Income Tax Act
(Chapter 134, Sections 13(1)(a) and (11) and 45(9))
Income Tax (Qualifying Debt Securities) Regulations
Rg 35
G.N. No. S 212/2001

REVISED EDITION 2002
(31st January 2002)
Citation
1.—(1)  These Regulations may be cited as the Income Tax (Qualifying Debt Securities) Regulations.
(2)  [Deleted by S 268/2009 wef 10/06/2009]
(3)  [Deleted by S 268/2009 wef 10/06/2009]
Definitions
2.  In these Regulations —
“approved bond intermediary”, “break cost”, “financial institution”, “financial sector incentive (bond market) company”, “prepayment fee”, “qualifying debt securities” and “redemption premium” have the same meanings as in section 13(16) of the Act;
“Authority” means the Monetary Authority of Singapore;
[S 240/2016 wef 28/06/2013]
“debt securities” means bonds, notes, commercial papers and certificates of deposit other than Singapore Government securities;
“funds from Singapore operations”, in relation to a person, means the funds and profits of that person’s operations through a permanent establishment in Singapore;
“Islamic debt securities” has the same meaning as in section 43N(4) of the Act;
“offering documents” means the prospectuses, offering circulars, information memoranda, pricing supplements or other documents issued to investors in connection with an issue of securities;
“programme” includes a medium term note programme, a commercial paper programme or any similar programme for the issue of debt securities;
“tranche” means a particular issue of debt securities under a programme.
Prescribed conditions for tax exemption on interest income from qualifying debt securities
3.—(1)  The conditions referred to in section 13(1)(a) of the Act are as follows:
(a)the exemption from tax shall not apply —
(i)to any interest derived by a permanent establishment in Singapore;
(ii)if the issuer of the qualifying debt securities does not include in all offering documents a statement to the effect that where interest is derived from any qualifying debt securities issued during the period from 27th February 1999 to 31st December 2013 by any person who is not resident in Singapore and who carries on any operation in Singapore through a permanent establishment in Singapore, the tax exemption shall not apply if such person acquires such securities using funds from Singapore operations; or
[S 268/2009 wef 01/01/2009]
(iii)if the issuer of the qualifying debt securities, or such other person as the Authority may direct, has not furnished to the Authority a return on the debt securities within such period as the Authority may specify and such other particulars in connection with those securities as the Authority may require; and
[S 52/2006 wef 01/01/2005]
[S 240/2016 wef 28/06/2013]
(b)[Deleted by S 52/2006 wef 01/01/2005]
(c)where the issuer of the qualifying debt securities is a person who is a resident of or a permanent establishment in Singapore and where such securities are issued to any person who is not a resident of Singapore (referred to in this sub-paragraph as the non-resident person) in connection with or for the purpose of enabling that non-resident person to issue securities (referred to in this sub-paragraph as the relevant securities), directly or indirectly, to investors, the exemption from tax shall apply only if —
(i)the relevant securities are qualifying debt securities;
(ii)the relevant securities contain restrictions against the acquisition of such relevant securities by any investor who is a resident of or a permanent establishment in Singapore; and
(iii)the relevant securities are not acquired by any investor using funds from its Singapore operations.
[S 350/2005 wef 10/04/2001]
[S 52/2006 wef 01/01/2005]
(d)[Deleted by S 52/2006 wef 01/01/2005]
(2)  For the purpose of paragraph (1)(a)(i), where interest on a qualifying debt security is derived —
(a)from funds managed —
(i)before 3rd May 2002, by an Asian Currency Unit of a financial institution or a fund manager approved under section 13C(a) of the Act in force immediately before 3rd May 2002 or section 43A of the Act; or
(ii)on or after 3rd May 2002, by a fund manager in Singapore, by a foreign investor as defined in the Income Tax (Income from Funds Managed for Foreign Investors) Regulations 2003 (G.N. No. S 640/2003);
(b)from funds managed by a headquarters company approved under section 43E of the Act, by its associated company outside Singapore approved under that section; or
(c)from funds managed by a Finance and Treasury Centre approved under section 43G of the Act, by its associated company outside Singapore approved under that section,
that Asian Currency Unit of the financial institution, fund manager, headquarters company or Finance and Treasury Centre shall not be regarded as a permanent establishment of the foreign investor or approved associated company (as the case may be) solely by virtue of its management of funds on behalf of the foreign investor or approved associated company.
