Income Tax Act
(CHAPTER 134, Section 43A)
Income Tax (Concessionary Rate of Tax for
Approved Fund Managers) Regulations
Rg 7
G.N. No. S 233/1988

REVISED EDITION 1998
(15th September 1998)
[2nd September 1988]
Citation
1.  These Regulations may be cited as the Income Tax (Concessionary Rate of Tax for Approved Fund Managers) Regulations.
Concessionary rate of tax
2.  Subject to regulations 3, 4 and 5, tax shall be payable by a Fund Manager approved under section 43A of the Act at the rate of 10% on its fees and commissions —
(a)derived on or after 7th March 1986 from managing the funds of a foreign investor for the purpose of any designated investments;
(b)derived in or after the basis period for the year of assessment 1993 from the provision of investment advisory services to a foreign investor in relation to any designated investments; and
(c)derived from arranging on behalf of foreign investors any loan of designated securities under a securities lending arrangement in writing to —
(i)an Asian Currency Unit of a financial institution; or
(ii)an approved securities company.
Computation of income of approved Fund Manager from managing funds of foreign investor as defined in paragraph (b)(i) of definition of “foreign investor” in regulation 6
3.  Where a foreign investor is a company referred to in paragraph (b)(i) of the definition of “foreign investor” in regulation 6 in which the Government of Singapore Investment Corporation Pte Ltd (referred to in these Regulations as GIC) is a shareholder, the amount of fees and commissions which is chargeable to tax at the concessionary rate of 10% under regulation 2 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;
B
is the total amount of issued capital of the foreign investor;
C
is the amount of fees and commissions derived from the provision of the services referred to in regulation 2(a), (b) and (c) to the foreign investor.
Computation of income of foreign investor as defined in paragraph (b)(ii) or (c) of definition of “foreign investor” in regulation 6
4.  Where a foreign investor is —
(a)a company referred to in paragraph (b)(ii) of the definition of “foreign investor” in regulation 6 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 6 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 that definition,
the amount of fees and commissions which is chargeable to tax at the concessionary rate of 10% under regulation 2 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 6, as the case may be;
B
is the total amount of issued capital of the foreign investor or the total value of the trust fund, as the case may be;
C
is the amount of fees and commissions derived from the provision of the services referred to in regulation 2(a), (b) and (c) to the foreign investor.
Tax at rate of 5% on incremental income derived by approved Fund Manager
5.—(1)  Notwithstanding regulation 2, tax shall be payable at the rate of 5% on the incremental income derived by a Fund Manager approved under section 43A of the Act for any year of assessment from the activities described in regulation 2, if the following conditions are satisfied:
(a)the average monthly value of the funds of foreign investors managed by the approved Fund Manager 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
(b)the Fund Manager has been approved under section 43A of the Act 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 an approved Fund Manager 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 an approved Fund Manager for any year of assessment, means the amount of income determined in accordance with the formula —
where A
is the relevant income of the approved Fund Manager for that year of assessment;
B
is the relevant income of the approved Fund Manager for the year of assessment in which tax at the rate of 5% under this regulation was last levied; or where tax at the rate of 5% under this regulation had not previously been so levied, the relevant income of the approved Fund Manager 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 approved Fund Manager in the basis period for that year of assessment is not less than $5,000 million;
C
is the chargeable income of the approved Fund Manager 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 2;
“relevant income”, in relation to an approved Fund Manager for any year of assessment, means the amount of income (if any) derived by the approved Fund Manager from the activities described in regulation 2 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)  This regulation shall have effect from the year of assessment 1996 to the year of assessment 2000.
Definitions
6.  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;
(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;
“designated securities” means —
(a)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; or
(b)bonds denominated in any foreign currency issued by any foreign government;
“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 Fund Manager;
(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 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.
Application
7.  These Regulations shall not apply where a foreign investor (other than an individual) —
(a)has a permanent establishment in Singapore (other than an approved Fund Manager);
(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 paragraph (a), (b) or (c),
unless approval is granted by the Minister or such person as he may appoint.
Fund Manager to maintain records
8.  The approved Fund Manager shall keep and maintain such records of the particulars of foreign investors as may be required by the Minister for the purposes of these Regulations.
Determination of income chargeable to tax
9.  For the purposes of regulations 2, 3, 4 and 5 the Comptroller shall determine —
(a)the income chargeable to tax of an approved Fund Manager 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 2 may be deducted under section 37(2) of the Act in ascertaining the chargeable income of the approved Fund Manager.
[G.N. Nos. S 233/1988; S 12/1989; S 494/1992; S 503/1993; S 54/1995; S 177/1996]