No. S 183
Income Tax Act
(Chapter 134)
Income Tax (Exemption of Income from Syndicated Offshore Facilities) Regulations 2003
In exercise of the powers conferred by section 43A of the Income Tax Act, the Minister for Finance hereby makes the following Regulations:
Citation
1.  These Regulations may be cited as the Income Tax (Exemption of Income from Syndicated Offshore Facilities) Regulations 2003.
Definitions
2.  In these Regulations, unless the context otherwise requires —
“offshore credit facility” means —
(a)any facility where —
(i)loans, advances or funds are made available to a person referred to in paragraph (a) of the definition of “specified person”;
(ii)the loans, advances or funds made available are to be used outside Singapore; and
(iii)no interest, commission, fee or other payment in respect of the facility is borne, directly or indirectly, by any person resident in Singapore (except in respect of any business carried on outside Singapore by a person resident in Singapore through a permanent establishment outside Singapore) or by any permanent establishment in Singapore;
(b)any facility where —
(i)loans, advances or funds are made available to a person referred to in paragraph (b) of the definition of “specified person”;
(ii)the loans, advances or funds made available are to be used outside Singapore; and
(iii)no interest, commission, fee or other payment in respect of the facility is deductible against any income of that person accruing in or derived from Singapore;
(c)any facility where —
(i)guarantees or letters of credit are made available to, and issued in favour of, a non-resident person (other than his permanent establishment in Singapore) or a person resident in Singapore in respect of any business carried on outside Singapore through a permanent establishment outside Singapore; and
(ii)no interest, commission, fee or other payment in respect of the facility is borne, directly or indirectly, by any person resident in Singapore (except in respect of any business carried on outside Singapore by a person resident in Singapore through a permanent establishment outside Singapore) or by any permanent establishment in Singapore;
(d)any facility where —
(i)the issue of bonds, notes, certificates of deposit or other instruments of indebtedness is provided to a person referred to in paragraph (a) of the definition of “specified person”;
(ii)the funds raised from the issue of such bonds, notes, certificates of deposit or other instruments of indebtedness are to be used outside Singapore; and
(iii)no interest, commission, fee or other payment in respect of the facility is borne, directly or indirectly, by any person resident in Singapore (except in respect of any business carried on outside Singapore by a person resident in Singapore through a permanent establishment outside Singapore) or by any permanent establishment in Singapore; or
(e)any facility where —
(i)the issue of bonds, notes, certificates of deposit or other instruments of indebtedness is provided to a person referred to in paragraph (b) of the definition of “specified person”;
(ii)the funds raised from the issue of such bonds, notes, certificates of deposit or other instruments of indebtedness are to be used outside Singapore; and
(iii)no interest, commission, fee or other payment in respect of the facility is deductible against any income of that person accruing in or derived from Singapore;
“offshore guarantee facility” means any facility where —
(a)guarantees or letters of credit are made available to and issued in favour of a specified financial institution for the purpose of providing or participating in a loan made to a non-resident person (other than his permanent establishment in Singapore);
(b)the loan is to be used outside Singapore; and
(c)no interest in respect of the loan is borne, directly or indirectly, by any person resident in Singapore (except in respect of any business carried on outside Singapore by a person resident in Singapore through a permanent establishment outside Singapore) or by any permanent establishment in Singapore;
“related party”, in relation to any specified person, means any other person who —
(a)controls the specified person, whether directly or indirectly;
(b)is controlled by the specified person, whether directly or indirectly; or
(c)together with the specified person, is controlled by a common person, whether directly or indirectly;
“specified financial institution” means —
(a)a bank licensed under the Banking Act (Cap. 19);
(b)a merchant bank approved by the Monetary Authority of Singapore; or
(c)a company approved under section 43A(1)(c) of the Act;
“specified person”, in relation to any offshore credit facility —
(a)means a non-resident person (other than his 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
(b)where the agreement for the offshore credit facility is made on or after 1st April 1998, includes a person resident in Singapore (except in respect of any business carried on outside Singapore by a person resident in Singapore through a permanent establishment outside Singapore) and a permanent establishment in Singapore.
