Economic Expansion Incentives (Relief from Income Tax) (Amendment) Act 1993

REPUBLIC OF SINGAPORE

GOVERNMENT GAZETTE

ACTS SUPPLEMENT

Published by Authority

NO. 35]

Friday, November 26

[1993

The following Act was passed by Parliament on 10th November 1993 and assented to by the President on 15th November 1993:—

Economic Expansion Incentives (Relief From Income Tax) (Amendment) Act 1993

(No. 36 of 1993)

I assent.

ONG TENG CHEONG

President.

15th November 1993.

Date of Commencement: 26th November 1993

An Act to amend the Economic Expansion Incentives (Relief from Income Tax) Act (Chapter 86 of the 1992 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 Economic Expansion Incentives (Relief from Income Tax) (Amendment) Act 1993.

(2) Section 5 shall be deemed to have come into operation on 1st April 1993.

(3) Section 2 shall have effect for the year of assessment 1993 and subsequent years of assessment.

(4) Sections 3, 4 and 6 shall have effect for the year of assessment 1994 and subsequent years of assessment.

Amendment of section 10

2. Section 10 of the Economic Expansion Incentives (Relief from Income Tax) Act (referred to in this Act as the principal Act) is amended by inserting, immediately after subsection (1), the following subsection:

“(1A) Where the tax relief period of a pioneer enterprise referred to in subsection (1) expires during the basis period for any year of assessment, for the purpose of determining the income in respect of its old trade or business and its new trade or business for that year of assessment, there shall be deducted allowances provided for in sections 16, 17, 18, 19, 20, 21 and 22 of the Income Tax Act (Cap. 134) notwithstanding that no claim for such allowances has been made; and for the purpose of computing such allowances —

(a)	the allowances for that year of assessment shall be computed as if the old trade or business of the pioneer enterprise had not been deemed to have permanently ceased at the end of the tax relief period; and
(b)	the allowances computed in accordance with paragraph (a) shall be apportioned between the old trade or business and the new trade or business of the pioneer enterprise in such manner as appears to the Comptroller to be reasonable in the circumstances.”.

Amendment of section 19H

3. Section 19H of the principal Act is amended —

(a)

by deleting the words “subsection (2)” in the second line of subsection (1) and substituting the words “subsections (2) and (3)”; and

(b)

by deleting subsections (2), (3) and (4) and substituting the following subsections:

“(2) In determining the qualifying income of the post-pioneer company for the basis period for any year of assessment —

(a)	the allowances provided for in sections 16, 17, 18, 19, 19A, 20, 21 and 22 of the Income Tax Act (Cap. 134) shall be taken into account notwithstanding that no claim for such allowances has been made;
(b)	the allowances referred to in paragraph (a) for that year of assessment shall firstly be deducted against the qualifying income, and any unabsorbed allowances shall be deducted against the other income of the company subject to tax at the rate of tax under section 43(1)(a) of the Income Tax Act in accordance with subsection (3);
(c)	the balance, if any, of the allowances after the deduction in paragraph (b) shall be available for deduction for any subsequent year of assessment in accordance with section 23 of the Income Tax Act and shall be made in the manner provided in paragraph (b);
(d)	any loss incurred for that basis period shall be deducted in accordance with subsection (3) against the other income of the company subject to tax at the rate of tax under section 43(1)(a) of the Income Tax Act; and
(e)	the balance, if any, of the losses after the deduction in paragraph (d) shall be available for deduction for any subsequent year of assessment in accordance with section 37 of the Income Tax Act firstly against the qualifying income, and any balance of the losses shall be deducted against the other income of the company subject to tax at the rate of tax under section 43(1)(a) of the Income Tax Act (Cap. 134) in accordance with subsection (3).

