Income Tax (Concessionary Rate of Tax for Financial Sector Incentive Companies) (Amendment) Regulations 2008

No. S 586

Income Tax Act

(Chapter 134)

Income Tax (Concessionary Rate of Tax for Financial Sector Incentive Companies) (Amendment) Regulations 2008

In exercise of the powers conferred by section 43Q 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 Financial Sector Incentive Companies) (Amendment) Regulations 2008.

(2) Regulations 2(a), 4(a) and (b) to (d) (in relation to regulation 4(2D)), 5(a), 6(e) and (f) and 8 (in relation to regulation 4(2D)) shall be deemed to have come into operation on 17th February 2006.

(3) Regulations 2(b), (f) and (g), 3 and 7 shall be deemed to have come into operation on 1st November 2006.

(4) Regulations 2(c), (d), (e) and (h), 4(b) to (d) (in relation to regulation 4(2E)), 5(b), 6(a) to (d) and 8 (in relation to regulation 4(2E)) shall be deemed to have come into operation on 15th February 2007.

Amendment of regulation 2

2. Regulation 2 of the Income Tax (Concessionary Rate of Tax for Financial Sector Incentive Companies) Regulations 2005 (G.N. No. S 735/2005) (referred to in these Regulations as the principal Regulations) is amended —

(a)

by inserting, immediately before the definition of “Approved Derivatives Trader” in paragraph (1), the following definition:

“ “approved company” means an approved company under section 13R of the Act;”;

(b)

by inserting, immediately after the definition of “financial sector incentive (headquarter services) company” in paragraph (1), the following definition:

“ “financial sector incentive (project finance) company” means a company approved as such under section 43Q of the Act;”;

(c)

by deleting paragraph (b) of the definition of “foreign investor” in paragraph (1) and substituting the following paragraph:

“(b)

a company not resident in Singapore —

(i)	which is incorporated before 15th February 2007 and of which not more than 20% of the total number of the issued shares are beneficially owned, directly or indirectly, by persons who are citizens of Singapore or resident in Singapore (excluding the total percentage owned directly by any designated person); or
(ii)	which is incorporated on or after 15th February 2007 and of which not more than 20% of the total value of the issued securities are beneficially owned, directly or indirectly, by persons who are citizens of Singapore or resident in Singapore (excluding the total percentage owned directly by any designated person); or”;

(d)

by deleting paragraph (ii) of the definition of “foreign investor” in paragraph (1) and substituting the following paragraph:

“(ii)

any company —

(A)	which is incorporated before 15th February 2007 and of which 20% or more of the total number of the issued shares are beneficially owned, directly or indirectly, by a company referred to in paragraph (i); or
(B)	which is incorporated on or after 15th February 2007 and of which 20% or more of the total value of the issued securities are beneficially owned, directly or indirectly, by a company referred to in paragraph (i),”;

(e)

by inserting, immediately after the definition of “initial public offering” in paragraph (1), the following definition:

“ “issued securities” means —

(a)

issued debentures, stocks or shares;

(b)

any right, option or derivative in respect of any such debentures, stocks or shares; or

(c)

any right under a contract for differences, or under any other contract the purpose or pretended purpose of which is to secure a profit or avoid a loss by reference to fluctuations, in —

(i)	the value or price of any such debentures, stocks or shares;
(ii)	the value or price of any group of any such debentures, stocks or shares; or
(iii)	an index of any such debentures, stocks or shares,

and includes derivatives of a buy-sell nature, but does not include —

(A)	futures contracts which are traded on a futures market;
(B)	bills of exchange;
(C)	promissory notes; or
(d)	certificates of deposit issued by a bank or finance company;”;

(f)

by inserting, immediately after the definition of “offshore trade transaction” in paragraph (1), the following definition:

“ “prescribed asset or project” means an infrastructure asset or project prescribed in regulation 5 of the Income Tax (Qualifying Project Debt Securities) Regulations 2008 (G.N. No. S 315/2008);”;

(g)

by inserting, immediately after the definition of “qualifying derivatives” in paragraph (1), the following definitions:

“ “qualifying project debt securities” has the same meaning as in section 13(16) of the Act;

“qualifying project loan” means a loan which satisfies the following conditions:

(a)	the interest payment in respect of the loan is funded primarily by the cash flows from one or more prescribed assets or projects;
(b)	the proceeds from the loan are only used to acquire, develop or invest in any prescribed asset or project or to refinance a previous loan where the previous loan is only used to acquire, develop or invest in any prescribed asset or project;
(c)	the proceeds from the loan are used outside Singapore;
(d)	the loan is substantially advised on and structured by a financial sector incentive (project finance) company or a financial institution in Singapore where the employees of the financial institution who are based in Singapore have a leading and substantial role in advising on and structuring the loan;
(e)	the loan agreement takes effect any time on or after 1st November 2006 but not after 31st December 2008; and
(f)	no interest, commission, fee or other payment in respect of the loan is deductible under the Act against any income of any person accruing in or derived from Singapore;”; and

(h)

by inserting, immediately after paragraph (2), the following paragraph:

“(3) Any reference in these Regulations to the value of issued securities of a company is a reference to the value of those securities ––

(a)	at the time of their issue by the company; or
(b)	in the case of derivatives of a buy-sell nature, at the time of their buy-sell transaction.”.

Amendment of regulation 3

3. Regulation 3 of the principal Regulations is amended —

(a)

by deleting the full-stop at the end of sub-paragraph (g) of paragraph (1) and substituting a semi-colon, and by inserting immediately thereafter the following sub-paragraph:

“(h)	a financial sector incentive (project finance) company.”; and

(b)

by deleting the words “or financial sector incentive (equity market) company” in paragraph (6) and substituting the words “, financial sector incentive (equity market) company or financial sector incentive (project finance) company”.

Amendment of regulation 4

4. Regulation 4 of the principal Regulations is amended —

(a)

by deleting the words “referred to in sub-paragraph (l)” in paragraph (1)(n) and substituting the words “in respect of fund management”;

(b)

by deleting the words “and (2C)” wherever they appear in paragraph (2) and substituting in each case the words “, (2C), (2D) and (2E)”;

(c)

by inserting, immediately after paragraph (2C), the following paragraphs:

“(2D) Subject to this regulation and regulation 7, tax shall be payable at the rate of 10% on the income of a financial sector incentive (standard tier) company, derived on or after 17th February 2006 from any of the following activities:

(a)	managing the funds of an approved company for the purpose of any designated investments;
(b)	providing investment advisory services to an approved company in respect of any designated investments.

(2E) Subject to this regulation and regulation 7, tax shall be payable at the rate of 10% on the income of a financial sector incentive (standard tier) company, derived on or after 15th February 2007 from providing investment advisory services to a foreign investor through a fund manager outside Singapore in respect of designated investments, where the payments for those services are not borne, directly or indirectly, by a person resident in Singapore or by a permanent establishment in Singapore.”; and

(d)

by deleting the words “and (2C)” in paragraph (b) of the definition of “”specified income” or “specified loss”” in paragraph (4) and substituting the words “, (2C), (2D) and (2E)”.

Amendment of regulation 6

5. Regulation 6 of the principal Regulations is amended ––

(a)

by deleting sub-paragraphs (a) and (b) of paragraph (1) and substituting the following sub-paragraphs:

“(a)

on or after 1st January 2004 ––

(i)

managing the funds of a foreign investor for the purpose of any designated investments, or providing investment advisory services to a foreign investor in respect of any designated investments, where the payments for the services are not borne, directly or indirectly, by a person resident in Singapore or by a permanent establishment in Singapore;

(ii)

arranging, on behalf of a foreign investor, any loan of designated securities under a securities lending arrangement in writing to a financial sector incentive (standard tier) company or another financial sector incentive (fund management) company, where the payments for the services are not borne, directly or indirectly, by a person resident in Singapore or by a permanent establishment in Singapore;

(b)

on or after 17th February 2006, managing the funds of an approved company for the purpose of any designated investments, or providing investment advisory services to an approved company in respect of any designated investments;”; and

(b)

by inserting, immediately after sub-paragraph (b) of paragraph (1), the following sub-paragraph:

“(c)

on or after 15th February 2007, providing investment advisory services to a foreign investor through a fund manager outside Singapore in respect of designated investments, where the payments for those services are not borne, directly or indirectly, by a person resident in Singapore or by a permanent establishment in Singapore.”.