Application
3.—(1)  These Regulations shall apply to any syndicated offshore facility which is an offshore credit facility or an offshore guarantee facility where —
(a)the agreement for the facility is made during the period from 27th February 1998 to 31st December 2003 (both dates inclusive);
(b)the facility is a syndicated facility, as determined in accordance with paragraph 1 of the Schedule;
(c)the syndication work in respect of the facility is carried out substantially in Singapore, as determined in accordance with paragraph 2 of the Schedule; and
(d)in the case of a facility where the agreement for the facility is made during the period from 27th February 1998 to 13th August 1998 (both dates inclusive), the facility is in currencies other than Singapore dollars.
(2)  The Minister or such person as he may appoint may in any particular case waive any requirement specified in paragraph (1) or the Schedule, subject to such conditions as he may impose.
Tax exemption
4.—(1)  Subject to these Regulations, there shall be exempt from tax the income of a specified financial institution from any syndicated offshore facility.
(2)  Where a specified financial institution holds any bonds, notes, certificates of deposit or other instruments of indebtedness issued under a facility referred to in paragraph (d) or (e) of the definition of “offshore credit facility” in regulation 2, the exemption referred to in paragraph (1) shall not apply to any income derived from the holding of those bonds, notes, certificates of deposit or other instruments of indebtedness or the profits arising from the sale thereof.
(3)  The exemption referred to in paragraph (1) shall not apply in relation to a syndicated offshore facility unless the agent bank of the facility has submitted to the Comptroller within such time as may be specified by the Comptroller —
(a)a return on the facility and a declaration from the arrangers of the facility that the facility is a syndicated offshore facility;
(b)a declaration from the specified person to whom the facility is provided and who has any related party in Singapore, that the funds from the facility have not been, and are not intended to be, transferred to that related party in Singapore; and
(c)such other particulars as may be required by the Comptroller.
(4)  A specified financial institution which is entitled to any exemption under paragraph (1) may elect not to have such exemption by notifying the Comptroller within the time referred to in paragraph (3) in such form as the Comptroller may require.
Determination of income exempted from tax
5.—(1)  The exemption under regulation 4 shall apply to such amount of the income of a specified financial institution from any syndicated offshore facility as may be determined by the Comptroller, having regard to such expenses, capital allowances and donations allowable under the Act as are, in his opinion, to be deducted in ascertaining the amount of the income to be exempted.
(2)  In determining the amount of the income to be exempted, any loss incurred in respect of a syndicated offshore facility or any capital allowances attributable to that income shall only be deducted against income to be exempted under these Regulations, and any balance of such lossor capital allowances, capital allowances or donations shall not be available as a deduction against any other income.
(3)  Where the funds raised from any syndicated offshore facility are used —
(a)solely to refinance previous borrowings; or
(b)partly outside Singapore and partly to refinance previous borrowings,
and where —
(i)the previous borrowings were granted by a person resident in Singapore or permanent establishment in Singapore (other than those borrowings the income derived therefrom is exempt from tax under section 43A(3) of the Act); or
(ii)the funds raised from previous borrowings were used in Singapore,
the income of a specified financial institution in relation to that syndicated offshore facility shall, for the purpose of paragraph (1), be determined by multiplying the income from the syndicated offshore facility by (1-A/B),
where A  is the amount of the funds raised from the syndicated offshore facility used to refinance previous borrowings where —
(i)  the previous borrowings were granted by a person resident in Singapore or permanent establishment in Singapore (other than those borrowings the income derived therefrom is exempt from tax under section 43A(3) of the Act); or
(ii)  the funds raised from previous borrowings were used in Singapore; and
B  is the total amount of the syndicated offshore facility.
Made this 24th day of March 2003.
LIM SIONG GUAN
Permanent Secretary,
Ministry of Finance,
Singapore.
[MF R32.19.03 Vol. 7; AG/LEG/SL/134/2002/9 Vol. 1]