Income Tax Act
(Chapter 134, Section 43C)
Income Tax (Concessionary Rate of Tax
for Approved Offshore General
Insurance Companies) Regulations
Rg 26
REVISED EDITION 1996
(5th May 1995)
[5th May 1995]
Citation
1.  These Regulations may be cited as the Income Tax (Concessionary Rate of Tax for Approved Offshore General Insurance Companies) Regulations and shall have effect for the year of assessment 1996 and subsequent years of assessment.
Definitions
2.  In these Regulations —
“approved insurance company” means any insurance company approved under regulation 3;
“approved marine hull and liability insurer” means any insurance company approved under regulation 3A;
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“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 marine hull and liability business” means the business of insuring and reinsuring offshore risks involving marine hull and liability but excludes cargo, energy and aviation risks.
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Approval of insurance company
3.  The Minister or such person as he may appoint may, upon application by any insurance company registered under the Insurance Act [Cap. 142] to carry on general insurance business only and if he considers it expedient in the public interest to do so, approve the insurance company for the purposes of these Regulations where —
(a)the insurance company has on 5th May 1995 been carrying on offshore general insurance business and the application is made not later than 31st December 1995; or
(b)the insurance company commences to carry on offshore general insurance business after 5th May 1995 and the application is made within 3 months after the date of commencement of such business.
Approval of marine hull and liability insurer
3A.  The Minister or such person as he may appoint may, upon application by any approved insurance company and if he considers it expedient in the public interest to do so, approve the insurance company as an approved marine hull and liability insurer for such period not exceeding 10 years as he may specify.
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Concessionary rate of tax
4.—(1)  Subject to regulation 5A, tax shall be payable at the rate of 10% on the following income derived by an approved insurance company:
(a)the income derived from accepting general insurance covering offshore risks and reinsurance covering offshore risks;
(b)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; and
(ii)the investment of its shareholders’ funds established in Singapore which are used to support the offshore general insurance business as ascertained under regulation 5.
(2)  Where the Comptroller is satisfied that any part of the insurance fund referred to in sub-paragraph (b)(i) of paragraph (1) is not required to support the offshore general insurance business of an approved insurance company, 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)(b)(ii) derived by an approved insurance company for the basis period for any year of assessment shall be ascertained by the formula —
UNKNOWN
where
Po is the amount of the gross premiums received or receivable during the basis period in respect of policies underwritten by the approved insurance company in the course of carrying on its business in Singapore from the offshore general insurance business;
Pi is the amount of the gross premiums received or receivable during the basis period in respect of policies underwritten by the approved insurance company in the course of carrying on its business in Singapore from the general insurance business other than offshore general insurance business;
I is the total amount of dividends and interest derived from Singapore and elsewhere by the approved 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)
UNKNOWN
(b)
UNKNOWN
Y is the total amount of dividends and interest derived from Singapore (but excluding interest from ACU deposits) by the approved 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)(b)(ii) derived by an approved insurance company for the basis period for any year of assessment shall be ascertained by the formula —
UNKNOWN
where
Po and Pi have 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 approved 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 approved insurance company is not required to support its offshore general insurance business, he may adopt such reduced amount of I or K as appears to him to be reasonable in the circumstances.
Exemption from income tax
5A.  Notwithstanding regulation 4, there shall be exempt from tax the following income derived by an approved marine hull and liability insurer for the basis period for any year of assessment:
(a)the underwriting income derived from accepting offshore marine hull and liability business; and
(b)such part of the income referred to in regulation 4(1)(b) as is ascertained by the formula —
UNKNOWN
where Pm
is the amount of the gross premiums received or receivable during the basis period in respect of policies underwritten by the approved marine hull and liability insurer in the course of carrying on its business in Singapore from the offshore marine hull and liability 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) for the basis period.
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Apportionment of expenses, allowances and donations
6.—(1)  Any item of expenditure not directly attributable to the offshore general insurance business of an approved insurance company, and capital allowances and donations, allowable to the insurance company under the Act, shall be apportioned between such business and the other general insurance business of the approved insurance company; and the portion attributable to such business shall be ascertained by using the fraction —
UNKNOWN
where Po and Pi have the same meanings as in regulation 5.
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(2)  There shall be apportioned between the offshore marine hull and liability business and the other offshore general insurance business of an approved marine hull and liability insurer —
(a)any amount of expenditure, capital allowances and donations apportioned to the offshore general insurance business in accordance with paragraph (1); and
(b)any item of expenditure incurred in respect of both the offshore marine hull and liability business and the other offshore general insurance business, allowable to the insurer under the Act,
and the portion attributable to its offshore marine hull and liability business shall be ascertained by using the fraction —
UNKNOWN
where Pm and Po have the same meanings as in regulation 5A.
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Determination of income exempted from tax
7.—(1)  In determining the income of an approved marine hull and liability 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 the offshore marine hull and liability business (which, if they had been profits, 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 for which the exemption from tax under regulation 5A is approved 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 the tax exemption ceases 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 concessionary income under that section.
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