Prescribed conditions for tax exemption on discount from qualifying debt securities
3A.—(1)  The conditions referred to in section 13(1)(aa) of the Act are as follows:
(a)the exemption from tax shall not apply —
(i)to any discount derived by a permanent establishment in Singapore;
[S 52/2006 wef 26/01/2006]
(ii)if the issuer of the qualifying debt securities does not include in all offering documents a statement to the effect that where any discount is derived from any qualifying debt securities which —
(A)are issued during the period from 27th February 2004 to 16th February 2006 and which mature within one year from the date of issue of those securities; or
(B)are issued during the period from 17th February 2006 to 31st December 2013,
[S 99/2007 wef 17/02/2006]
[S 268/2009 wef 01/01/2009]
by any person who is not resident in Singapore and who carries on any operation in Singapore through a permanent establishment in Singapore, the tax exemption shall not apply if such person acquires such securities using funds from Singapore operations; or
(iii)if the issuer of the qualifying debt securities which are —
(A)issued during the period from 27th February 2004 to 16th February 2006 and which mature within one year from the date of issue of those securities; or
(B)issued during the period from 17th February 2006 to 31st December 2013,
[S 268/2009 wef 01/01/2009]
or such other person as the Authority may direct, has not furnished to the Authority a return on the debt securities within such period as the Authority may specify and such other particulars in connection with those securities as the Authority may require; and
[S 99/2007 wef 17/02/2006]
[S 52/2006 wef 01/01/2005]
[S 240/2016 wef 28/06/2013]
(b)[Deleted by S 52/2006 wef 01/01/2005]
(c)where the issuer of the qualifying debt securities is a person who is a resident of or a permanent establishment in Singapore and where such securities are issued to any person who is not a resident of Singapore (referred to in this sub-paragraph as the non-resident person) in connection with or for the purpose of enabling that non-resident person to issue securities (referred to in this sub-paragraph as the relevant securities), directly or indirectly, to investors, the exemption from tax shall apply only if —
(i)the relevant securities are qualifying debt securities;
(ii)the relevant securities contain restrictions against the acquisition of such relevant securities by any investor who is a resident of or a permanent establishment in Singapore; and
(iii)the relevant securities are not acquired by any investor using funds from its Singapore operations.
(2)  For the purpose of paragraph (1)(a)(i), where any discount from any qualifying debt securities is derived —
(a)from funds managed by a fund manager in Singapore, by a foreign investor as defined in the Income Tax (Income from Funds Managed for Foreign Investors) Regulations 2003 (G.N. No. S 640/2003);
(b)from funds managed by a headquarters company approved under section 43E of the Act, by its associated company outside Singapore approved under that section; or
(c)from funds managed by a Finance and Treasury Centre approved under section 43G of the Act, by its associated company outside Singapore approved under that section,
that fund manager, headquarters company or Finance and Treasury Centre shall not be regarded as a permanent establishment of the foreign investor or approved associated company (as the case may be) solely by virtue of its management of funds on behalf of the foreign investor or approved associated company.
