Income Tax (Concessionary Rate of Tax for Asian Currency Unit Income) (Amendment) Regulations 1999

No. S 511

Income Tax Act

(Chapter 134)

Income Tax (Concessionary Rate of Tax for Asian Currency Unit Income) (Amendment) Regulations 1999

In exercise of the powers conferred by section 43A 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 (Concessionary Rate of Tax for Asian Currency Unit Income) (Amendment) Regulations 1999.

(2) Regulations 2(a), (b), (e) and (f), 3(c), (d), (h) and (i), 6(b) and (e) and 7 of these Regulations shall have effect for the year of assessment 1998 and subsequent years of assessment.

(3) Regulations 2(c) and (d), 4 and 6(d), (f), (h) and (k) of these Regulations shall have effect for the year of assessment 1999 and subsequent years of assessment.

(4) Regulation 3(e) of these Regulations shall have effect for the year of assessment 2000 and subsequent years of assessment.

Amendment of regulation 2

2. Regulation 2 of the Income Tax (Concessionary Rate of Tax for Asian Currency Unit Income) Regulations (Rg 10) (referred to in these Regulations as the principal Regulations) is amended —

(a)

by deleting the word “and” at the end of paragraph (k) of the definition of “designated investments”;

(b)

by inserting, at the end of paragraph (l) of the definition of “designated investments”, the word “and”, and by inserting immediately thereafter the following paragraph:

“(m)	units in any unit trust which invests wholly in designated investments;”;

(c)

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

“ “designated person” means the Government of Singapore Investment Corporation Pte. Ltd., any statutory board or any company which is wholly owned, directly or indirectly, by the Minister (in his capacity as a corporation established under the Minister for Finance (Incorporation) Act (Cap.183)) and which is approved by the Minister or such person as he may appoint;”;

(d)

by deleting paragraphs (b) and (c) of the definition of “foreign investor” and substituting the following paragraphs:

“(b)	in relation to a company, means a company not resident in Singapore where not more than 20% (excluding the total percentage owned directly by designated persons) of its issued share capital is beneficially owned, directly or indirectly, by persons who are citizens of Singapore or resident in Singapore; and
(c)	in relation to a trust fund, means a trust fund where not more than 20% (excluding the total percentage held directly by designated persons) of the value of the fund is beneficially held, directly or indirectly, by persons who are not foreign investors referred to in paragraph (a) or (b);”;

(e)

by inserting, immediately after the definition of “foreign investor”, the following definition:

“ “initial public offering” means a public offering of securities of a company, whose stocks or shares have not previously been listed on the Stock Exchange of Singapore, in conjunction with the listing of those securities on the Stock Exchange of Singapore, and includes a listing of securities of such a company on the Stock Exchange of Singapore by way of an introduction;”; and

(f)

by deleting the full-stop at the end of the definition of “offshore trade transactions” and substituting a semi-colon, and by inserting immediately thereafter the following definitions:

“ “unit” means a right or interest (whether described as a unit, a sub-unit or otherwise) which may be acquired under a unit trust;

“unit trust” means any trust established for the purpose, or having the effect, of providing facilities for the participation by persons as beneficiaries under a trust, in profits or income arising from the acquisition, holding, management or disposal of securities or any other property.”.

Amendment of regulation 3

3. Regulation 3 of the principal Regulations is amended —

(a)

by deleting the words “and 6” in the 1st line and substituting the words “, 5A and 6”;

(b)

by deleting the word “or” at the end of paragraph (k)(iii);

(c)

by inserting, at the end of sub-paragraph (iv) of paragraph (k), the word “or”, and by inserting immediately thereafter the following sub-paragraph:

“(v)	stocks, shares, bonds and other securities listed on the Stock Exchange of Singapore in any foreign currency issued by a company which is incorporated in Singapore and whose operations are substantially outside Singapore and approved by the Minister or such person as he may appoint;”;

