Income Tax (Concessionary Rate of Tax for Approved Securities Companies) Regulations

Income Tax Act

(CHAPTER 134, Section 43A)

Income Tax (Concessionary Rate of Tax for
Approved Securities Companies) Regulations

Rg 9

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 Approved Securities Companies) Regulations.

Concessionary rate of 10% on income derived by approved securities

2.—(1) Tax shall be payable at the rate of 10% on the income derived by an approved securities company from the following activities:

(a)

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:

Provided that this sub-paragraph shall not apply where the payments for the services and other expenses in connection with such transactions are borne, directly or indirectly, by a person resident in Singapore or by a permanent establishment in Singapore of a non-resident person;

(b)

the sale of stocks, shares, bonds and other securities referred to in sub-paragraph (a) to —

(i)	a person who is neither a resident of nor a permanent establishment in Singapore;
(ii)	an Asian Currency Unit of a financial institution;
(iii)	another approved securities company; or
(iv)	a foreign investor where such sale is transacted through a Fund Manager approved under section 43A(1)(b) of the Act;

(c)

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;

(d)

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

(i)	an Asian Currency Unit of a financial institution;
(ii)	another 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 where such loans are transacted through a Fund Manager approved under section 43A(1)(b) of the Act;

(e)

services as a broker on behalf of an Asian Currency Unit of a financial institution or another approved securities company in connection with the sale of the securities specified in sub-paragraph (a) which are owned by that Asian Currency Unit of the financial institution or that other 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 where such sale is transacted through a Fund Manager approved under section 43A(1)(b) of the Act;

(f)

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

(2) Paragraph (1) shall apply in relation to an approved securities company from such date as the Minister may specify.

5% tax payable on incremental income derived by approved securities company

3.—(1) Notwithstanding regulation 2(1), tax shall be payable at the rate of 5% on the incremental income derived by an approved securities company for any year of assessment from the following groups of activities:

(a)

the activities described in regulation 2(1)(a) and (b), if the following conditions are satisfied:

(i)	the relevant income of the approved securities company from such activities for that year of assessment and the relevant income of the approved securities company 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 securities company has been approved under section 43A of the Act for at least 3 years immediately preceding that year of assessment; and

(b)

the activities described in regulation 2(1)(c), if the following conditions are satisfied:

(i)	the relevant income of the approved securities company from such activities for that year of assessment and the relevant income of the approved securities company 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 securities company has been approved under section 43A of the Act for at least 3 years immediately preceding that year of assessment.

(2) For the purposes of this regulation —

“incremental income”, in relation to an approved securities company 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 approved securities company for that year of assessment derived from —

(a) in relation to paragraph (1)(a), the activities described in regulation 2(1)(a) and (b);

(b) in relation to paragraph (1)(b), the activities described in regulation 2(1)(c);

B is the relevant income of the approved securities company derived from —

(a) in relation to paragraph (1)(a), the activities described in regulation 2(1)(a) and (b);

(b) in relation to paragraph (1)(b), the activities described in regulation 2(1)(c),

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 approved securities company derived from —

(i) in relation to paragraph (1)(a), the activities described in regulation 2(1)(a) and (b);

(ii) in relation to paragraph (1)(b), the activities described in regulation 2(1)(c) ,

for the first year of assessment after the year of assessment 1994 in which the relevant income of the approved securities company from the same activities for that year of assessment is not less than $10 million;

C is the relevant income of the approved securities company for that year of assessment derived from the group of activities described in regulation 2(1); and

D is the chargeable income of the approved securities company 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(1);

“relevant income”, in relation to any group of activities of the approved securities company for any year of assessment, means the amount of income (if any) derived by the approved securities company 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, the activities described in regulation 2(1)(a) shall not include those activities that are excluded under the proviso thereto.

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

Determination of income chargeable to tax

4. For the purposes of regulations 2 and 3, the Comptroller shall determine —

(a)	the income chargeable to tax of an approved securities company 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(1) may be deducted under section 37(2) of the Act in ascertaining the chargeable income of the approved securities company.

Deductibility of certain payments made by approved securities company

5. For the purposes of regulation 4, any payment made by an approved securities company to an Asian Currency Unit of a financial institution for services rendered under regulation 3(w) of the Income Tax (Concessionary Rate of Tax for Asian Currency Unit Income) Regulations (Rg 10) or to another approved securities company for services rendered under regulation 2(1)(f) shall be deductible only against income chargeable to tax at the rate of 10%.

Definitions

6. In these Regulations —

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

“foreign investor” has the same meaning as in the Income Tax (Income from Funds Managed for Foreign Investors) Regulations (Rg 8).

[G.N. Nos. S 253/88; S 405/92; S55/95; S 179/96; S 274/96; S 521/96]

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