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No. S 499

Income Tax Act

(Chapter 134)

Income Tax (Exemption of Interest and Other Payments for Economic and Technological Development) (No. 2) Notification 2003

In exercise of the powers conferred by section 13(4) of the Income Tax Act, the Minister for Finance hereby makes the following Notification:

Citation

1. This Notification may be cited as the Income Tax (Exemption of Interest and Other Payments for Economic and Technological Development) (No. 2) Notification 2003.

Definitions

2. In this Notification —

“approved Finance and Treasury Centre” means a company approved under regulation 3(1) of the Income Tax (Concessionary Rate of Tax for Approved Finance and Treasury Centre) Regulations (Rg 18) as a Finance and Treasury Centre for the purposes of section 43G of the Act;

“approved headquarters company” means a company approved under regulation 3(1) of the Income Tax (Concessionary Rate of Tax for Approved Headquarters Company) Regulations (Rg 6) as a headquarters company for the purposes of section 43E of the Act;

“bond” means any bond, note, debenture or other debt security;

“compensatory payment” has the same meaning as in section 10N(12) of the Act;

“loan” means any loan or other arrangement similar in nature to a loan;

“office” and “associated company” —

(a)	in relation to an approved headquarters company, mean an office and an associated company, respectively, referred to in section 43E of the Act; and
(b)	in relation to an approved Finance and Treasury Centre, mean an office and an associated company, respectively, referred to in section 43G of the Act;

“qualifying activities” and “qualifying services”, in relation to an approved Finance and Treasury Centre, have the same meanings as in the Income Tax (Concessionary Rate of Tax for Approved Finance and Treasury Centre) Regulations (Rg 18);

“qualifying services” and “qualifying treasury, investment or financial activities”, in relation to an approved headquarters company, have the same meanings as in the Income Tax (Concessionary Rate of Tax for Approved Headquarters Company) Regulations;

“securities lending or repurchase arrangement” has the same meaning as in section 10N(12) of the Act.

Exemption in relation to loans

3.—(1) Subject to sub-paragraph (2) and such conditions as may be imposed by the Minister or such person as he may appoint for the purpose of this Notification, there shall be exempt from tax the interest which a company for the time being approved as an approved headquarters company or an approved Finance and Treasury Centre (as the case may be) is liable to pay on or after 5th September 2000 on any loan where —

(a)

the loan is denominated in currencies other than Singapore dollars; and

(b)

the loan is from —

(i)	any of its offices or associated companies outside Singapore which has been approved for the purposes of this Notification by the Minister or such person as he may appoint;
(ii)	any bank outside Singapore; or
(iii)	any non-bank financial institution outside Singapore which is not its office or associated company.

(2) The funds obtained from any loan referred to in sub-paragraph (1) shall be used —

(a)	in the case of an approved headquarters company, for its qualifying services or qualifying treasury, investment or financial activities; and
(b)	in the case of an approved Finance and Treasury Centre, for its qualifying activities or qualifying services.

Exemption in relation to bonds

4.—(1) Subject to sub-paragraphs (2) and (3) and such conditions as may be imposed by the Minister or such person as he may appoint for the purpose of this Notification, where a company is approved before 30th September 2005 as a headquarters company or a Finance and Treasury Centre for the purposes of section 43E or 43G of the Act (as the case may be), there shall be exempt from tax the interest which the company for the time being approved as an approved headquarters company or approved Finance and Treasury Centre (as the case may be) is liable to pay on or after 5th September 2000 on any bond where —

(a)	the bond is denominated in currencies other than Singapore dollars; and
(b)	the bond is held by a person who is not resident in Singapore.

(2) The exemption referred to in sub-paragraph (1) shall not apply where —

(a)	the bond is held by a person referred to in sub-paragraph (1)(b) who has a permanent establishment in Singapore and the funds used to acquire the bond were obtained from any operation in Singapore carried on through that permanent establishment; or
(b)	at any time during the life of the bond, it is beneficially held or funded, directly or indirectly, by any office or associated company of the approved headquarters company or approved Finance and Treasury Centre which is not an office or associated company approved for the purposes of this Notification by the Minister or such person as he may appoint.

(3) The funds obtained from any bond referred to in sub-paragraph (1) shall be used —

(a)	in the case of an approved headquarters company, for its qualifying services or qualifying treasury, investment or financial activities; and
(b)	in the case of an approved Finance and Treasury Centre, for its qualifying activities or qualifying services.

Exemption in relation to securities lending or repurchase arrangement

5.—(1) Subject to sub-paragraph (2) and such conditions as may be imposed by the Minister or such person as he may appoint for the purpose of this Notification, there shall be exempt from tax the loan rebate fees and price differentials which a company for the time being approved as an approved headquarters company or an approved Finance and Treasury Centre is liable to pay —

(a)	on or after 5th September 2000 in respect of a repurchase agreement made before 23rd November 2001; or
(b)	on or after 23rd November 2001 in respect of any securities lending or repurchase arrangement,

where —

(i)

any funds obtained under the repurchase agreement or securities lending or repurchase arrangement are denominated in currencies other than Singapore dollars; and

(ii)

any funds obtained under the repurchase agreement or securities lending or repurchase arrangement are from —

(A)	any of its offices or associated companies outside Singapore which has been approved for the purposes of this Notification by the Minister or such person as he may appoint;
(B)	any bank outside Singapore; or
(C)	any non-bank financial institution outside Singapore which is not its office or associated company.

(2) The funds obtained under the repurchase agreement or securities lending or repurchase arrangement referred to in sub-paragraph (1) shall be used (where the agreement or arrangement permits the funds to be used) —

(a)	in the case of an approved headquarters company, for its qualifying services or qualifying treasury, investment or financial activities; and
(b)	in the case of an approved Finance and Treasury Centre, for its qualifying activities or qualifying services.

(3) Subject to such conditions as may be imposed by the Minister or such person as he may appoint for the purpose of this Notification, there shall be exempt from tax the borrowing fees and compensatory payments which a company for the time being approved as an approved Finance and Treasury Centre is liable to pay on or after 28th October 2003 under any securities lending or repurchase arrangement to a person who is neither a resident of nor a permanent establishment in Singapore.

Amendment of Notifications

6.—(1) Paragraph 4 of the Income Tax (Exemption of Interest and Other Payments on Economic and Technological Development Loans) (Consolidation) Notification (N 5) is deleted, with effect from 5th September 2000.

(2) Paragraph 3 of the Income Tax (Exemption of Interest and Other Payments on Economic and Technological Development Loans) (Consolidation) Notification (N 6) is deleted, with effect from 5th September 2000.

(3) Paragraph 5 of the Income Tax (Exemption of Interest and Other Payments for Economic and Technological Development Loans) (Consolidation) Notification (N 10) is deleted, with effect from 5th September 2000.

Made this 16th day of October 2003.

LIM SIONG GUAN

Permanent Secretary,
Ministry of Finance,
Singapore.

[R32.16.60 Vol. 3; AG/LEG/SL/134/2002/11 Vol. 1]