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No. S 80

Income Tax Act

(Chapter 134)

Income Tax (Concessionary Rate of Tax for Approved Offshore Composite Insurance Companies) (Amendment) Regulations 2009

In exercise of the powers conferred by section 43C 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 Approved Offshore Composite Insurance Companies) (Amendment) Regulations 2009.

(2) Regulation 5 shall be deemed to have come into operation on 2nd June 2005.

(3) Regulations 4(a), (c) and (d), 6 (in relation to regulation 4A), 7(a) (in relation to regulation 7A), 8 (in relation to regulation 7A), 9 (in relation to an approved captive insurer, offshore captive insurance business and P_c) and 10(a) (in relation to an approved captive insurer), (b) (in relation to offshore captive insurance business), (c) (in relation to regulation 7A) and (e) (in relation to regulation 4A) shall be deemed to have come into operation on 17th February 2006.

(4) Regulations 4(b) and (f), 6 (in relation to regulation 4B), 7(a) (in relation to regulation 7B), 8 (in relation to regulation 7B), 9 (in relation to an approved specialised insurer, offshore qualifying specialised insurance business and P_s) and 10(a) (in relation to an approved specialised insurer), (b) (in relation to offshore qualifying specialised insurance business), (c) (in relation to regulation 7B) and (e) (in relation to regulation 4B) shall be deemed to have come into operation on 1st September 2006.

(5) Regulations 2, 3 and 12 shall have effect for the year of assessment 2005 and the subsequent years of assessment.

(6) Regulations 4(e) and (g), 7(b) and 11 shall have effect for the year of assessment 2006 and the subsequent years of assessment.

Amendment of title

2. The Income Tax (Concessionary Rate of Tax for Approved Offshore Composite Insurance Companies) Regulations (Rg 27) (referred to in these Regulations as the principal Regulations) are amended by deleting the words “INSURANCE COMPANIES” in the title and substituting the word “INSURERS”.

Amendment of regulation 1

3. Regulation 1 of the principal Regulations is amended by deleting the words “Insurance Companies” and substituting the word “Insurers”.

Amendment of regulation 2

4. Regulation 2 of the principal Regulations is amended —

(a)

by inserting, immediately before the definition of “approved insurer”, the following definition:

“ “approved captive insurer” means any captive insurer approved under regulation 4A;”;

(b)

by inserting, immediately after the definition of “approved marine hull and liability insurer”, the following definition:

“ “approved specialised insurer” means any insurer approved under regulation 4B;”;

(c)

by inserting, immediately after the definition of “capital allowances”, the following definition:

“ “captive insurer” has the same meaning as in section 1A of the Insurance Act (Cap. 142);”;

(d)

by inserting, immediately after the definition of “marine hull and liability business”, the following definition:

“ “offshore captive insurance business” means the offshore general insurance business and offshore life business in relation to the risks of related companies, including third party offshore risks underwritten in the course of and incidental to the captive insurance business;”;

(e)

by deleting the definitions of “ “offshore life business”, “offshore life insurance surplus” and “offshore life policies” ” and substituting the following definitions:

“ “offshore life business”, “offshore life policies” and “participating fund” have the same meanings as in section 26(12) of the Act;”;

(f)

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

“ “offshore qualifying specialised insurance business” means the business of insuring and reinsuring offshore qualifying specialised insurance risks;

“offshore qualifying specialised insurance risks” means —

(a)	terrorism risks;
(b)	political risks;
(c)	energy risks; and
(d)	aviation and aerospace risks;”; and

(g)

by inserting, immediately after the definition of “offshore qualifying specialised insurance risks”, the following definition:

“ “participating policy” has the same meaning as in paragraph 6A of the First Schedule to the Insurance Act.”.

Deletion and substitution of regulation 3

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

“Approval of insurer

3. The Minister or such person as he may appoint may, upon application by any insurer registered under the Insurance Act (Cap. 142) to carry on both general insurance business and life insurance business and if he considers it expedient in the public interest to do so, approve the insurer as an approved insurer for the purposes of these Regulations.”.

New regulations 4A and 4B

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

“Approval of captive insurer

4A.—(1) The Minister or such person as he may appoint may, upon application by any captive insurer and if he considers it expedient in the public interest to do so, during the period from 17th February 2006 to 16th February 2011, approve the insurer as an approved captive insurer.

(2) Any approval under paragraph (1) shall be for such period not exceeding 10 years as the Minister or such person as he may appoint may specify.

Approval of specialised insurer

4B.—(1) The Minister or such person as he may appoint may, upon application by any insurer underwriting offshore qualifying specialised insurance risks and if he considers it expedient in the public interest to do so, during the period from 1st September 2006 to 31st August 2011 approve the insurer as an approved specialised insurer.

