive (bond market) company or an affiliate of any financial sector incentive (bond market) company; and

(d)

where the Islamic debt securities are issued under a tranche of a programme which does not satisfy the requirement in sub-paragraph (b) or (c), the dealers for more than half of the Islamic debt securities issued under that tranche are —

(i)	financial institutions in Singapore where their staff based in Singapore have a leading and substantial role in the distribution of the Islamic debt securities; or
(ii)	financial sector incentive (bond market) companies.”; and

(c)

by deleting the words “paragraph (1)(b)(ii) and (e)” in paragraph (2) and substituting the words “paragraphs (1)(b)(ii) and (e) and (1A)(a)(ii) and (d)”.

Amendment of regulation 5

7. The principal Regulations are amended by renumbering regulation 5 as paragraph (1) of that regulation and by inserting immediately thereafter the following paragraph:

“(2) The conditions referred to in section 45A(2A) of the Act are —

(a)

an issuer of any Islamic debt securities which are qualifying debt securities, and issued during the period from 1st January 2005 to 31st December 2008, includes in all offering documents a statement to the effect that any person to whom an amount from those Islamic debt securities is payable shall, where such amount is not exempt from tax, include such amount in a return of income made under the Act;

(b)

an issuer of any Islamic debt securities which are qualifying debt securities, and issued during the period from 1st January 2005 to 31st December 2008, or such other person as the Comptroller may direct, furnishes to the Comptroller —

(i)	a return on the debt securities within such period as the Comptroller may specify; and
(ii)	such other particulars in connection with those Islamic debt securities as the Comptroller may require.”.

[G.N. No. S 350/2005]

Made this 25th day of January 2006.

LIM SIONG GUAN

Permanent Secretary,
Ministry of Finance,
Singapore.

[MF (R)32.19.2871 V4; AG/LEG/SL/134/2005/2 Vol. 1]

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