Income Tax (Concessionary Rate of Tax for Asian Currency Unit Income) Regulations

Income Tax Act

(CHAPTER 134, Section 43A)

Income Tax (Concessionary Rate of Tax for
Asian Currency Unit Income) Regulations

Rg 10

G.N. No. S 254/1988

REVISED EDITION 1998

(15th September 1998)

[16th September 1988]

Citation

1. These Regulations may be cited as the Income Tax (Concessionary Rate of Tax for Asian Currency Unit Income) Regulations.

Definitions

2. In these Regulations —

“approved securities company” means a company approved under section 43A (1) (c) of the Act;

“designated investments” means —

(a)

stocks and shares denominated in any foreign currency of companies not incorporated and not resident in Singapore, excluding stocks and shares of companies incorporated in Malaysia which are listed on the Stock Exchange of Singapore or on the Kuala Lumpur Stock Exchange;

(b)

securities, other than stocks and shares, denominated in any foreign currency (including bonds, notes, certificates of deposit and treasury bills) issued by foreign governments, foreign banks outside Singapore and companies not incorporated and not resident in Singapore;

(c)

futures contracts denominated in any foreign currency held in any futures exchange;

(d)

any immovable property situated outside Singapore;

(e)

certificates of deposit, notes and bonds issued by Asian Currency Units in Singapore;

(f)

Asian Dollar Bonds approved under section 13(1)(v) of the Act;

(g)

deposits in Singapore with banks approved under section 13(9) of the Act;

(h)

foreign currency deposits with financial institutions outside Singapore;

(i)

stocks, shares, bonds and other securities listed on the Stock Exchange of Singapore or on the Kuala Lumpur Stock Exchange and other stocks, shares, bonds and securities issued by companies incorporated and resident in Singapore;

(j)

Singapore Government securities;

(k)

foreign exchange transactions in currencies other than Singapore dollars carried out in or after the basis period for the year of assessment 1992; and

(l)

transactions in currencies other than Singapore dollars carried out on or after 1st April 1993 in interest rate or currency contracts on a forward basis, interest rate or currency options and interest rate or currency swaps with —

(i)	an Asian Currency Unit of a financial institution;
(ii)	a person who is neither a resident of nor a permanent establishment in Singapore; or
(iii)	a branch office outside Singapore of a company resident in Singapore;

“foreign investor” —

(a)

in relation to an individual, means an individual who is not resident in Singapore and not a citizen of Singapore and who is the beneficial owner of the funds managed by the approved Asian Currency Unit;

(b)

in relation to a company, means a company not resident in Singapore and in the case of —

(i)	a company with not more than 50 shareholders, the whole of its issued capital (excluding the amount owned directly by the Government of Singapore Investment Corporation Pte Ltd (referred to in these Regulations as GIC)) is beneficially owned, directly or indirectly, by persons who are not citizens of Singapore and not resident in Singapore; and
(ii)	a company with more than 50 shareholders, not more than 20% (excluding the percentage owned directly by GIC) of its issued capital is beneficially owned, directly or indirectly, by persons who are citizens of Singapore or resident in Singapore; and

(c)

in relation to a trust fund, means a trust fund where not more than 20% (excluding the percentage held directly by GIC) of the value of the fund is beneficially held, directly or indirectly, by persons who are not foreign investors referred to in paragraph (a) or (b) and, unless waived by the Minister or such person as he may appoint, where —

(i)	the fund is created outside Singapore; and
(ii)	the trustees of the fund are neither citizens of Singapore nor resident in Singapore;

“offshore trade transactions” means trade transactions where —

(a)	neither the buyer nor the seller is a resident of Singapore or a permanent establishment in Singapore;
(b)	the goods are not exported from or imported into Singapore except for transhipment; and
(c)	the transactions are in foreign currencies.