(d)

by inserting, immediately after the word “Singapore” in the 5th line of paragraph (m), the words “, stocks, shares, bonds and other securities referred to in paragraph (k)(v)”;

(e)

by deleting the words “Fund Manager approved under section 43A(1)(b)” in paragraphs (m)(iv), (t)(v) and (v)(iv) and substituting in each case the words “fund manager approved under section 13C(a) or 43A (1)(b)”;

(f)

by deleting the word “and” at the end of paragraph (n)(iii);

(g)

by inserting, at the end of sub-paragraph (iv) of paragraph (n), the word “and”, and by inserting immediately thereafter the following sub-paragraph:

“(v)	in or after the basis period for the year of assessment 1998, for the purpose of any designated investments specified in paragraph (m) of that definition;”;

(h)

by deleting the words “paragraph (k)(i) and (iv)” in paragraph (t) and substituting the words “paragraph (k)(i), (iv) and (v)”; and

(i)

by deleting the full-stop at the end of paragraph (w) and substituting a semi-colon, and by inserting immediately thereafter the following paragraph:

“(x)

services on behalf of a company which is incorporated in Singapore and whose operations are substantially outside Singapore and approved by the Minister or such person as he may appoint, in respect of the arrangement, underwriting, management and placement of —

(i)	securities by the company which are listed on the Stock Exchange of Singapore in any foreign currency; or
(ii)	an initial public offering by the company of securities for the purpose of a listing on the Stock Exchange of Singapore in any foreign currency.”.

Deletion of regulations 4 and 5 and substitution of regulation 4

4. Regulations 4 and 5 of the principal Regulations are deleted and the following regulation substituted therefor:

“Computation of income of approved Asian Currency Unit from managing funds of certain foreign investors

4. In respect of services provided to a foreign investor under regulation 3(n), (o) and (u), where the foreign investor is —

(a)	a company referred to in paragraph (b) of the definition of “foreign investor” in regulation 2 in which any designated person is a shareholder and more than 20% of its issued share capital is beneficially owned, directly or indirectly, by persons who are not foreign investors referred to in paragraph (a) or (b) of that definition and by designated persons; or
(b)	a trust fund referred to in paragraph (c) of the definition of “foreign investor” in regulation 2 in which any designated person is a beneficiary and more than 20% of the value of the fund is beneficially held, directly or indirectly, by persons who are not foreign investors referred to in paragraph (a) or (b) of that definition and by designated persons,

the amount of fees and commissions which is chargeable to tax at the concessionary rate of 10% under regulation 3 shall be computed in accordance with the formula —

where A

is the amount of issued share capital of the company or the value of the trust fund, as the case may be, which is not beneficially owned or held, directly or indirectly, by persons who are not foreign investors referred to in paragraph (a) or (b) of the definition of “foreign investor” in regulation 2 or by designated persons;

is the amount of issued share capital of the company or the value of the trust fund, as the case may be;

is the amount of fees and commissions derived from the provision of the services referred to in regulation 3(n), (o) and (u) to the foreign investor.”.

New regulations 5 and 5A

5. The principal Regulations are amended by inserting, immediately after regulation 4, the following regulations:

“5% tax payable on incremental income derived by Asian Currency Unit from activities described in regulation 3

5.—(1) Notwithstanding regulations 3 and 6, a financial institution may elect that the incremental income derived by its Asian Currency Unit from the activities described in regulation 3 shall be taxed at the rate of 5% for any year of assessment, where the chargeable concessionary income of the Asian Currency Unit for that year of assessment and the chargeable concessionary income of the Asian Currency Unit for any year of assessment before that year of assessment (being a year after the year of assessment 1996) is respectively not less than $50 million.

(2) An election under paragraph (1) shall be made at the time of lodgment of the return of income for the relevant years of assessment or within such further time as the Comptroller may, in his discretion, allow.