Amendment of regulation 7

6. Regulation 7 of the principal Regulations is amended —

(a)

by deleting the words “or 6(1)” in the 2nd line and substituting the words “or (2E) or 6(1)(a) or (c)”;

(b)

by deleting paragraph (a) and substituting the following paragraphs:

“(a)	a company referred to in paragraph (b)(i) of the definition of “foreign investor” in regulation 2 in which any designated person is a shareholder and of which more than 20% of the total number of the issued shares are beneficially owned, directly or indirectly, by persons who are not referred to in paragraphs (a) and (b) of that definition and by designated persons;
(aa)	a company referred to in paragraph (b)(ii) of the definition of “foreign investor” in regulation 2 in which any designated person is a shareholder and of which more than 20% of the total value of the issued securities are beneficially owned, directly or indirectly, by persons who are not referred to in paragraphs (a) and (b) of that definition and by designated persons; or”;

(c)

by deleting the definitions of “A” and “B” and substituting the following definitions:

“

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

is the total number of issued shares of the company referred to in paragraph (a), the total value of issued securities of the company referred to in paragraph (aa) or the total value of the trust fund referred to in paragraph (b), as the case may be; and”;

”;

(d)

by deleting the words “or 6(1)” in the definition of “C” and substituting the words “or (2E) or 6(1)(a) or (c)”;

(e)

by renumbering the regulation as paragraph (1) of that regulation, and by inserting immediately thereafter the following paragraph:

“(2) In respect of services provided to an approved company under regulation 4(2D) or 6(1)(b), where the approved company is —

(a)	a company incorporated before 15th February 2007, in which any designated person is a shareholder and of which more than 20% of the total number of the issued shares are beneficially owned, directly or indirectly, by persons who are citizens of Singapore or resident in Singapore and by designated persons; or
(b)	a company incorporated on or after 15th February 2007, in which any designated person is a shareholder and of which more than 20% of the total value of the issued securities are beneficially owned, directly or indirectly, by persons who are citizens of Singapore or resident in Singapore and by designated persons,

the amount of fees and commissions which is chargeable with tax at the concessionary rate of 10% shall be computed in accordance with the following formula:

D + (20% x E)

x F

where

is the number of issued shares of the company referred to in sub-paragraph (a) or the value of issued securities of the company referred to in sub-paragraph (b), as the case may be, which are not beneficially owned or held, directly or indirectly, by persons who are citizens of Singapore or resident in Singapore or by designated persons;

is the total number of issued shares of the company referred to in sub-paragraph (a) or the total value of issued securities of the company referred to in sub-paragraph (b), as the case may be; and

is the amount of fees and commissions derived from the provision of the services referred to in regulation 4(2D) or 6(1)(b) to the approved company.”; and”.

(f)

by inserting, immediately after the words “foreign investors” in the regulation heading, the words “and approved companies”.

Amendment of regulation 8

7. Regulation 8 of the principal Regulations is amended —

(a)

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

(b)

by deleting the full-stop at the end of paragraph (e) and substituting the word “; and”, and by inserting immediately thereafter the following paragraph:

“(f)

by a financial sector incentive (project finance) company from any of the following activities:

(i)	arranging, underwriting or distributing any qualifying project debt securities;
(ii)	arranging or underwriting any qualifying project loan;
(iii)	providing project finance advisory services in connection with transactions relating to any prescribed asset or project.”.

Amendment of regulation 10

8. Regulation 10(9) of the principal Regulations is amended by deleted words “and (2C)” in paragraph (b)(ii) of the definition of “specified previous income” and substituting the “, (2C), (2D) and (2E)”.

Amendment of regulations 12

9. Regulation 12 of the principal Regulations is amended —

(a)	by inserting, immediately after the words “as the case may be” in the last line of paragraph (3), the words “, or until 31st December 2008, whichever is the later”;
(b)	by inserting, immediately after the words “1st January 2004” in the last line of paragraph (4), the words “, or until 31st December 2008, which is the later”; and
(c)	by inserting, immediately after the words “1st January 2004” in the penultimate and last lines of paragraph (6), the words “, or until 31st December 2008, whichever is the later”.

Made this 14th day of November 2008.

TEO MING KIAN

Permanent Secretary,
Ministry of Finance,
Singapore.

[MF(R) 32.18.2183 V12; AG/LEG/SL/134/2005/12 Vol. 2]

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