(2) Any approval under paragraph (1) shall be for such period not exceeding 5 years as the Minister or such person as he may appoint may specify.”.

Amendment of regulation 5

7. Regulation 5(1) of the principal Regulations is amended —

(a)	by inserting, immediately after the words “regulation 7”, the words “, 7A or 7B”; and
(b)	by deleting the words “offshore life surplus” in sub-paragraph (b) and substituting the words “income from insurance funds established and maintained for offshore life policies computed in accordance with section 26(7)(a)(i) of the Act”.

New regulations 7A and 7B

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

“Income of approved captive insurer exempt from tax

7A.—(1) There shall be exempt from tax the following income derived by an approved captive insurer (including one who is also an approved insurer) for the basis period for any year of assessment:

(a)

the underwriting income derived from accepting general insurance covering offshore risks (excluding amounts derived from policies covering third party offshore risks not underwritten in the course of, nor incidental to, its captive insurance business);

(b)

income derived from accepting offshore life insurance as computed in accordance with section 26(7)(a)(i) of the Act, excluding —

(i)	amounts derived from offshore life policies covering third parties which are not underwritten in the course of, nor incidental to, its captive insurance business; and
(ii)	the investment income and gains or profits derived from the sale of investments and other income, whether derived from Singapore or elsewhere, of any life insurance fund established under the Insurance Act (Cap. 142) relating to offshore life policies;

(c)

such part of the income referred to in regulation 5(1)(c) as is ascertained by the formula —

P_c

——— —

P_o + P _oL

where

P_c

is the amount of the gross premiums received or receivable during the basis period in respect of offshore life or general policies underwritten by the approved captive insurer in the course of carrying on its offshore captive insurance business in Singapore (excluding amounts received or receivable in respect of offshore life or general policies covering third parties which are not underwritten in the course of, nor incidental to, its captive insurance business);

P_o and P_oL

have the same meanings as in regulation 6(1);

is the total amount of the income referred to in regulation 5(1)(c) of the approved captive insurer for the basis period less any expenses directly attributable to the production of such income allowable under the Act.

(2) Where the Comptroller is satisfied that any part of the insurance fund or the shareholders’ funds referred to in regulation 5(1)(c) of the approved captive insurer (including one who is also an approved insurer) is not required to support the offshore captive insurance business of such insurer, he may adopt such reduced amount of the income under paragraph (1)(c) as appears to him to be reasonable in the circumstances.

Income of approved specialised insurer exempt from tax

7B.—(1) There shall be exempt from tax the following income derived by an approved specialised insurer (including one who is also an approved insurer) for the basis period for any year of assessment:

(a)

the underwriting income derived from accepting offshore qualifying specialised insurance business; and

(b)

such part of the income referred to in regulation 5(1)(c) as is ascertained by the formula —

P_s

——— —

P_o + P _oL

where

P_s

is the amount of the gross premiums received or receivable during the basis period in respect of policies for offshore qualifying specialised insurance risks underwritten by the approved specialised insurer;

P_o and P_oL

have the same meanings as in regulation 6(1); and

is the total amount of the income referred to in regulation 5(1)(c) of the approved specialised insurer for the basis period less any expenses directly attributable to the production of such income allowable under the Act.

(2) Where the Comptroller is satisfied that any part of the insurance fund or the shareholders’ funds referred to in regulation 5(1)(c) of the approved specialised insurer (including one who is also an approved insurer) is not required to support the offshore qualifying specialised insurance business of such insurer, he may adopt such reduced amount of the income under paragraph (1)(b) as appears to him to be reasonable in the circumstances.”.

Amendment of regulation 8

9. Regulation 8 of the principal Regulations is amended by deleting paragraph (2) and substituting the following paragraph:

“(2) Notwithstanding paragraph (1), where an approved insurer is also an approved marine hull and liability insurer under regulation 4, an approved captive insurer under regulation 4A or an approved specialised insurer under regulation 4B, any item of expenditure not directly attributable to the marine hull and liability business, the offshore captive insurance business, the offshore qualifying specialised insurance business, the offshore general insurance business or the offshore life business of such insurer, and capital allowances and donations allowable to such insurer under the Act, shall be apportioned between such business and the other insurance business of such insurer in the following manner:

(a)

the portion attributable to marine hull and liability business shall be ascertained by using the fraction —

P_m + P _n

————————;

P_o + P _i + P_oL + P _iL

(b)

the portion attributable to offshore captive insurance business shall be ascertained by using the fraction —

—————————;

