Income Tax (Concessionary Rate of Tax for Approved Offshore GEneral Insurers) Regulations

Income Tax Act

(Chapter 134, Section 43C)

Income Tax (Concessionary Rate of Tax for Approved Offshore General Insurance Companies) Regulations

Rg 26

G.N. No. S 211/1995

REVISED EDITION 2001

(31st May 2001)

[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.

[S 79/2009, wef Y/A 2005 & Sub Ys/A:2009-SL-134-RG-79]

Definitions

2. In these Regulations —

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

“approved insurance company” means any insurance company approved under regulation 3;

[S 79/2009, wef Y/A 2005 & Sub Ys/A:2009-SL-134-RG-79]

“approved marine hull and liability insurer” means any insurance companyapproved under regulation 4;

[S 79/2009, wef Y/A 2005 & Sub Ys/A:2009-SL-134-RG-79]

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

[S 79/2009 wef 01/09/2006]

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

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

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

“marine hull and liability business” means the business of insuring and reinsuring risks involving marine hull and liability but excludes cargo, energy and aviation risks;

“offshore captive insurance business” means the offshore general insurance 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;

“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;

[S 79/2009 wef 01/09/2006]

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

[S 79/2009 wef 01/09/2006]

“offshore qualifying specialised insurance risks” means —

(a)	terrorism risks;
(b)	political risks;
(c)	energy risks; and
(d)	aviation and aerospace risks. [S 79/2009 wef 01/09/2006] [S 746/2010 wef 01/04/2008]

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 general 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.

Approval of marine hull and liability insurer

4. 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.

[S 79/2009, wef Y/A 2005 & Sub Ys/A:2009-SL-134-RG-79]

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.

[S 79/2009 wef 01/09/2006]

Concessionary rate of tax

5.—(1) Subject to regulation 7regulation 7 7A 7B, 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 6.

(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.

[S 79/2009, wef Y/A 2005 & Sub Ys/A:2009-SL-134-RG-79]

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

6.—(1) The dividends and interest under regulation 5(1)(b)(ii) derived by an approved insurance company for the basis period for any year of assessment shall be ascertained by the formula —

where P_o

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;

P_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;

is —

where 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 5(1)(b)(ii) derived by an approved insurance company for the basis period for any year of assessment shall be ascertained by the formula —

where P_o and P_i have the same meanings as in paragraph (1); and

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.

[S 79/2009, wef Y/A 2005 & Sub Ys/A:2009-SL-134-RG-79]

Exemption from tax

7.—(1) Notwithstanding regulation 5, 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 marine hull and liability business; and

(b)

the amount of income as is ascertained by the formula —

where P_m

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;

P_n

P_o and P_i

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

is the total amount of the income referred to in regulation 5(1)(b) for the basis period; and

is the total amount of dividends and interest derived from outside Singapore, gains or profits realised from the sale of offshore investments, and interest from ACU deposits derived during the basis period from —

(i) the investment of its insurance funds established and maintained under the Insurance Act (Cap.142) for the general insurance business; and

(ii) the investment of its shareholders’ funds established in Singapore which are used to support the general insurance business,

where the gains or profits realised from the sale of offshore investments 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 less any expenses directly attributable to the production of such gains or profits allowable under the Act.

(2) Where the Comptroller is satisfied that any part of the insurance funds and shareholders’ funds is not required to support the marine hull and liability business of an approved marine hull and liability insurer, he may adopt a reduced amount of the dividends, interest and gains or profits under paragraph (1)(b) as appears to him to be reasonable in the circumstances..

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); and

(b)

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

P_c

— —

P_o

where

P_c

is the amount of the gross premiums received or receivable during the basis period in respect of policies covering offshore risks 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 policies covering third party offshore risks not underwritten in the course of, nor incidental to, its captive insurance business);

P_o

has the same meaning as in regulation 6(1); and

is the total amount of the income referred to in regulation 5(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 5(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 income under paragraph (1)(b) 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)(b) as is ascertained by the formula —

P_s

— —

P_o

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

has the same meaning as in regulation 6(1); and

is the total amount of the income referred to in regulation 5(1)(b) 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)(b) 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 income under paragraph (1)(b) as appears to him to be reasonable in the circumstances.

[S 79/2009 wef 01/09/2006]

Apportionment of expenses, allowances and donations

8.—(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 —

where P_o and P_i have the same meanings as in regulation 6.

(2) Nothwithstanding paragraph (1), where an approved insurance company under the Act is also an approved marine hull and liability insurer under regulation 4, any item of expenditure not directly attributable to the marine hull and liability business or the offshore general insurance business of such company, and capital allowances and donations, allowable to such company under the Act, shall be apportioned between such business and the other insurance business of such company 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 ; and
_______

P_o + P _i

(b)

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

P_o — P _m ,
________

P_o + P _i

where P_m and P_n

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

P_o and P_i

have the same meanings as in regulation 6(1)

Determination of income exempted from tax

9.—(1) In determining the income of an approved marine hull and liability insurer, an approved captive insurer or an approved specialised insurer to be exempted from tax under regulation 77A 7B —

(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 marine hull and liability business, the offshore captive insurance business or the offshore qualifying specialised insurance business, as the case may be (which, if they had been profits, would have been exempted from tax under regulation 7) shall only be deducted against income to be exempted under regulation 7, and any balance of such allowances and losses shall not be deducted against any other income; and [S 658/2004, wef Y/A 2004 & Sub Ys/A:2004-SL-134-RG-658] [S 79/2009 wef 17/02/2006] [S 79/2009 wef 01/09/2006] [S 79/2009 wef 25/02/2009]
(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 7 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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