Prescribed conditions for tax exemption on any amount payable from Islamic debt securities which are qualifying debt securities
3B.—(1)  The conditions referred to in section 13(1)(ab) of the Act are —
(a)the exemption from tax shall not apply —
(i)to any amount that is payable to a permanent establishment in Singapore from Islamic debt securities which are qualifying debt securities;
(ii)if the issuer of the Islamic debt securities which are qualifying debt securities, and issued during the period from 1st January 2005 to 31st December 2013, does not include in all offering documents a statement to the effect that the tax exemption shall not apply where any amount from those Islamic debt securities is payable to any person who is not resident in Singapore and who carries on any operation in Singapore through a permanent establishment in Singapore, if such person acquires such securities using funds from its Singapore operations; or
[S 268/2009 wef 01/01/2009]
(iii)if the issuer of the Islamic debt securities which are qualifying debt securities, and issued during the period from 1st January 2005 to 31st December 2013, or such other person as the Authority may direct, has not furnished to the Authority a return on the Islamic debt securities within such period as the Authority may specify and such other particulars in connection with those securities as the Authority may require; and
[S 268/2009 wef 01/01/2009]
[S 240/2016 wef 28/06/2013]
(b)where the issuer of the Islamic debt securities which are qualifying debt securities, and issued during the period from 1st January 2005 to 31st December 2013, is a person who is a resident of or a permanent establishment in Singapore and where such securities are issued to a person who is not a resident of Singapore (referred to in this sub-paragraph as a non-resident person) in connection with or for the purpose of enabling that non-resident person to issue securities (referred to in this sub-paragraph as the relevant securities), directly or indirectly, to investors, the exemption from tax shall apply only if —
(i)the relevant securities are qualifying debt securities;
(ii)the relevant securities contain restrictions against the acquisition of such relevant securities by any investor who is a resident of or a permanent establishment in Singapore; and
(iii)the relevant securities are not acquired by any investor using funds from its Singapore operations.
(2)  For the purposes of paragraph (1)(a)(i) —
(a)where a fund manager has invested the funds of a foreign investor, as defined in the Income Tax (Income from Funds Managed for Foreign Investors) Regulations 2003 (G.N. No. S 640/2003) in the Islamic debt securities as part of the management of those funds on behalf of the foreign investor, and the amount from the Islamic debt securities is payable to the foreign investor through the fund manager;
(b)where a headquarters company approved under section 43E of the Act has invested the funds of its associated company outside Singapore approved under that section in the Islamic debt securities as part of the management of those funds on behalf of the associated company, and the amount from the Islamic debt securities is payable to the associated company through the headquarters company; or
(c)where a Finance and Treasury Centre approved under section 43G of the Act has invested the funds of its associated company outside Singapore approved under that section in the Islamic debt securities as part of the management of those funds on behalf of the associated company, and the amount from the Islamic debt securities is payable to the associated company through the Finance and Treasury Centre,
the fund manager, headquarters company or Finance and Treasury Centre shall not be regarded as a permanent establishment of the foreign investor or approved associated company (as the case may be) solely by virtue of its management of funds on behalf of the foreign investor or approved associated company.
Prescribed conditions for tax exemption on break cost, prepayment fee and redemption premium from qualifying debt securities
3C.—(1)  The conditions referred to in section 13(1)(ba) of the Act are —
(a)the exemption from tax shall not apply —
(i)to any break cost, prepayment fee or redemption premium derived by a permanent establishment in Singapore;
(ii)if the issuer of the qualifying debt securities does not include in all offering documents a statement to the effect that where any break cost, prepayment fee or redemption premium is derived from any qualifying debt securities issued during the period from 15th February 2007 to 31st December 2013 by any person who is not resident in Singapore and who carries on any operation in Singapore through a permanent establishment in Singapore, the tax exemption shall not apply if such person acquires such securities using funds from its Singapore operations; or
[S 268/2009 wef 01/01/2009]
(iii)if the issuer of the qualifying debt securities issued during the period from 15th February 2007 to 31st December 2013, or such other person as the Authority may direct, has not furnished to the Authority a return on the debt securities within such period as the Authority may specify and such other particulars in connection with those securities as the Authority may require; and
[S 268/2009 wef 01/01/2009]
[S 240/2016 wef 28/06/2013]
(b)where the issuer of the qualifying debt securities issued during the period from 15th February 2007 to 31st December 2013, is a person who is a resident of or a permanent establishment in Singapore and where such securities are issued to any person who is not a resident of Singapore (referred to in this sub-paragraph as a non-resident person) in connection with or for the purpose of enabling that non-resident person to issue securities (referred to in this sub-paragraph as the relevant securities), directly or indirectly, to investors, the exemption from tax shall apply only if —
(i)the relevant securities are qualifying debt securities;
(ii)the relevant securities contain restrictions against the acquisition of such relevant securities by any investor who is a resident of or a permanent establishment in Singapore; and
(iii)the relevant securities are not acquired by any investor using funds from its Singapore operations.
