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No. S 350

Income Tax Act

(Chapter 134)

Income Tax (Exemption of Income of Foreign Trusts) (Amendment) Regulations 2003

In exercise of the powers conferred by section 13G of the Income Tax Act, the Minister for Finance hereby makes the following Regulations:

Citation and commencement

1.—(1) These Regulations may be cited as the Income Tax (Exemption of Income of Foreign Trusts) (Amendment) Regulations 2003.

(2) Regulations 2 (a), (b) and (d) and 4 shall have effect for the year of assessment 2003 and subsequent years of assessment.

(3) Regulations 2 (c), 3 and 5 shall be deemed to have come into operation on 2nd July 2002.

Amendment of regulation 2

2. Regulation 2 of the Income Tax (Exemption of Income of Foreign Trusts) Regulations (Rg 24) (referred to in these Regulations as the principal Regulations) is amended —

(a)

by inserting, immediately before the definition of “designated investments”, the following definition:

“ “administered by a trustee company” means —

(a)

the provision of services by a trustee company in its capacity as trustee of a foreign trust, including services provided as manager or administrator of an eligible holding company in relation to that foreign trust; or

(b)

the provision of services by a trustee company to a trustee of a foreign trust under a contract for services with that trustee, such services being all or any of the following:

(i)	the establishing of a foreign trust or an eligible holding company;
(ii)	the administration or management of a foreign trust or an eligible holding company;”;

(b)

by inserting, immediately after the definition of “designated investments”, the following definition:

“ “eligible holding company” means a company —

(a)	which is incorporated outside Singapore;
(b)	which is set up to hold assets of a foreign trust administered by a trustee company approved under section 43J of the Act;
(c)	whose operations consist solely of trading or making investments for the purpose of the foreign trust;
(d)	which does not claim any relief under any arrangement made under section 49 of the Act or any tax credit under section 50A of the Act; and
(e)	all the shares of which are held by the trustees of the foreign trust, or by their nominee;”;

(c)

by deleting the definition of “foreign trust” and substituting the following definition:

“ “foreign company” means a company which is neither incorporated nor resident in Singapore and —

(a)	where the company has not more than 50 shareholders, the whole of the issued capital of the company is beneficially owned, directly or indirectly, by persons who are neither citizens of Singapore nor resident in Singapore; and
(b)	where the company has more than 50 shareholders, not less than 95% of the issued capital of the company is beneficially owned, directly or indirectly, by persons who are neither citizens of Singapore nor resident in Singapore;”;

(d)

by inserting, immediately before the definition of “specified income”, the following definition:

“ “nominee” means any person who acts as a nominee or custodian in relation to shares of an eligible holding company for and on behalf of the trustees of a foreign trust;”; and

(e)

by deleting the words “section 13(6)” in paragraph (b) of the definition of “specified income” and substituting the words “section 13(13)”.

New regulation 2A

3. The principal Regulations are amended by inserting, immediately after regulation 2, the following regulation:

“Foreign trust to which Regulations apply

2A.—(1) Subject to paragraph (2), a trust shall be regarded as a foreign trust for the purposes of these Regulations if —

(a)

it is a trust created in writing and every settlor and every beneficiary thereof are —

(i)	individuals who are neither citizens of Singapore nor resident in Singapore; or
(ii)	foreign companies; or

(b)

it is a unit trust and the whole value of the unit trust fund is beneficially held, directly or indirectly, by —

(i)	individuals who are neither citizens of Singapore nor resident in Singapore; or
(ii)	foreign companies.

(2) For the purpose of paragraph (1)(a), a trust shall continue to be regarded as a foreign trust notwithstanding that any settlor or beneficiary of the trust who is an individual subsequently becomes a citizen of Singapore or resident in Singapore, if the following conditions are satisfied:

(a)

in the case of a settlor who subsequently becomes a citizen of Singapore or resident in Singapore —

(i)	no new assets are injected into the trust by the settlor from the day he becomes a citizen of Singapore or resident in Singapore;
(ii)	the settlor neither receives nor enjoys any benefit under the trust and shall not exercise any power of appointment in favour of any person who is a citizen of Singapore or resident in Singapore; and
(iii)	the settlor neither revokes the trust nor varies the terms of the trust so as to cause any benefit to be paid or otherwise made available to a citizen of Singapore or resident in Singapore;

(b)

in the case of a settlor who was previously a citizen of Singapore or resident in Singapore and the trust was constituted subsequent to the settlor ceasing to be a citizen of Singapore or resident in Singapore, the settlor does not within 5 years of last ceasing to be a citizen of Singapore or resident in Singapore resume being a citizen of Singapore or resident in Singapore; and

(c)

in the case of a beneficiary who subsequently becomes a citizen of Singapore or resident in Singapore —

(i)	the total value of all distributions made by the trustee to the beneficiaries who are citizens of Singapore or resident in Singapore is less than 20% of the cumulative value of all trust distributions made by the trustee for the trust; and
(ii)	all beneficiaries who are citizens of Singapore or resident in Singapore are beneficially entitled to less than 20% of the assets of the trust.”.

Deletion and substitution of regulation 3

4. Regulation 3 of the principal Regulations is deleted and the following regulation substituted therefor:

“Exemption

3.—(1) Subject to paragraph (2) and regulations 4 and 5, there shall be exempt from tax —

(a)

the specified income derived from designated investments by an eligible holding company; and

(b)

the following income derived by a foreign trust administered by a trustee company approved under section 43J of the Act:

(i)	any dividends paid or payable by an eligible holding company from the income referred to in sub-paragraph (a); and
(ii)	the specified income derived from designated investments.

(2) An approved trustee company shall submit an annual declaration to the Comptroller, in such form as the Comptroller or the Monetary Authority of Singapore may specify, that the foreign trust or the eligible holding company (as the case may be) has, or both the foreign trust and the eligible holding company have, met the conditions in these Regulations.”.

New regulation 7

5. The principal Regulations are amended by inserting, immediately after regulation 6, the following regulation:

“Additional assessment on income of foreign trust or eligible holding company in certain circumstances

7.—(1) Where a trust ceases to be a foreign trust for the purposes of these Regulations for failing to satisfy the condition referred to in paragraph (2)(a)(iii) or (b) of regulation 2A, the Comptroller may assess the trustee of the foreign trust or the eligible holding company established for the purposes of that foreign trust, as the case may be, under section 74 of the Act on any income of that foreign trust or eligible holding company that was exempted from tax under these Regulations.

(2) Any amount or additional amount assessed by the Comptroller under paragraph (1) shall only be paid out of the funds of the foreign trust or eligible holding company established for the purposes of that foreign trust.”.

Made this 21st day of July 2003.

LIM SIONG GUAN

Permanent Secretary,
Ministry of Finance,
Singapore.

[R32.19.0005 Vol. 10; AG/LEG/SL/134/2002/8 Vol. 1]