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

Income Tax Act

(Chapter 134, Section 43C)

Rg 28

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 Life Insurance Companies) Regulations and shall have effect for the year of assessment 1996 and subsequent years of assessment.

[S 81/2009, wef Y/A 2005 & Sub Ys/A]

Definitions

2. In these Regulations —

“approved captive insurer” means any captive insurer approved under regulation 3A;

[S 81/2009 wef 17/02/2006]

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

[S 81/2009, wef Y/A 2005 & Sub Ys/A]

“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);

[S 81/2009 wef 17/02/2006]

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

“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;

[S 81/2009 wef 17/02/2006]

“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.

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.

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.

[S 81/2009 wef 17/02/2006]

Concessionary rate of tax

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

(a)

the offshore life insurance 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);

[S 81/2009, wef Y/A 2006 & Sub Ys/A]

(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 for the offshore life business; and
(ii)	the investment of its shareholders’ funds established in Singapore which are used to support the 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 (b)(i) of paragraph (1) is not required to support the offshore life 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 81/2009, wef Y/A 2005 & Sub Ys/A]

Calculation of dividends, interest and gains from sale of offshore investments.Calculation of dividends, interest and gains from sale of offshore investments for approved insurer

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 —

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 life business;

P_i 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 life insurance business other than offshore life 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 —

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 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 —

where

P_o and P_i 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 life business, he may adopt such reduced amount of I or K as appears to him to be reasonable in the circumstances.

[S 81/2009, wef Y/A 2005 & Sub Ys/A]

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 —

P_c

P_o

where

P_c

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);

P_o

has the same meaning as in regulation 5(1); and

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.

[S 81/2009 wef 17/02/2006]

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).

[S 81/2009 wef 17/02/2006]

Apportionment of expenses, allowances and donations

6.—(1) Any item of expenditure not directly attributable to the offshore life business of an approved insurance company, and capital allowances and donations, allowable to the approved insurance company under the Act, shall be apportioned between such business and the other life 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 5.

[S 81/2009, wef Y/A 2005 & Sub Ys/A]

Apportionment of income between policy-holders and shareholders

7. Any income of an approved insurance company 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 (3B)(b) and (c) of the Act, be apportioned between the policyholders and shareholders of the approved 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 approved insurance company between its policyholders and shareholders in that basis period or, where no such allocation is made by the approved insurance company, be deemed to be apportioned wholly to its shareholders.

[S 81/2009, wef Y/A 2005 & Sub Ys/A]

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