Income Tax (Exemption of Income of Foreign Trusts) Regulations

Income Tax Act

(Chapter 134, Section 13G)

Rg 24

G.N. No. S 92/1994

REVISED EDITION 1995

(1st April 1995)

[18th March 1994]

Citation

1. These Regulations may be cited as the Income Tax (Exemption of Income of Foreign Trusts) Regulations and shall have effect for the year of assessment 1994 and subsequent years of assessment.

Definitions

2. In these Regulations —

“designated investments” has the same meaning as in the Income Tax (Income from Funds Managed for Foreign Investors) Regulations 2003 (G.N. No. S 640/2003);

[S 590/2005 wef 03/05/2002]

“foreign company” means a company which is neither incorporated nor resident in Singapore and —

(a)	where the company has not more than 50 shareholders, the whole of the issued capital of the company is beneficially owned, directly or indirectly, by persons who are neither citizens of Singapore nor resident in Singapore; and
(b)	where the company has more than 50 shareholders, not less than 95% of the issued capital of the company is beneficially owned, directly or indirectly, by persons who are neither citizens of Singapore nor resident in Singapore; [S 350/2003 wef 02/07/2002]

“specified income” means —

(a)	interest and dividends derived from outside Singapore and received in Singapore in respect of any designated investments;
(b)	interest derived from deposits with and certificates of deposit issued by banks approved under section 13 of the Act and from Asian dollar bonds approved under section 13(1)(v) of the Act;
(c)	rents, royalties, premiums and any other profits arising from property that are derived from outside Singapore and received in Singapore on or after 1st June 2003; [S 590/2005 wef 01/06/2003]
(d)	gains or profits realised from the sale of any designated investments, or realised on or after 1st June 2003 from the sale of any property the income, if any, from which falls within paragraph (c); and [S 590/2005 wef 01/06/2003]
(e)	gains or profits arising from transactions in paragraphs (c), (k) and (l) of the definition of ‘‘designated investments’’ in the Income Tax (Income from Funds Managed for Foreign Investors) Regulations 2003 (G.N. No. S 640/2003); [S 590/2005 wef 01/06/2003]
	“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.

Foreign trust to which Regulations apply

2A.—(1) Subject to paragraph (2), a trust shall be regarded as a foreign trust for the purposes of these Regulations if —

(a)

it is a trust created in writing and every settlor and every beneficiary thereof are —

(i)	individuals who are neither citizens of Singapore nor resident in Singapore; or
(ii)	foreign companies; or

(b)

it is a unit trust and the whole value of the unit trust fund is beneficially held, directly or indirectly, by —

(i)	individuals who are neither citizens of Singapore nor resident in Singapore; or
(ii)	foreign companies.

(2) For the purpose of paragraph (1)(a), a trust shall continue to be regarded as a foreign trust notwithstanding that any settlor or beneficiary of the trust who is an individual subsequently becomes a citizen of Singapore or resident in Singapore, if the following conditions are satisfied:

(a)

in the case of a settlor who subsequently becomes a citizen of Singapore or resident in Singapore —

(i)	no new assets are injected into the trust by the settlor from the day he becomes a citizen of Singapore or resident in Singapore;
(ii)	the settlor neither receives nor enjoys any benefit under the trust and shall not exercise any power of appointment in favour of any person who is a citizen of Singapore or resident in Singapore; and
(iii)	the settlor neither revokes the trust nor varies the terms of the trust so as to cause any benefit to be paid or otherwise made available to a citizen of Singapore or resident in Singapore;

(b)

in the case of a settlor who was previously a citizen of Singapore or resident in Singapore and the trust was constituted subsequent to the settlor ceasing to be a citizen of Singapore or resident in Singapore, the settlor does not within 5 years of last ceasing to be a citizen of Singapore or resident in Singapore resume being a citizen of Singapore or resident in Singapore; and

(c)

in the case of a beneficiary who subsequently becomes a citizen of Singapore or resident in Singapore —

(i)	the total value of all distributions made by the trustee to the beneficiaries who are citizens of Singapore or resident in Singapore is less than 20% of the cumulative value of all trust distributions made by the trustee for the trust; and
(ii)	all beneficiaries who are citizens of Singapore or resident in Singapore are beneficially entitled to less than 20% of the assets of the trust. [S 350/2003 wef 02/07/2002]

Exemption

3. Subject to regulations 4 and 5, there shall be exempt from tax the specified income derived from designated investments by a foreign trust administered by a trustee company approved under section 43J of the Act.

Deduction of certain losses not allowed

4. No deduction shall be allowed under the Act to any eligible holding company or foreign trust in respect of any loss arising from any transaction that would have been exempted from tax under regulation 3 had it resulted in a gain or profit.

[S 590/2005 wef 01/06/2003]

Regulations not applicable to certain foreign trusts

5. These Regulations shall not apply to a foreign trust where any settlor or beneficiary or unit holder (as the case may be) of the foreign trust is a company which —

(a)	has a permanent establishment in Singapore other than a trustee company approved under section 43J of the Act;
(b)	carries on a business in Singapore;
(c)	beneficially owns more than 20% of the issued capital of any company incorporated in Singapore; or
(d)	has 20% or more of its issued capital beneficially owned, directly or indirectly, by a company which falls within paragraph (a), (b) or (c),

unless approval is granted by the Minister or such other person as he may appoint.

Keeping of records

6. Every approved trustee company shall keep and maintain in respect of a foreign trust such records of the particulars of every settlor and beneficiary or unit holder (as the case may be) of the foreign trust as may be required by the Minister or such person as he may appoint for the purposes of these Regulations.

Additional assessment on income of foreign trust or eligible holding company in certain circumstances

7.—(1) Where a trust ceases to be a foreign trust for the purposes of these Regulations for failing to satisfy the condition referred to in paragraph (2)(a)(iii) or (b) of regulation 2A, the Comptroller may assess the trustee of the foreign trust or the eligible holding company established for the purposes of that foreign trust, as the case may be, under section 74 of the Act on any income of that foreign trust or eligible holding company that was exempted from tax under these Regulations.

(2) Any amount or additional amount assessed by the Comptroller under paragraph (1) shall only be paid out of the funds of the foreign trust or eligible holding company established for the purposes of that foreign trust.

[S 350/2003 wef 02/07/2002]

[G. N. No. S 92/94]

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