(3) Section 37B of the Income Tax Act shall apply with such modifications as may be necessary in relation to the deduction of the allowances provided for in sections 16, 17, 18, 19, 19A, 20, 21 and 22 of that Act or the losses under section 37 of that Act in respect of the qualifying income of the post-pioneer company and such part of its income as is subject to tax at the rate of tax under section 43(1)(a) of that Act; and for the purpose of such application any reference in section 37B of that Act to —

(a)	concessionary income shall be read as a reference to its qualifying income; and
(b)	normal income shall be read as a reference to such part of its income as is subject to tax at the rate of tax under section 43(1)(a) of that Act.

(4) In this section, “qualifying income” means the income of a post-pioneer company in respect of its qualifying activities.”.

Amendment of section 77

4. The principal Act is amended by renumbering section 77 as subsection (1) of that section, and by inserting immediately thereafter the following subsection:

“(2) The Minister may, where he is satisfied that it is expedient in the public interest to do so and subject to such terms and conditions as he may impose, extend the tax relief period of any warehousing company or servicing company for such further periods, not exceeding 5 years at any one time, as he thinks fit.”.

New section 97G

5. The principal Act is amended by inserting, immediately after section 97F, the following section:

“Deduction of losses incurred overseas by eligible investment company

97G.—(1) Any company, incorporated and resident in Singapore, desirous of investing in an overseas company —

(a)	which is developing or using a new technology in relation to a product, process or service; or
(b)	for the purpose of acquiring for use in Singapore any technology from the overseas company or for the purpose of gaining access to any overseas market for itself or any of its subsidiaries,

may make an application in respect of the investment in that overseas company in the prescribed form to the Minister to be approved as an eligible investment company.

(2) Where the Minister is satisfied in respect of any application under subsection (1) that —

(a)	the technology, if introduced in Singapore, or the access which would be gained to any overseas market, would promote or enhance the economic or technological development of Singapore; and
(b)	not less than 50% of the paid-up capital of the company which makes the application is beneficially owned by citizens or permanent residents of Singapore unless the Minister otherwise decides,

he may approve the company as an eligible investment company and issue a certificate to the company subject to such conditions as he may impose.

(3) Any company approved by the Minister under subsection (2) shall maintain the shareholding referred to in subsection (2)(b) throughout the period during which it holds shares in the overseas company.

(4) Where, in the basis period for any year of assessment, an eligible investment company incurs any loss on the sale of any share in, or from the liquidation of, an overseas company, that loss shall be treated as if it were a loss incurred from a trade or business carried on by the eligible investment company.

(5) The loss referred to in subsection (4) in relation to any overseas company shall be allowed as a deduction against the statutory income of the eligible investment company for any year of assessment in accordance with section 37 of the Income Tax Act (Cap. 134), subject to the following provisions:

(a)	any gain made or loss incurred on the sale of any share in that overseas company which occurred during the period of less than two years from the date of issue of the share shall be disregarded;
(b)	any gain made or loss incurred on the sale of any share in, or from the liquidation of, that overseas company which occurred after 8 years from the date of approval under this section of the eligible investment company in respect of that overseas company shall be disregarded;
(c)	no deduction under this section shall be allowed unless the total losses in respect of the sale of any share in, or from the liquidation of, that overseas company up to the end of the basis period for that year of assessment exceed the total gains made in respect of the sale of any share in, or from the liquidation of, that overseas company up to the end of that basis period; and
(d)	the amount of deduction under this section shall not exceed the excess of the total losses over the total gains referred to in paragraph (c).

(6) Where in the basis period for any year of assessment an eligible investment company makes a gain from the sale of any share in, or from the liquidation of, an overseas company and where any loss in relation to that overseas company has been allowed as a deduction to the eligible investment company under this section for any previous year of assessment, such gain shall, so far as it is not chargeable to tax as a revenue or trading receipt, be deemed to be income of the eligible investment company chargeable to tax for that year of assessment, except that —

(a)	no gain shall be so deemed to be income unless the total amount of the losses allowed for previous years of assessment exceed the total amount of the gains deemed to be income for previous years of assessment;
(b)	the amount of the gain chargeable to tax shall not exceed the excess of the total amount of the losses allowed for previous years of assessment over the total amount of the gains deemed to be income for previous years of assessment; and
(c)	the losses and gains referred to in subsection (5)(a) and (b) shall be disregarded.