(2)  For the purposes of paragraph (1)(a)(i), where any break cost, prepayment fee or redemption premium from any qualifying debt securities is derived —
(a)from funds managed by a fund manager in Singapore, by a foreign investor as defined in regulations made under section 13C or 13CA of the Act;
(b)from funds managed by a headquarters company approved under section 43E of the Act, by its associated company outside Singapore approved under that section; or
(c)from funds managed by a Finance and Treasury Centre approved under section 43G of the Act, by its associated company outside Singapore approved under that section,
that fund manager, headquarters company or Finance and Treasury Centre shall not be regarded as a permanent establishment of the foreign investor or approved associated company (as the case may be) solely by virtue of its management of funds on behalf of the foreign investor or approved associated company.
Prescribed condition for tax exemption under section 13(1)(bc) of Act
3D.  The exemption from tax under section 13(1)(bc) of the Act shall not apply if the issuer of the qualifying debt securities, or such other person as the Authority may direct, has not furnished to the Authority —
(a)a return on the debt securities within such period as the Authority may specify; and
[S 240/2016 wef 28/06/2013]
(b)such other particulars in connection with those securities as the Authority may require.
[S 240/2016 wef 28/06/2013]
Prescribed circumstances for tax exemption under section 13(1)(bc) of Act
3DA.  The circumstances mentioned in section 13(1)(bc)(i)(C)(CB) and (ii)(C) of the Act under which the tenure of the qualifying debt securities may be shortened to less than 10 years from the date of their issue are —
(a)the shortening of the tenure is a result of any early termination pursuant to an early termination clause specified in the Schedule which the issuer included in any offering document for those qualifying debt securities; and
(b)the qualifying debt securities do not contain any call, put, conversion, exchange or similar option that can be triggered at specified dates or at specified prices which have been priced into the value of the securities at the time of their issue.
[S 240/2016 wef 28/06/2013]
Prescribed condition for tax exemption under section 13(1)(bd) of Act
3E.  The exemption from tax under section 13(1)(bd) of the Act shall not apply if the issuer of the Islamic debt securities, or such other person as the Authority may direct, has not furnished to the Authority —
(a)a return on the debt securities within such period as the Authority may specify; and
[S 240/2016 wef 28/06/2013]
(b)such other particulars in connection with those securities as the Authority may require.
[S 240/2016 wef 28/06/2013]
Arrangements for qualifying debt securities
4.—(1)  The arrangements referred to in paragraph (b) of the definition of “qualifying debt securities” in section 13(16) of the Act are as follows:
(a)where the debt securities are issued during the period from 28th February 1998 to 9th May 1999 —
(i)the securities are substantially arranged by a financial institution in Singapore; and
(ii)at least half of the following functions in connection with the issue of the securities are performed by financial institutions in Singapore:
(A)securing the mandate;
(B)originating and structuring the debt issue;
(C)documentation and preparation of the offering circular;
(D)distribution of the issue of the securities;
(b)where the debt securities are issued during the period from 10th May 1999 to 31st December 2013 and where such securities are not issued under a programme —
(i)the lead manager is —
(A)in the case of an arrangement made before 1st January 2004, an approved bond intermediary;
(B)in the case of an arrangement made on or after 1st January 2004, a financial sector incentive (bond market) company; or
(ii)the staff of the financial institution arranging the issue who are based in Singapore have a leading and substantial role in originating and structuring the issue and its distribution;
(c)where the debt securities are issued during the period from 10th May 1999 to 31st December 2013 under a programme —
(i)the programme as a whole is arranged by an approved bond intermediary, the arrangement of which is completed on or before 31st December 2003;
(ii)the programme as a whole is arranged by an approved bond intermediary, the arrangement of which is not completed on or before 31st December 2003 by the approved bond intermediary and the arrangement is completed by a financial sector incentive (bond market) company; or
(iii)the programme as a whole is arranged by a financial sector incentive (bond market) company;