10% tax payable on income of Asian Currency Unit

3. Subject to regulations 4, 5 and 6, tax shall be payable at the rate of 10% on the income of the Asian Currency Unit of a financial institution derived by it from the following activities:

(a)

loans in foreign currencies, other than bonds and debentures specified in paragraph (e), made to persons outside Singapore to be used outside Singapore where the interest on such loans is not borne, directly or indirectly, by a person resident in Singapore or a permanent establishment in Singapore, except in respect of any business carried on outside Singapore by a person resident in Singapore through a permanent establishment outside Singapore;

(b)

opening, advising or confirming of letters of credit relating to offshore trade transactions;

(c)

financing or re-financing of offshore trade transactions with or without letters of credit;

(d)

transactions in foreign currencies with banks or branch offices outside Singapore or with other Asian Currency Units in Singapore with regard to any of the following:

(i)	loans;
(ii)	placement of funds;
(iii)	bankers’ acceptances on bills relating to offshore trade transactions;
(iv)	bills relating to offshore trade transactions; and
(v)	negotiable certificates of deposit;

(e)

managing, underwriting or selling (as a member of a selling group) the following types of securities denominated in any foreign currency:

(i)	Asian Dollar Bonds approved by the Minister under section 13(1)(v) of the Act;
(ii)	Asian Dollar Bonds and other bonds and debentures where the interest on such bonds and debentures is not borne, directly or indirectly, by a person resident in Singapore or a permanent establishment in Singapore except in respect of any business carried on outside Singapore through a permanent establishment outside Singapore; and
(iii)	fixed or floating rate notes and fixed or floating rate negotiable certificates of deposit issued by banks;

(f)

transacting, broking and investing in securities specified in paragraph (e);

(g)

providing advisory services relating to financial matters to persons outside Singapore;

(h)

foreign exchange transactions in currencies, other than Singapore dollars, with banks or branch offices or other persons outside Singapore or with other Asian Currency Units in Singapore;

(i)

transactions in gold bullion, gold futures or financial futures, in foreign currencies with —

(i)	an Asian Currency Unit of another financial institution;
(ii)	a member of the Singapore International Monetary Exchange;
(iii)	a person who is neither a resident of nor a permanent establishment in Singapore; or
(iv)	a branch office outside Singapore of a company resident in Singapore;

(j)

providing guarantees, performance bonds, standby letters of credit and services relating to remittances where —

(i)

in the case of a guarantee, performance bond or standby letter of credit, the party on whose behalf as well as the party in whose favour the facility is issued is an Asian Currency Unit of a financial institution, or a person who is neither a resident of nor a permanent establishment in Singapore, or a permanent establishment outside Singapore of a person resident in Singapore in respect of any business carried on outside Singapore through that permanent establishment; and

(ii)

in the case of services relating to remittances, the person for whom as well as the person to whom the remittances are made is an Asian Currency Unit of a financial institution or is a person who is neither a resident of nor a permanent establishment in Singapore;

(k)

services (including services as a broker, as a nominee or as a custodian) on behalf of a person who is neither a resident of nor a permanent establishment in Singapore in connection with transactions relating to —

(i)	stocks, shares, bonds and other securities, denominated in any foreign currency, issued by a company which is not incorporated in Singapore and which is not resident in Singapore;
(ii)	negotiable certificates of deposit denominated in any foreign currency;
(iii)	Asian Dollar Bonds; or
(iv)	bonds denominated in any foreign currency issued by any foreign government;

(l)

services relating to transactions involving interest rate or currency swaps, in currencies other than Singapore dollars, for or with —

(i)	an Asian Currency Unit of another financial institution;
(ii)	a person who is neither a resident of nor a permanent establishment in Singapore; or
(iii)	a branch office outside Singapore of a company resident in Singapore;

(m)

the sale of stocks, shares, bonds and other securities (other than those specified in paragraph (e)) denominated in foreign currencies, issued by a company which is not incorporated in Singapore and which is not resident in Singapore and bonds denominated in any foreign currency issued by any foreign government to —

