No. S 81
Income Tax Act
(Chapter 134)
Income Tax (Concessionary Rate of Tax for Approved Offshore Life 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 Life Insurance Companies) (Amendment) Regulations 2009.
(2)  Regulation 5 shall be deemed to have come into operation on 2nd June 2005.
(3)  Regulations 4(a), (b) and (c), 6, 8 (except in relation to regulation 5B(2)) and 9(b) shall be deemed to have come into operation on 17th February 2006.
(4)  Regulations 2, 3, 9(a) and 11 shall have effect for the year of assessment 2005 and the subsequent years of assessment.
(5)  Regulations 4(d) and (e), 7 and 10 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 Life Insurance Companies) Regulations (Rg 28) (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 3A;”;
(b)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);”;
(c)by inserting, immediately after the definition of “interest from ACU deposits”, the following definition:
“ “offshore captive insurance business” means the 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;”;
(d)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;”; and
(e)by inserting, immediately after the definitions of “ “offshore life business”, “offshore life policies” and “participating fund” ”, 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 life insurance business only 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 regulation 3A
6.  The principal Regulations are amended by inserting, immediately after regulation 3, the following regulation:
Approval of captive insurer
3A.—(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 subsection (1) shall be for such period not exceeding 10 years as the Minister or such person as he may appoint may specify.”.
Amendment of regulation 4
7.  Regulation 4(1) of the principal Regulations is amended by deleting the words “offshore life insurance surplus” in
sub-paragraph (a) and substituting the words “amount referred to in section 26(7)(a)(i) of the Act”.
New regulations 5A and 5B
8.  The principal Regulations are amended by inserting, immediately after regulation 5, the following regulations:
Income of approved captive insurer exempt from tax
5A.—(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)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;
(b)such part of the income referred to in regulation 4(1)(b) as is ascertained by the formula —
where
Pc
is the amount of the gross premiums received or receivable during the basis period in respect of offshore life 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 policies covering third parties which are not underwritten in the course of, nor incidental to, its captive insurance business);
 
Po
has the same meaning as in regulation 5(1); and
 
A
is the total amount of the income referred to in regulation 4(1)(b) 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 4(1)(b) 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)(b) as appears to him to be reasonable in the circumstances.
Determination of income exempted from tax
5B.—(1)  In determining the income of an approved captive insurer to be exempted from tax under regulation 5A —
(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 capital allowances attributable to that income notwithstanding that no claim for those allowances has been made;
(c)any balance of the allowances mentioned in sub-paragraph (b) and any losses incurred in respect of its offshore captive insurance business (which, had they been income, would have been exempted from tax under regulation 5A) shall only be deducted against income to be exempted under regulation 5A, and any balance of such allowances and losses shall not be deducted against any other income; and
(d)any balance of the allowances and losses referred to in sub-paragraph (c) remaining unabsorbed as at the end of the period in which its approval under regulation 3A expires or is withdrawn 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.
(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 4(1).”.
Amendment of regulation 6
9.  Regulation 6 of the principal Regulations is amended —
(a)by deleting the words “insurance company” wherever they appear and substituting in each case the word “insurer”; and
(b)by renumbering the regulation as paragraph (1) of that regulation, and by inserting immediately thereafter the following paragraph:
(2)  Notwithstanding paragraph (1), where an approved insurer is also an approved captive insurer under regulation 3A, any item of expenditure not directly attributable to the offshore captive 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 offshore captive insurance business shall be ascertained by using the fraction —
(b)the portion attributable to offshore life business, other than offshore captive insurance business, shall be ascertained by using the fraction —
where
Pc
has the same meaning as in regulation 5A; and
 
Po and Pi
have the same meanings as in regulation 5(1).”.
Deletion and substitution of regulation 7
10.  Regulation 7 of the principal Regulations is deleted and the following regulation substituted therefor:
Apportionment of income between policyholders and shareholders
7.—(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 4(1)(a) and (b)(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, 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
11.  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 (definition of “approved insurance company”), 4(1) and (2), 5(1), (2) and (3) and 7.
Made this 23rd day of February 2009.
TEO MING KIAN
Permanent Secretary,
Ministry of .
[MFR 32.7.6 Vol. 18; AG/LEG/SL/134/2005/36 Vol. 1]