(d)where the debt securities are issued during the period from 10th May 1999 to 31st December 2013 by a new issuer who joins an existing programme which does not satisfy the requirement in sub-paragraph (c) —
(i)the participation of the new issuer in the programme is arranged by an approved bond intermediary, the arrangement of which is completed on or before 31st December 2003, and that programme as a whole was previously arranged by any approved bond intermediary or an affiliate of any approved bond intermediary, the arrangement of which is completed on or before 31st December 2003;
(ii)the participation of the new issuer in the programme is arranged by a financial sector incentive (bond market) company, and that programme as a whole was previously arranged by any approved bond intermediary or an affiliate of any approved bond intermediary, the arrangement of which is completed on or before 31st December 2003; or
(iii)the participation of the new issuer in the programme is arranged by a financial sector incentive (bond market) company, and that programme as a whole was previously arranged by a financial sector incentive (bond market) company or an affiliate of any financial sector incentive (bond market) company; and
(e)where the debt securities are issued during the period from 10th May 1999 to 31st December 2013 under a tranche of a programme which does not satisfy the requirement in sub-paragraph (c) or (d), the dealers for more than half of the debt securities issued under that tranche are —
(i)financial institutions in Singapore where their staff based in Singapore have a leading and substantial role in the distribution of the debt securities;
(ii)approved bond intermediaries; or
(iii)financial sector incentive (bond market) companies.
(1A)  The arrangements referred to in paragraph (c) of the definition of “qualifying debt securities” in section 13(16) of the Act are —
(a)where the Islamic debt securities are not issued under a programme —
(i)the lead manager is a financial sector incentive (bond market) company; or
(ii)the staff of the financial institution arranging the issue who are based in Singapore have a leading and substantial role in originating and structuring the issue and its distribution;
(b)where the Islamic debt securities are issued under a programme —
(i)the programme as a whole is arranged by an approved bond intermediary, the arrangement of which is completed on or before 31st December 2003;
(ii)the programme as a whole is arranged by an approved bond intermediary, the arrangement of which is not completed on or before 31st December 2003 by the approved bond intermediary and the arrangement is completed by a financial sector incentive (bond market) company; or
(iii)the programme as a whole is arranged by a financial sector incentive (bond market) company;
(c)where the Islamic debt securities are issued by a new issuer who joins an existing programme which does not satisfy the requirement in sub-paragraph (b) —
(i)the participation of the new issuer in the programme is arranged by a financial sector incentive (bond market) company, and that programme as a whole was previously arranged by any approved bond intermediary or an affiliate of any approved bond intermediary, the arrangement of which is completed on or before 31st December 2003; or
(ii)the participation of the new issuer in the programme is arranged by a financial sector incentive (bond market) company, and that programme as a whole was previously arranged by a financial sector incentive (bond market) company or an affiliate of any financial sector incentive (bond market) company; and
(d)where the Islamic debt securities are issued under a tranche of a programme which does not satisfy the requirement in sub-paragraph (b) or (c), the dealers for more than half of the Islamic debt securities issued under that tranche are —
(i)financial institutions in Singapore where their staff based in Singapore have a leading and substantial role in the distribution of the Islamic debt securities; or
(ii)financial sector incentive (bond market) companies.
(2)  For the purposes of paragraphs (1)(b)(ii) and (e) and (1A)(a)(ii) and (d), the Singapore-based staff of a financial institution (other than an approved bond intermediary or a financial sector incentive (bond market) company) arranging an issue of debt securities shall be deemed not to have a leading and substantial role in originating and structuring of the issue and its distribution if a major role in the origination, structuring or distribution of the issue was played by staff (whether of that financial institution, its affiliate or otherwise) based outside Singapore.