(i)	a person who is neither a resident of nor a permanent establishment in Singapore;
(ii)	an Asian Currency Unit of another financial institution;
(iii)	an approved securities company; or
(iv)	a foreign investor as defined in the Income Tax (Income from Funds Managed for Foreign Investors) Regulations (Rg 8) where such sale is transacted through a Fund Manager approved under section 43A(1)(b) of the Act;

(n)

subject to regulation 8, managing the funds of a foreign investor —

(i)	after 1st May 1983, for the purpose of any designated investments specified in paragraphs (a) to (h) of the definition of ``designated investments’’ in regulation 2;
(ii)	after 7th March 1986, for the purpose of any designated investments specified in paragraphs (i) and (j) of that definition;
(iii)	in or after the basis period for the year of assessment 1992, for the purpose of any designated investments specified in paragraph (k) of that definition; and
(iv)	on or after 1st April 1993, for the purpose of any designated investments specified in paragraph (l) of that definition;

(o)

providing investment advisory services to a foreign investor, in or after the basis period for the year of assessment 1993, in relation to any designated investments;

(p)

services on behalf of a company which is neither incorporated nor resident in Singapore (excluding a permanent establishment in Singapore of such a company) in respect of the arrangement, underwriting, management and placement of securities by such a company where —

(i)	such securities are denominated in any foreign currency;
(ii)	the placement of such securities is with persons who are neither residents nor permanent establishments in Singapore; and
(iii)	the payment for such services and other expenses in connection with the issue of such securities are not borne, directly or indirectly, by a person resident in Singapore or a permanent establishment in Singapore;

(q)

providing trustee or custodian services referred to in regulation 3 of the Income Tax (Concessionary Rate of Tax for Approved Trustee Companies) Regulations (Rg 21) where the payments for such services to the Asian Currency Unit are not borne, directly or indirectly, by a person resident in Singapore or a permanent establishment in Singapore;

(r)

providing to any holder of a credit or charge card services in connection with the use of the card where —

(i)	the holder of the card is not resident in Singapore;
(ii)	the billing for the transactions for which the card is used is denominated in any foreign currency;
(iii)	the card is used outside Singapore for the purpose of making payments to a person outside Singapore who is neither resident in Singapore nor a permanent establishment in Singapore; and
(iv)	the payments for such services to the Asian Currency Unit are not borne, directly or indirectly, by a person resident in Singapore or a permanent establishment in Singapore, except in respect of any business carried on outside Singapore through a permanent establishment outside Singapore;

(s)

transactions in silver bullion, silver futures, platinum bullion or platinum futures, denominated in foreign currencies with —

(i)	an Asian Currency Unit of another financial institution;
(ii)	a member of the Singapore International Monetary Exchange;
(iii)	a person who is neither a resident of nor a permanent establishment in Singapore; or
(iv)	a branch office outside Singapore of a company resident in Singapore;

(t)

loans of securities specified in paragraph (k) (i) and (iv) under a securities lending arrangement in writing to —

(i)	an Asian Currency Unit of another financial institution;
(ii)	an approved securities company;
(iii)	a person who is neither a resident of nor a permanent establishment in Singapore;
(iv)	a branch office outside Singapore of a bank resident in Singapore which has an Asian Currency Unit; or
(v)	a foreign investor as defined in the Income Tax (Income from Funds Managed for Foreign Investors) Regulations (Rg 8) where such loans are transacted through a Fund Manager approved under section 43A (1) (b)of the Act;

(u)

subject to regulation 8, arranging loans of securities specified in paragraph (k)(i) and (iv) on behalf of foreign investors under a securities lending arrangement in writing to —

(i)	an Asian Currency Unit of another financial institution; or
(ii)	an approved securities company;