P_o + P _i + P_oL + P _iL

(c)

the portion attributable to offshore qualifying specialised insurance business shall be ascertained by using the fraction —

P_s

————————————; and

P_o + P _i + P_oL + P _iL

(d)

the portion attributable to offshore life business and offshore general insurance business, other than offshore marine hull and liability business, offshore captive insurance business and offshore qualifying specialised insurance business, shall be ascertained by using the fraction —

P_o + P _oL — P_m — P _c — P_s

———————————,

P_o + P _i+ P_oL + P _iL

where

P_m and P_n

have the same meanings as in regulation 7(1);

P_c

has the same meaning as in regulation 7A(1);

P_s

has the same meaning as in regulation 7B(1); and

P_o, P_i, P_oL and P_iL

have the same meanings as in regulation 6(1).”.

Amendment of regulation 9

10. Regulation 9 of the principal Regulations is amended —

(a)

by inserting, immediately after the words “approved marine hull and liability insurer” in paragraph (1), the words “, an approved captive insurer or an approved specialised insurer”;

(b)

by inserting, immediately after the words “marine hull and liability business” in paragraph (1)(c), the words “, the offshore captive insurance business or the offshore qualifying specialised insurance business, as the case may be”;

(c)

by deleting the words “regulation 7” wherever they appear in paragraph (1) and substituting in each case the words “regulation 7, 7A or 7B, as the case may be”;

(d)

by deleting the word “and” at the end of paragraph (1)(c);

(e)

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

“(d)

any balance of the allowances and losses referred to in sub-paragraph (c) remaining unabsorbed as at the date of expiry or withdrawal of the approval under regulation 4, 4A or 4B, as the case may be, shall, subject to paragraph (2), be available as a deduction against any other income of the insurer for the year of assessment which relates to the basis period in which that approval expires or is withdrawn and any subsequent year of assessment in accordance with section 23 or 37 of the Act, as the case may be; and

(e)

for the purposes of sub-paragraph (d), where an insurer is approved under regulations 4 and 4A, regulations 4 and 4B, regulations 4A and 4B or regulations 4, 4A and 4B, the approval referred to in sub-paragraph (d) shall be the one whose date of expiry or withdrawal is the last.”; and

(f)

by deleting paragraph (2) and substituting the following paragraph:

“(2) 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 (1)(d) as if they were unabsorbed allowances or losses in respect of the income of a company subject to tax at a lower rate of tax under that section, and for this purpose the rate of tax shall be taken to be the concessionary rate of tax under regulation 5(1).”.

Deletion and substitution of regulation 10

11. Regulation 10 of the principal Regulations is deleted and the following regulation substituted therefor:

“Apportionment of income between policyholders and shareholders

10.—(1) Any income derived from a participating fund in relation to offshore life business by an approved insurer for any year of assessment taxable at the rate of 10% in accordance with regulation 5(1)(b) and (c)(i) shall, for the purposes of section 26(8)(b) and (c) of the Act, be apportioned between the policyholders and shareholders of the approved insurer in the same ratio as the amount referred to in section 26(7)(a)(i)(A) of the Act bears to the amount referred to in section 26(7)(a)(i)(B) of the Act for the basis period for that year of assessment.

(2) For the purposes of paragraph (1), where no allocation is made out of the participating fund by the approved insurer in accordance with section 17(6)(b) of the Insurance Act (Cap. 142), the income shall be deemed to be apportioned to the policyholders in accordance with —

(a)

where the articles of association of the approved insurer specify the percentage of the gains or profits of the participating fund in respect of offshore life policies that may be distributed to the policyholders, that percentage; or

(b)

where the articles of association of the approved insurer do not so specify, the difference between 100% and the maximum amount (in terms of percentage) of the fund that may be allocated to the surplus account under section 17(6)(c)(iv) of the Insurance Act (Cap. 142), out of the total of such amount and the amount of the fund that may be allocated to participating policies by way of bonus in accordance with section 17(6)(b) of that Act.

(3) Paragraphs (1) and (2) shall not apply to a captive insurer.”.

Miscellaneous amendments

12. The principal Regulations are amended by deleting the words “insurance company” wherever they appear in the following provisions and substituting in each case the word “insurer”:

Regulations 2 (definitions of “approved insurance company” and “approved marine hull and liability insurer”), 4, 5(1) and (2), 6(1), (2) and (3), 7(1) and 8(1) and (2) and 10.

[G.N. No. S 659/2004]

Made this 23rd day of February 2009.

TEO MING KIAN

Permanent Secretary,
Ministry of Finance,
Singapore.

[MFR 32.7.6 Vol. 8; AG/LEG/SL/134/2005/36 Vol. 1]