(7) For the purposes of this section, the loss shall be the excess of the purchase price of the shares —

(a)	over the proceeds from the sale; and where the open market value at the date of the sale (or the value of net asset backing as determined by the Comptroller in the case of a company not quoted on any stock exchange) of the shares is greater than the sale proceeds, that value shall be deemed to be the proceeds from the sale; or
(b)	over the proceeds from the liquidation,

as the case may be.

(8) For the purposes of this section, the gain shall be the excess of —

(a)	the proceeds from the sale; and where the open market value at the date of the sale (or the value of net asset backing as determined by the Comptroller in the case of a company not quoted on any stock exchange) of the shares is greater than the sale proceeds, that value shall be deemed to be the proceeds from the sale; or
(b)	the proceeds from the liquidation,

as the case may be, over the purchase price of the shares.

(9) For the purposes of this section, in computing the gain or loss from the sale of any share, the shares allotted on an earlier date shall be deemed to have been sold first.

(10) The deduction under this section shall be available only to a person to whom shares are allotted by an overseas company on or after 1st April 1993 and shall not be available to any transferee of such shares.

(11) Notwithstanding anything in this section, where it appears to the Comptroller that any deduction under this section ought not to have been given to an eligible investment company by reason of the revocation under section 99 of a certificate issued to that company, the Comptroller may, at any time within 12 years from the date of the revocation, make such assessment or additional assessment upon the eligible investment company or any of its shareholders as may be necessary in order to recover any tax which should have been payable by the eligible investment company or any of its shareholders.”.

New Part XIIIB

6. The principal Act is amended by inserting, immediately after section 97G, the following Part:

“PART XIIIB

OVERSEAS ENTERPRISE INCENTIVE

Interpretation of this Part

97H. For the purpose of this Part, unless the context otherwise requires —

“qualifying activity” means any of the following activities in an overseas project:

(a)	manufacturing activities or services;
(b)	infrastructure development and management;
(c)	tourism development and management;
(d)	services referred to in paragraphs (a) to (f) of the definition of “qualifying services” in section 44A; and
(e)	any other activities or services as may be prescribed;

“qualifying income” means —

(a)	dividends received from any qualifying investment, specified in the certificate issued under section 97I(2), in any overseas company to the extent that the Comptroller is satisfied that such dividends are paid out of income of the overseas company derived from any qualifying activity; and
(b)	income derived from Singapore or received in Singapore from outside Singapore from any qualifying activity;

“overseas enterprise” means a company approved as an overseas enterprise under section 97I(2) and in respect of which not less than 50% of the paid-up capital is beneficially owned by citizens or permanent residents of Singapore throughout the period during which it holds shares in an overseas company in the case of dividends received from qualifying investment in that overseas company or throughout the period during which it carries out any qualifying activity in the case of income derived from that qualifying activity, unless the Minister otherwise decides.

Application for and issue of certificate to overseas enterprise

97I.—(1) Any company, incorporated and resident in Singapore, which is desirous of expanding its business by investing in an overseas company or carrying out any qualifying activity may make an application to the Minister to be approved as an overseas enterprise in such form and with such particulars as may be prescribed.

(2) Where the Minister is satisfied in respect of any application under subsection (1) that the investment in the overseas company or qualifying activity would promote or enhance the economic or technological development of Singapore, he may approve the company as an overseas enterprise and issue a certificate to the company subject to such conditions as he may impose.

(3) Every certificate issued to an overseas enterprise under this section shall specify —

(a)	a date as the commencement day from which the company shall be entitled to tax relief under this Part; and
(b)	the qualifying investment in an overseas company or qualifying activity.