[S 350/2005 wef 03/12/2003]
[S 52/2006 wef 01/01/2005]
Determination of exempt income, and deductions
4A.—(1)  In determining the income of a person to be exempted from tax under section 13(1)(bc) or (bd) of the Act —
(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; and
(b)there shall be deducted from that income any allowances under section 19, 19A, 20, 21 or 22 of the Act attributable to that income notwithstanding that no claim for those allowances has been made.
(2)  Any balance of the allowances mentioned in paragraph (1)(b) shall only be deducted against any income referred to in section 13(1)(bc) or (bd) of the Act of the person for subsequent years of assessment, and shall not be deducted against any other income of the person.
(3)  Any losses incurred in respect of any qualifying debt securities referred to in section 13(1)(bc) or (bd) of the Act shall only be deducted against any income referred to in section 13(1)(bc) or (bd) of the Act of the person for subsequent years of assessment, and shall not be deducted against any other income of the person.
(4)  Any balance of the allowances mentioned in paragraph (2) and losses mentioned in paragraph (3) remaining unabsorbed on the date the tax exemption ceases shall, subject to paragraphs (5), (6) and (7), be available as a deduction against any other income of the person for the year of assessment which relates to the basis period in which the tax exemption ceases, and any subsequent year of assessment.
(5)  Section 37B of the Act shall, with the necessary modifications, apply to a deduction under paragraph (4) as if the balance of the allowances or losses available as a deduction under that paragraph 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 in accordance with the regulations made under section 43N of the Act.
(6)  Allowances may be deducted under paragraph (4) only if the person continues to carry on the trade or business in respect of the gains or profits of which the allowances falls to be made, and the allowances shall be disregarded if he has ceased to do so.
(7)  Sections 23(4) to (8) and 37(12) to (17) of the Act shall apply, with the necessary modifications, to a deduction under paragraph (4).
(8)  In paragraph (4), the tax exemption ceases when the person ceases to be in a position to derive income referred to in section 13(1)(bc) or (bd) of the Act, whether because the qualifying debt securities have reached maturity, the person has disposed of them or otherwise.
Waiver of withholding of tax in respect of interest paid to or discount derived by non-resident person
5.—(1)  The conditions referred to in sections 45(9) and 45A(2) of the Act are as follows:
(a)an issuer of any qualifying debt securities includes in all offering documents a statement to the effect that any person whose interest or discount derived from those securities is not exempt from tax shall include such interest or discount in a return of income made under the Act; and
(b)an issuer of any qualifying debt securities, or such other person as the Authority may direct, furnishes to the Authority a return on the debt securities within such period as the Authority may specify and such other particulars in connection with those securities as the Authority may require.
[S 240/2016 wef 28/06/2013]
(2)  The conditions referred to in section 45A(2A) of the Act are —
(a)an issuer of any Islamic debt securities which are qualifying debt securities, and issued during the period from 1st January 2005 to 31st December 2013, includes in all offering documents a statement to the effect that any person to whom an amount from those Islamic debt securities is payable shall, where such amount is not exempt from tax, include such amount in a return of income made under the Act;
[S 268/2009 wef 01/01/2009]
(b)an issuer of any Islamic debt securities which are qualifying debt securities, and issued during the period from 1st January 2005 to 31st December 2013, or such other person as the Authority may direct, furnishes to the Authority —
(i)a return on the debt securities within such period as the Authority may specify; and
[S 240/2016 wef 28/06/2013]
(ii)such other particulars in connection with those Islamic debt securities as the Authority may require.
[S 240/2016 wef 28/06/2013]
(3)  The conditions referred to in section 45A(2B) of the Act are —
(a)an issuer of any qualifying debt securities includes in all offering documents a statement to the effect that any person whose break cost, prepayment fee or redemption premium derived from those securities is not exempt from tax shall include such break cost, prepayment fee or redemption premium in a return of income made under the Act; and
(b)an issuer of any qualifying debt securities, or such other person as the Authority may direct, furnishes to the Authority a return on the debt securities within such period as the Authority may specify and such other particulars in connection with those securities as the Authority may require.
[S 240/2016 wef 28/06/2013]
[G.N. No. S 212/2001]
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