(v)

services as a broker on behalf of an Asian Currency Unit of another financial institution or an approved securities company in connection with the sale of the securities specified in paragraph (k) which are owned by that Asian Currency Unit of the other financial institution or that approved securities company to —

(i)	a person who is neither a resident of nor a permanent establishment in Singapore;
(ii)	an Asian Currency Unit of another financial institution;
(iii)	another approved securities company; or
(iv)	a foreign investor as defined in the Income Tax (Income from Funds Managed for Foreign Investors) Regulations (Rg 8) where such sale is transacted through a Fund Manager approved under section 43A (1) (b)of the Act;

(w)

services as a nominee or custodian on behalf of an Asian Currency Unit of another financial institution or an approved securities company in connection with transactions relating to the securities specified in paragraph (k) which are owned by that Asian Currency Unit of the other financial institution or that approved securities company.

Computation of certain income of Asian Currency Unit from managing funds of foreign investor as defined in paragraph (b) (i) of definition of “foreign investor” in regulation 2

4. In respect of services provided to a foreign investor under regulation 3(n), (o) and (u), where the foreign investor is a company referred to in paragraph (b) (i) of the definition of “foreign investor” in regulation 2 in which GIC is a shareholder, the amount of fees and commissions which is chargeable to tax at the concessionary rate of 10% under regulation 3 shall be computed in accordance with the formula —

where A

is the amount of issued capital of the foreign investor which is not owned by GIC;

is the total amount of issued capital of the foreign investor;

is the amount of fees and commissions derived from the provision of the services referred to in regulation 3(n), (o) and (u) to the foreign investor.

Computation of certain income of Asian Currency Unit from managing funds of foreign investor as defined in paragraph (b) (ii) or (c) of definition of “foreign investor” in regulation 2

5. In respect of services provided to a foreign investor under regulation 3(n), (o) and (u), where the foreign investor is —

(a)	a company referred to in paragraph (b)(ii) of the definition of “foreign investor” in regulation 2 in which GIC is a shareholder and where more than 20% of its issued capital is beneficially owned, directly or indirectly, by persons who are citizens of Singapore or resident in Singapore; or
(b)	a trust fund referred to in paragraph (c) of the definition of “foreign investor” in regulation 2 in which GIC is a unit holder and where more than 20% of the value of the fund is beneficially held, directly or indirectly, by persons who are not foreign investors as defined in paragraphs (a) and (b) of the definition of “foreign investor” in regulation 2,

the amount of fees and commissions which is chargeable to tax at the concessionary rate of 10% under regulation 3 shall be computed in accordance with the formula —

where A

is the amount of issued capital of the foreign investor which is beneficially owned, directly or indirectly, by persons who are not citizens of Singapore and not resident in Singapore or the value of the trust fund which is beneficially held, directly or indirectly, by foreign investors as defined in paragraphs (a) and (b) of the definition of “foreign investor” in regulation 2, as the case may be;

is the total amount of issued capital of the foreign investor or the total value of the trust fund, as the case may be;

is the amount of fees and commissions derived from the provision of the services referred to in regulation 3(n), (o) and (u) to the foreign investor.

5% rate of tax on incremental income derived by Asian Currency Unit

6.—(1) Notwithstanding regulation 3, tax shall be payable at the rate of 5% on the incremental income derived by the Asian Currency Unit of a financial institution for any year of assessment from the following groups of activities:

(a)

the activities described in regulation 3 (k) and (m), if the following conditions are satisfied:

(i)	the relevant income of the Asian Currency Unit from such activities for that year of assessment and the relevant income of the Asian Currency Unit from such activities for any prior year of assessment (after the year of assessment 1994) is respectively not less than $10 million; and
(ii)	the financial institution has been operating in Singapore for at least 3 years immediately preceding that year of assessment;

(b)

the activities described in regulation 3 (p) , if the following conditions are satisfied:

