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No. S 212

Income Tax Act

(Chapter 134)

Income Tax (Qualifying Debt Securities) Regulations 2001

In exercise of the powers conferred by sections 13 (1)(a) and (11) and 45(9) of the Income Tax Act, the Minister for Finance hereby makes the following Regulations:

Citation and application

1.—(1) These Regulations may be cited as the Income Tax (Qualifying Debt Securities) Regulations 2001.

(2) Regulation 3(1)(a) shall apply to qualifying debt securities issued during the period from 27th February 1999 to 27th February 2003.

(3) Regulations 3(1)(b) and (c) and 5 shall apply to qualifying debt securities issued during the period from 26th April 1999 to 27th February 2003.

Definitions

2. In these Regulations —

“approved bond intermediary”, “financial institution” and “qualifying debt securities” have the same meanings as in section 13(11) of the Act;

“debt securities” means bonds, notes, commercial papers and certificates of deposit other than Singapore Government securities;

“funds from Singapore operations”, in relation to a person, means the funds and profits of that person’s operations through a permanent establishment in Singapore;

“offering documents” means the prospectuses, offering circulars, information memoranda, pricing supplements or other documents issued to investors in connection with an issue of securities;

“programme” includes a medium term note programme, a commercial paper programme or any similar programme for the issue of debt securities;

“tranche” means a particular issue of debt securities under a programme.

Prescribed conditions for tax exemption on interest income from qualifying debt securities

3.—(1) The conditions referred to in section 13(1)(a) of the Act are as follows:

(a)

the exemption from tax shall not apply to any interest derived by a permanent establishment in Singapore;

(b)

the issuer of the qualifying debt securities includes in all offering documents a statement to the effect that where interest is derived from any qualifying debt securities issued during the period from 27th February 1999 to 27th February 2003 by any person who is not resident in Singapore and who carries on any operation in Singapore through a permanent establishment in Singapore, the tax exemption shall not apply if such person acquires such securities using funds from Singapore operations; and

(c)

where the issuer of the qualifying debt securities is a person who is a resident of or a permanent establishment in Singapore and where such securities are issued to any person who is not a resident of Singapore (referred to in this sub-paragraph as the non-resident person) in connection with or for the purpose of enabling that non-resident person to issue securities (referred to in this sub-paragraph as the relevant securities), directly or indirectly, to investors —

(i)	the relevant securities are qualifying debt securities;
(ii)	the relevant securities contain restrictions against the acquisition of such relevant securities by any investor who is a resident of or a permanent establishment in Singapore; and
(iii)	the relevant securities are not acquired by any investor using funds from its Singapore operations.

(2) For the purpose of paragraph (1)(a), where interest on a qualifying debt security is derived —

(a)	from funds managed by an Asian Currency Unit of a financial institution or a fund manager approved under section 13C or 43A of the Act, by a foreign investor as defined in the Income Tax (Income from Funds Managed for Foreign Investors) Regulations (Rg 8);
(b)	from funds managed by a headquarters company approved under section 43E of the Act, by its associated company outside Singapore approved under that section; or
(c)	from funds managed by a Finance and Treasury Centre approved under section 43G of the Act, by its associated company outside Singapore approved under that section,

that Asian Currency Unit of the financial institution, fund manager, headquarters company or Finance and Treasury Centre shall not be regarded as a permanent establishment of the foreign investor or approved associated company (as the case may be) solely by virtue of its management of funds on behalf of the foreign investor or approved associated company.

Arrangements for qualifying debt securities

4.—(1) The arrangements referred to in paragraph (b) of the definition of “qualifying debt securities” in section 13(11) of the Act are as follows:

(a)

where the debt securities are issued during the period from 28th February 1998 to 9th May 1999 —

(i)

the securities are substantially arranged by a financial institution in Singapore; and

(ii)

at least half of the following functions in connection with the issue of the securities are performed by financial institutions in Singapore:

(A)	securing the mandate;
(B)	originating and structuring the debt issue;
(C)	documentation and preparation of the offering circular;
(D)	distribution of the issue of the securities;

(b)

where the debt securities are issued during the period from 10th May 1999 to 27th February 2003 and where such securities are not issued under a programme —

(i)	the lead manager is an approved bond intermediary; or
(ii)	the staff of the financial institution arranging the issue who are based in Singapore have a leading and substantial role in originating and structuring the issue and its distribution;

(c)

where the debt securities are issued during the period from 10th May 1999 to 27th February 2003 under a programme, the programme as a whole is arranged by an approved bond intermediary;

(d)

where the debt securities are issued during the period from 10th May 1999 to 27th February 2003 by a new issuer who joins an existing programme which does not satisfy the requirement in sub-paragraph (c), the participation of the new issuer in the programme is arranged by an approved bond intermediary and that programme as a whole was previously arranged by any approved bond intermediary or any affiliate of any approved bond intermediary; and

(e)

where debt securities are issued during the period from 10th May 1999 to 27th February 2003 under a tranche of a programme which does not satisfy the requirement in sub-paragraphs (c) and (d), the dealers for more than half of the debt securities issued under that tranche are approved bond intermediaries or financial institutions in Singapore.

(2) For the purposes of paragraph (1)(b)(ii), the Singapore-based staff of a financial institution (other than an approved bond intermediary) arranging an issue of debt securities shall be deemed not to have a leading and substantial role in originating and structuring of the issue and its distribution if a major role in the origination, structuring or distribution of the issue was played by staff (whether of that financial institution, its affiliate or otherwise) based outside Singapore.

Waiver of withholding of tax in respect of interest paid to non-resident person

5. The conditions referred to in section 45(9) of the Act are as follows:

(a)	an issuer of any qualifying debt securities includes in all offering documents a statement to the effect that any person whose interest derived from those securities is not exempt from tax shall include such interest in a return of income made under the Act; and
(b)	an issuer of any qualifying debt securities, or such other person as the Comptroller may direct, furnishes to the Comptroller a return on the debt securities within such period as the Comptroller may specify and such other particulars in connection with those securities as the Comptroller may require.

Made this 4th day of April 2001.

LIM SIONG GUAN

Permanent Secretary,
Ministry of Finance,
Singapore.

[R32.12.0016 V.008; AG/LEG/SL/134/97/9 Vol. 2]