(4) The Minister may, in his discretion, upon the application of an overseas enterprise, amend its certificate by substituting for the commencement day specified therein such earlier or later date as he thinks fit and thereupon the provisions of this Part shall have effect as if the date so substituted were the commencement day in relation to that certificate.

Tax relief period of overseas enterprise

97J. The tax relief period of an overseas enterprise shall commence on its commencement day and shall continue for such period or periods, not exceeding 10 years in the aggregate, as the Minister may determine.

Separate accounts for qualifying activity

97K. An overseas enterprise shall maintain separate accounts in respect of each qualifying activity.

Power to give directions

97L. For the purposes of the Income Tax Act (Cap. 134) and this Act, the Comptroller may direct that —

(a)

any sums payable to an overseas enterprise in any accounting period which, but for the provisions of this Act, might reasonably and properly have been expected to be payable in the normal course of business, after the end of that period shall be treated as not having been payable in that period but as having been payable on such date, after that period, as the Comptroller thinks fit and, where that date is after the end of the tax relief period of the overseas enterprise, as having been so payable, on that date, as a sum payable in respect of its trade or business immediately after the end of its tax relief period; and

(b)

any expense incurred by an overseas enterprise within one year after the end of its tax relief period which, but for the provisions of this Act, might reasonably and properly have been expected to be incurred, in the normal course of business, during its tax relief period shall be treated as not having been incurred within that year but as having been incurred for the purpose of its trade or business during its tax relief period and on such date, during its tax relief period, as the Comptroller thinks fit.

Qualifying income

97M.—(1) The qualifying income of an overseas enterprise for any accounting period during its tax relief period shall be ascertained in accordance with the provisions of the Income Tax Act (Cap. 134) after making such adjustments as may be necessary in consequence of a direction given under section 97L and, in particular, the following provisions shall apply:

(a)

income other than the qualifying income shall be excluded and separately assessed;

(b)

there shall be deducted in arriving at the qualifying income —

(i)	all direct costs and expenses incurred in respect of that qualifying income;
(ii)	all indirect expenses which are reasonably and properly attributable to that qualifying income; and
(iii)	donations allowable under the Income Tax Act which the Comptroller may allocate as he thinks fit;

(c)

the allowances provided for in sections 16 to 22 (where applicable) of the Income Tax Act attributable to the qualifying income during the tax relief period shall be taken into account notwithstanding that no claim for those allowances has been made;

(d)

where in any year of assessment full effect cannot, by reason of an insufficiency of qualifying income for that year of assessment, be given to those allowances, the balance of the allowances shall be added to, and be deemed to form part of, the corresponding allowances, if any, for the next succeeding year of assessment, and, if no such corresponding allowances fall to be made for that year, shall be deemed to constitute the corresponding allowances for that year, and so on for subsequent years of assessment, and shall, during the tax relief period, only be made against the qualifying income and the balance of such allowances shall not be available as a deduction against any other income;

(e)

for the purposes of paragraphs (b)(ii) and (c), the amounts attributable to the qualifying income shall be determined on such basis as the Comptroller thinks reasonable and proper;

(f)

where the overseas enterprise has, during its tax relief period, incurred a loss for any year in respect of any qualifying activity, that loss shall during the tax relief period only be deducted against the qualifying income and the balance of such losses shall not be available as a deduction against any other income;

(g)

for the purposes of paragraphs (b), (c) and (f), expenses, donations, allowances and losses attributable to any qualifying income derived from outside Singapore shall only be deducted against such income and the balance of such expenses, donations, allowances and losses shall not be available as a deduction against any other income; and

(h)

subject to sections 23 and 37 of the Income Tax Act (Cap. 134), any allowances and losses attributable to any qualifying income derived from Singapore which remain unabsorbed at the end of its tax relief period shall be available for deduction in its post tax relief period.