(3) For the purposes of this regulation —

“chargeable concessionary income” means the amount of chargeable income derived by an Asian Currency Unit from the activities described in regulation 3 (other than the activities the income derived from which is exempt from tax under regulation 5A, the Income Tax (Income from Syndicated Offshore Credit and Underwriting Facilities) Regulations (Rg 4) or the Income Tax (Concessionary Rate of Tax or Exemption for Income Derived from Debt Securities) Regulations 1999 (S 479/99), after deducting any investment allowance given under Part X of the Economic Expansion Incentives (Relief from Income Tax) Act (Cap. 86);

“incremental income”, in relation to an Asian Currency Unit for any year of assessment, means —

(a)	the amount of chargeable concessionary income of the Asian Currency Unit for that year of assessment which exceeds the chargeable concessionary income of the Asian Currency Unit for the year of assessment in which tax at the rate of 5% under this regulation was last levied on the incremental income of the Asian Currency Unit; or
(b)	where tax at the rate of 5% under this regulation had not previously been so levied, the chargeable concessionary income of the Asian Currency Unit for the first year of assessment after the year of assessment 1996 in which the chargeable concessionary income of the Asian Currency Unit for that year of assessment is not less than $50 million.

(4) This regulation shall have effect from the year of assessment 1998 to the year of assessment 2002.

Tax exemption on income derived by Asian Currency Unit

5A.—(1) Notwithstanding regulations 3, 5 and 6, there shall be exempt from tax —

(a)

for the year of assessment 1998, the fees and commissions derived by an Asian Currency Unit from the activities described in regulation 3 (n), (o) and (u) (other than those excluded under regulation 7(2) or 8 (2)), if the following conditions are satisfied:

(i)	the average monthly value of the funds of foreign investors managed by the Asian Currency Unit in the basis period for that year of assessment is not less than $10,000 million;
(ii)	the Asian Currency Unit has employed not less than 7 professional fund managers or analysts throughout the basis period for that year of assessment; and
(iii)	the Asian Currency Unit has been approved under regulation 8 (1) for at least 3 years immediately preceding that year of assessment;

(b)

from the year of assessment 1998 to the year of assessment 2002, the income derived by an Asian Currency Unit from —

(i)	the activities described in regulation 3 (k) (other than those excluded under regulation 7(2)) and 3 (m) where the stocks, shares, bonds and other securities specified therein are listed on the Stock Exchange of Singapore; and
(ii)	the activities described in regulation 3 (p) and (x) where such activities are in respect of an initial public offering by a company of the securities specified therein for the purpose of a listing on the Stock Exchange of Singapore; and

(c)

for the year of assessment 1999 and any subsequent year of assessment, the fees and commissions derived from the activities described in regulation 3 (n), (o) and (u) (other than those excluded under regulation 7 (2) or 8 (2)) by an Asian Currency Unit approved by the Minister (or such person as he may appoint) for the purpose of the exemption if he is of the opinion that such exemption from tax will promote or enhance the economic development of Singapore.

(2) Where the activities described in regulation 3 (n), (o) and (u) are in respect of a foreign investor which is a company or a trust fund referred to —

(a)	in regulation 4 or 5 in force for the year of assessment 1998, the amount of fees and commissions to be exempted from tax under paragraph (1)(a) shall be computed in accordance with the formula specified in that regulation 4 or 5, as the case may be; and
(b)	in regulation 4, the amount of fees and commissions to be exempted from tax under paragraph (1)(c) shall be computed in accordance with the formula specified in that regulation.

(3) The exemption from tax under paragraph (1)(c) shall —

(a)	be for such period (referred to in these Regulations as the tax exempt period), not exceeding 10 years, as the Minister (or such person as he may appoint) may specify; and
(b)	apply only to Asian Currency Units approved for the purpose of the exemption from 28th February 1998 to 27th February 2003.

(4) For the purpose of paragraph (1)(a), “average monthly value”, in relation to funds of foreign investors managed by an approved Asian Currency Unit in the basis period for any year of assessment, means the aggregate of the values of such funds as at the last day of each month in that basis period for that year of assessment divided by the number of months in that basis period.”.