(i)	the relevant income of the Asian Currency Unit from such activities for that year of assessment and the relevant income of the Asian Currency Unit from such activities for any prior year of assessment (after the year of assessment 1994) is respectively not less than $10 million; and
(ii)	the financial institution has been operating in Singapore for at least 3 years immediately preceding that year of assessment; and

(c)

the activities described in regulation 3 (n), (o) and (u), if the following conditions are satisfied:

(i)	the average monthly value of the funds of foreign investors managed by the Asian Currency Unit in the basis period for the year of assessment and the average monthly value of such funds in the basis period for any prior year of assessment (after the year of assessment 1994) is respectively not less than $5,000 million; and
(ii)	the Asian Currency Unit has been approved under regulation 8(1) for at least 3 years immediately preceding the year of assessment.

(2) For the purposes of this regulation —

“average monthly value”, in relation to funds of foreign investors managed by the Asian Currency Unit in the basis period for any year of assessment, means the aggregate of the values of such funds as at the last day of each month in that basis period for that year of assessment divided by the number of months in that basis period;

“incremental income”, in relation to the Asian Currency Unit for any year of assessment, means the amount of income determined in accordance with the formula —

(a)

(b)

whichever is the less,

where A

is the relevant income of the Asian Currency Unit for that year of assessment derived from —

(a)	in relation to paragraph (1)(a), the activities described in regulation 3(k) and (m);

(b)	in relation to paragraph (1)(b), the activities described in regulation 3(p);

(c)	in relation to paragraph (1)(c), the activities described in regulation 3(n), (o) and (u);

is the relevant income of the Asian Currency Unit derived from —

(a)	in relation to paragraph (1)(a), the activities described in regulation 3(k) and (m);

(b)	in relation to paragraph (1)(b), the activities described in regulation 3(p);

(c)	in relation to paragraph (1)(c), the activities described in regulation 3(n), (o) and (u),

for the year of assessment in which tax at the rate of 5% under this regulation was last levied on the relevant income from the same activities; or where tax at the rate of 5% under this regulation had not previously been so levied, the relevant income of the Asian Currency Unit derived from —

(i)	in relation to paragraph (1)(a), the activities described in regulation 3(k) and (m);

(ii)	in relation to paragraph (1)(b), the activities described in regulation 3(p), for the first year of assessment after the year of assessment 1994 in which the relevant income of the Asian Currency Unit from the same activities for that year of assessment is not less than $10 million;

(iii)

in relation to paragraph (1)(c), the activities described in regulation 3(n), (o) and (u), for the first year of assessment after the year of assessment 1994 in which the average monthly value of funds of foreign investors managed by the Asian Currency Unit in the basis period for that year of assessment is not less than $5,000 million;

is the relevant income of the Asian Currency Unit for that year of assessment derived from the group of activities described in regulation 3; and

is the chargeable income of the Asian Currency Unit for that year of assessment, after deducting any investment allowance given under Part X of the Economic Expansion Incentives (Relief from Income Tax) Act (Cap. 86), which is subject to tax at the rate of 10% under regulation 3;

“relevant income”, in relation to any group of activities of the Asian Currency Unit for any year of assessment, means the amount of income (if any) derived by the Asian Currency Unit from that group of activities ascertained in accordance with the provisions of the Act except that the following amounts shall not be deducted:

(a)	the amount of any allowances granted for that year of assessment under sections 16, 17, 18, 19, 19A, 20, 21 and 22 of the Act and any losses incurred in respect of that year of assessment, in respect of any other activity; and
(b)	the amount of any unabsorbed allowances and any unabsorbed losses in respect of any year of assessment preceding that year of assessment which would otherwise be available under sections 23 and 37(2) of the Act, respectively.

(3) For the purposes of this regulation —

(a)	the activities described in paragraph (m) of regulation 3 shall include the sale of bonds and securities specified in paragraph (e) thereof;
(b)	the activities described in paragraph (k) of regulation 3 shall not include those activities that are excluded under regulation 7(2); and
(c)	the activities described in regulation 3 (n), (o) and (u) shall not include those activities that are excluded under regulation 7(2) or 8(2).

