Income Tax (Concessionary Rate of Tax for Income from Offshore Composite Insurance Business) Regulations

Income Tax Act

(Chapter 134, Section 43C)

Rg 25

G.N. No. S 209/1995

REVISED EDITION 1996

(15th May 1996)

[5th May 1995]

Citation

1. These Regulations may be cited as the Income Tax (Concessionary Rate of Tax for Income from Offshore Composite Insurance Business) Regulations and shall have effect for the years of assessment 1993, 1994 and 1995.

Definitions

2. In these Regulations —

“capital allowances” means the allowances under section 19, 19A, 20, 21, 22 or 23 of the Act;

“interest from ACU deposits” means interest derived from deposits with an Asian Currency Unit in Singapore;

“offshore general insurance business” means the business (other than the business of life insurance) of insuring and reinsuring offshore risks;

“offshore investments” means —

(a)	stocks and shares denominated in any foreign currency of companies not incorporated and not resident in Singapore;
(b)	securities, other than stocks and shares, denominated in any foreign currency (including bonds, notes, certificates of deposit and treasury bills) issued by foreign governments, foreign banks outside Singapore and companies not incorporated and not resident in Singapore;
(c)	futures contracts denominated in any foreign currency made in any futures exchange;
(d)	any immovable property situated outside Singapore;
(e)	certificates of deposit, notes and bonds issued by Asian Currency Units in Singapore;
(f)	Asian Dollar Bonds approved under section 13(1)(v) of the Act; and
(g)	foreign currency deposits with financial institutions outside Singapore;

“offshore life business”, “offshore life insurance surplus” and “offshore life policies” have the same meanings as in section 26(5) of the Act.

Application

3.—(1) These Regulations shall apply to any insurance company registered under the Insurance Act [Cap. 142] to carry on both general insurance business and life insurance business unless the insurance company has, by notice under paragraph (2), elected for the gains or profits from the whole of its offshore general insurance business and offshore life business and the shareholders’ funds supporting such business to be taxed at the rate under section 43(1)(a) of the Act.

(2) Any election under paragraph (1) shall be irrevocable and shall be given by notice in writing to the Comptroller before 1st August 1995 and shall have effect for the year of assessment for which the election is to take effect and subsequent years of assessment.

(3) Notwithstanding anything in paragraph (1), these Regulations shall not apply to any insurance company which has irrevocably elected under —

(a)	the revoked Income Tax (Concessionary Rate of Tax for Income from Offshore General Insurance Business) Regulations [Rg 20, 1993 Ed.];
(b)	the Income Tax (Concessionary Rate of Tax for Income from Offshore General Insurance Business) Regulations [Rg 20, 1996 Ed.]; or
(c)	the Income Tax (Concessionary Rate of Tax for Income from Offshore Life Insurance Business) Regulations [Rg 19, 1996 Ed.],

to be taxed at the rate under section 43(1)(a) of the Act.

Concessionary rate of tax

4.—(1) Tax shall be payable at the rate of 10% on the following income derived by an insurance company to which these Regulations apply:

(a)

the income derived from accepting general insurance covering offshore risks and reinsurance covering offshore risks;

(b)

the offshore life surplus (but excluding 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 relating to offshore life policies); and

(c)

the dividends and interest derived from outside Singapore, the gains or profits realised from the sale of offshore investments, and interest from ACU deposits derived from —

(i)	subject to paragraph (2), the investment of its insurance fund established and maintained under the Insurance Act [Cap. 142] for the offshore general insurance business or offshore life business; and
(ii)	the investment of its shareholders’ funds established in Singapore which are used to support the offshore general insurance business or offshore life business as ascertained under regulation 5.

(2) Where the Comptroller is satisfied that any part of the insurance fund referred to in sub-paragraph (c)(i) of paragraph (1) is not required to support the offshore general insurance business or offshore life business of an insurance company to which these Regulations apply, he may adopt such reduced amount of the dividends, interest and gains or profits under that sub-paragraph as appears to him to be reasonable in the circumstances.

Calculation of dividends, interest and gains from sale of offshore investments

5.—(1) The dividends and interest under regulation 4(1)(c)(ii) derived by an insurance company to which these Regulations apply for the basis period for any year of assessment shall be ascertained by the formula —

where P_ois the amount of the gross premiums received or receivable during the basis period in respect of policies underwritten by the insurance company in the course of carrying on its business in Singapore from the offshore general insurance business;

P_iis the amount of the gross premiums received or receivable during the basis period in respect of policies underwritten by the insurance company in the course of carrying on its business in Singapore from the general insurance business other than offshore general insurance business;

P_oLis the amount of gross premiums received or receivable during the basis period in respect of policies underwritten by the insurance company in the course of carrying on its business in Singapore from the offshore life business;

P_iLis the amount of gross premiums received or receivable during the basis period in respect of policies underwritten by the insurance company in the course of carrying on its business in Singapore from the life insurance business other than offshore life business;

I is the total amount of dividends and interest derived from Singapore and elsewhere by the insurance company during the basis period from the investment of its shareholders’ funds established in Singapore less any expenses directly attributable to the production of such dividends and interest allowable under the Act;

X is —

(a)

is equal to or greater than Y; or

(b)

if Y is greater than

where Y is the total amount of dividends and interest derived from Singapore (but excluding interest from ACU deposits) by the insurance company during the basis period from the investment of its shareholders’ funds established in Singapore, less any expenses directly attributable to the production of such dividends and interest allowable under the Act.

(2) The gains or profits from the sale of offshore investments under regulation 4(1)(c)(ii) derived by an insurance company to which these Regulations apply for the basis period for any year of assessment shall be ascertained by the formula —

where P_o, P_i, P_oL and P_iLhave the same meanings as in paragraph (1); and

K is the net amount (after deducting losses from the gains or profits) realised during the basis period from the sale of offshore investments acquired by the insurance company using its shareholders’ funds established in Singapore less any expenses directly attributable to the production of such gains or profits allowable under the Act.

(3) For the purposes of paragraphs (1) and (2), where the Comptroller is satisfied that any part of the shareholders’ funds of the insurance company is not required to support its offshore general insurance business or offshore life business, he may adopt such reduced amount of I or K as appears to him to be reasonable in the circumstances.

Apportionment of expenses, allowances and donations

6. Any item of expenditure not directly attributable to the offshore general insurance business or offshore life business of an insurance company to which these Regulations apply, and capital allowances and donations, allowable to the insurance company under the Act, shall be apportioned between such business and the other insurance business of the insurance company; and the portion attributable to such business shall be ascertained by using the fraction —

where P_o, P_i, P_oL, and P_iL have the same meanings as in regulation 5.

Apportionment of income between policyholders and shareholders

7. Any income derived from offshore life business by an insurance company to which these Regulations apply for any year of assessment taxable at the rate of 10% in accordance with regulation 4(1)(b) and (c)(i) shall, for the purposes of section 26 (3B)(b) and (c) of the Act, be apportioned between the policyholders and shareholders of the insurance company in the same ratio as the offshore life insurance surplus for the basis period for that year of assessment is allocated by the insurance company between its policyholders and shareholders in that basis period or, where no such allocation is made by the insurance company, be deemed to be apportioned wholly to its shareholders.

[G.N. No. S 209/95]

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