Amendment of regulation 6

6. Regulation 6 of the principal Regulations is amended —

(a)	by inserting the word “and” at the end of paragraph (1)(a)(ii);
(b)	by inserting, immediately after the words “regulation 3 (p)” in paragraph (1)(b), the words “and (x)”, and by deleting the word “; and” at the end of sub-paragraph (ii) of that paragraph and substituting a full-stop;
(c)	by deleting paragraph 1(c);
(d)	by deleting the definition of “average monthly value” in paragraph (2);
(e)	by inserting, immediately after the words “regulation 3 (p)” wherever they appear in the definition of “incremental income” in paragraph (2), the words “and (x)”;
(f)	by deleting paragraph (c) in the meaning of A in the definition of “incremental income” in paragraph (2);
(g)	by deleting the semi-colon at the end of paragraph (b) of the meaning of B in the definition of “incremental income” in paragraph (2) and substituting a comma;
(h)	by deleting paragraph (c) and sub-paragraph (iii) in the meaning of B in the definition of “incremental income” in paragraph (2);
(i)	by inserting the word “and” at the end of paragraph (3)(a);
(j)	by deleting the word “; and” at the end of paragraph (3)(b) and substituting a full-stop; and
(k)	by deleting paragraph (3)(c).

New regulation 9A

7. The principal Regulations are amended by inserting, immediately after regulation 9, the following regulation:

“Determination of income exempted from tax

9A.—(1) In determining the income of the Asian Currency Unit of a financial institution to be exempted from tax under regulation 5A derived by it from the activities described in regulation 3(k), (m), (n), (o), (p), (u) and (x) —

(a)	the Comptroller shall have regard to such expenses, capital allowances and donations allowable under the Act as are, in his opinion, to be deducted in ascertaining such income;
(b)	there shall be deducted from that income any allowances under section 19, 19A, 20, 21 or 22 attributable to that income notwithstanding that no claim for those allowances has been made; and
(c)	any balance of the allowances mentioned in sub-paragraph (b) and any losses incurred in respect of any activity the income from which would be exempted from tax under regulation 5A shall only be deducted against income from the same activity exempted under that regulation, and any balance of such allowances and losses shall not be deducted against any other income.

(2) Where any balance of the allowances and losses mentioned in paragraph (1)(c) is in respect of activities the income from which would be exempted from tax —

(a)	under regulation 5A (1)(a), any amount of such allowances and losses remaining unabsorbed as at the end of the year of assessment 1998 shall, subject to paragraph (3), be available as a deduction against any other income for the year of assessment 1999 and any subsequent year of assessment in accordance with section 23 or 37 of the Act, as the case may be, if the Asian Currency Unit is not approved for the exemption under regulation 5A (1)(c) from the year of assessment 1999;
(b)	under regulation 5A (1)(b), any amount of such allowances and losses remaining unabsorbed as at the end of the year of assessment 2002 shall, subject to paragraph (3), be available as a deduction against any other income for any subsequent year of assessment in accordance with section 23 or 37 of the Act, as the case may be; and
(c)	under regulation 5A (1)(c), any amount of such allowances and losses remaining unabsorbed as at the end of the tax exempt period shall, subject to paragraph (3), be available as a deduction against any other income for the year of assessment which relates to the basis period in which the tax exemption ceases and any subsequent year of assessment in accordance with section 23 or 37 of the Act, as the case may be.

(3) Section 37B of the Act shall apply to any amount of the allowances and losses available as a deduction against any other income as provided under paragraph (2) as if they were unabsorbed allowances or losses in respect of the concessionary income under that section.”.

Made this 29th day of October 1999.

LIM SIONG GUAN

Permanent Secretary,
Ministry of Finance,
Singapore.

[R32.19.05 Vol.7; AG/LEG/SL/134/97/9 Vol. 1]

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