Application of Part X of Income Tax Act

97N. Part X of the Income Tax Act (relating to returns of income) shall apply in all respects as if the qualifying income of an overseas enterprise were chargeable to tax.

Statement of qualifying income

97O. For each year of assessment, the Comptroller shall issue to the overseas enterprise a statement showing the amount of qualifying income for that year of assessment, and Parts XI and XII of the Income Tax Act (relating to objections and appeals) and any regulations made thereunder shall apply, mutatis mutandis, as if that statement were a notice of assessment given under those provisions.

Exemption from income tax

97P. Subject to section 97Q(6) where any statement issued under section 97O has become final and conclusive, the amount of the qualifying income shown by the statement shall not form part of the statutory income of the overseas enterprise for any year of assessment and shall be exempt from tax:

Provided that the Comptroller may, in his discretion and before such a statement has become final and conclusive, declare that a specified part of the amount of such income is not in dispute and such an undisputed amount of income is exempt from tax, pending such a statement becoming final and conclusive.

Certain dividends exempted from income tax

97Q.—(1) As soon as any amount of qualifying income has become exempt from tax under section 97P, that amount shall be credited to an account to be kept by the overseas enterprise for the purposes of this section.

(2) Where that account is in credit at the date on which any dividends are paid by the overseas enterprise out of income which has been exempted, an amount equal to those dividends or to that credit, whichever is the less, shall be debited to the account.

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

(4) Notwithstanding subsections (3) and (9), where any dividend is paid on any share of a preferential nature, it shall not be so exempt in the hands of the shareholder.

(5) The overseas enterprise shall deliver to the Comptroller a copy of that account, made up to a date specified by him, whenever called upon to do so by notice in writing sent by him to its registered office, until such time as he is satisfied that there is no further need for maintaining the account.

(6) Notwithstanding section 97P and subsections (1) to (5), where it appears to the Comptroller that —

(a)	any amount of exempted income of an overseas enterprise; or
(b)	any dividend exempted in the hands of any shareholder, including any dividend paid by a holding company to which subsection (9) applies,

ought not to have been exempted by reason of a direction under section 97L, having been made with respect to the overseas enterprise, after any income of that enterprise has been exempted under the provisions of this Act or the revocation under section 99 of a certificate issued to the overseas enterprise, the Comptroller may, at any time within 12 years of the date of any such direction or revocation —

(i)	make such assessment or additional assessment upon the overseas enterprise or any such shareholders as may appear to be necessary in order to counteract any profit or income obtained from any such amount which ought not to have been exempted; or
(ii)	direct the overseas enterprise to debit its account, kept in accordance with subsection (1), with such amount as the circumstances require.

(7) Parts XI and XII of the Income Tax Act (Cap. 134) (relating to objections and appeals) and any regulations made thereunder shall apply, mutatis mutandis, to any direction given under subsection (6) as if it were a notice of assessment given under those provisions.

(8) Section 44 of the Income Tax Act shall not apply in respect of any dividend or part thereof which is debited to the account required to be kept for the purposes of this section.

(9) Where an amount has been received by way of dividend from an overseas enterprise by a shareholder and the amount is exempt from tax under subsections (1) to (8), if that shareholder is a company (referred to in this section as the holding company) which holds, at the time any dividend is declared, the beneficial interest in all the issued shares of the overseas enterprise (or in not less than such proportion of those shares as the Minister may approve), 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 that amount, shall be exempt from tax in the hands of those shareholders; and section 44 of the Income Tax Act shall not apply in respect of any dividend or part thereof so exempt.

Certification of income by auditor

97R. The Comptroller may require an auditor to certify the income derived by an overseas enterprise from its qualifying activity, any direct costs and expenses incurred therefor and any dividends from qualifying investment in an overseas company to have been paid out of income from its qualifying activity for the purposes of section 97P.”.

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