(4) This regulation shall have effect from the year of assessment 1996 to the year of assessment 2000.

Application of regulation 3 (g), (j) and (l)

7.—(1) Regulation 3(g), (j) and (l) shall not apply where the payments for the services are borne, directly or indirectly —

(a)	by a person resident in Singapore (excluding for the purposes of regulation 3(j) and (l) an Asian Currency Unit of a financial institution), except in respect of any business carried on outside Singapore by a person resident in Singapore through a permanent establishment outside Singapore; or
(b)	by a permanent establishment in Singapore (excluding for the purposes of regulation 3(j) and (l) an Asian Currency Unit of a financial institution).

(2) Regulation 3(k), (n), (o) or (u) shall not apply where the payments for the services are borne, directly or indirectly, by a person resident in Singapore or by a permanent establishment in Singapore.

Application of regulation 3 (n), (o) and (u) to fees and commissions derived by Asian Currency Unit

8.—(1) Regulation 3(n), (o) or (u) shall apply to the fees and commissions derived by an Asian Currency Unit specially approved by the Minister or such person as he may appoint for that purpose.

(2) Regulation 3(n), (o) or (u) shall not apply where a foreign investor, other than an individual, whose funds are managed by an Asian Currency Unit —

(a)	has a permanent establishment in Singapore (other than an approved Asian Currency Unit);
(b)	carries on a business in Singapore;
(c)	beneficially owns more than 20% of the issued capital of any company incorporated in Singapore; or
(d)	has 20% or more of its issued capital beneficially owned, directly or indirectly, by a company which falls within sub-paragraph (a), (b) or (c),

unless approval is granted by the Minister or such person as he may appoint.

(3) An approved Asian Currency Unit shall keep and maintain such records of the particulars of foreign investors as may be required by the Minister for the purposes of regulation 3(n), (o) or (u).

Determination of income chargeable to tax

9.—(1) For the purposes of regulations 3, 4, 5 and 6, the Comptroller shall determine —

(a)	the income chargeable to tax of the Asian Currency Unit of a financial institution having regard to such expenses, capital allowances and donations allowable under the Act as are, in his opinion, to be deducted in ascertaining such income; and
(b)	the manner and extent to which any losses arising from the activities specified in regulation 3 may be deducted under section 37(2) of the Act in ascertaining the chargeable income of a financial institution for the year of assessment 1986 or any subsequent years of assessment.

(2) For the purposes of paragraph (1), any payment made by an Asian Currency Unit of a financial institution to an Asian Currency Unit of another financial institution for services rendered under regulation 3(w) or to an approved securities company for services rendered under regulation 2(1)(f) of the Income Tax (Concessionary Rate of Tax for Approved Securities Companies) Regulations (Rg 9) shall be deductible only against income chargeable to tax at the rate of 10%.

Operative dates

10.—(1) Regulation 3 (a) to (h) shall have effect for the year of assessment 1978 and subsequent years of assessment.

(2) Regulation 3(i) shall have effect for the year of assessment 1985 and subsequent years of assessment.

(3) Regulation 3(j), (k)(i) and (l) shall have effect for the year of assessment 1986 and subsequent years of assessment.

(4) Regulation 3(k)(ii) and (iii) and (m) shall have effect for the year of assessment 1988 and subsequent years of assessment.

(5) Regulations 2(c), 3(k)(iv) and 8(2)(d) shall have effect for the year of assessment 1988 and subsequent years of assessment.

(6) Regulation 3(p), (q) and (r) shall have effect for the year of assessment 1992 and subsequent years of assessment.

[G.N. Nos. S 254/88; S 13/89; S 513/92; S 502/93; S 56/95; S 180/96; S 522/96]

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