Determination of qualifying base percentage
10.—(1)  The initial qualifying base percentage of a financial sector incentive (standard tier) company shall be determined in the following order:
(a)100%, if the previous incentive income for each of the 3 years of assessment immediately preceding the year of assessment relating to the basis period in which the company is approved for the first time or deemed to be approved as a financial sector incentive (standard tier) company is nil or less than nil;
(b)0%, if the previous non-incentive income for each of the 3 years of assessment immediately preceding the year of assessment relating to the basis period in which the company is approved for the first time or deemed to be approved as a financial sector incentive (standard tier) company is nil or less than nil;
(c)   
if for the 3 years of assessment immediately preceding the year of assessment relating to the basis period in which the company is approved for the first time or deemed to be approved as a financial sector incentive (standard tier) company, both the average of the previous incentive income and the average of the previous non-incentive income of the company are positive,
where Xi
is the previous incentive income for year of assessment i;
Yi
is the previous non-incentive income for year of assessment i; and
i
is each of the first, second and third years of assessment immediately preceding the year of assessment relating to the basis period in which the company is approved for the first time or deemed to be approved as a financial sector incentive (standard tier) company;
(d)   
if for the 3 years of assessment immediately preceding the year of assessment relating to the basis period in which the company is approved for the first time or deemed to be approved as a financial sector incentive (standard tier) company, either the average of the previous incentive income of the company or the average of the previous non-incentive income of the company is, or both are, nil or less than nil,
where Xj
is the previous incentive income for year of assessment j;
Yj
is the previous non-incentive income for year of assessment j; and
j
is each year of assessment which falls within the 3 years of assessment immediately preceding the year of assessment relating to the basis period in which the company is approved for the first time or deemed to be approved as a financial sector incentive (standard tier) company, and in which both the previous incentive income and the previous non-incentive income are positive; and
(e)0%, in any other case.
(2)  Where a company has less than 3 years of assessment immediately preceding the year of assessment relating to the basis period in which the company is approved for the first time or deemed to be approved as a financial sector incentive (standard tier) company —
(a)any reference in this regulation to the 3 years of assessment immediately preceding the year of assessment relating to that basis period shall be read as a reference to all the years of assessment immediately preceding the year of assessment relating to that basis period; and
(b)any reference in this regulation to the first, second and third year of assessment immediately preceding the year of assessment relating to that basis period shall be construed accordingly.
(3)  Where the initial qualifying base percentage of the financial sector incentive (standard tier) company is 100%, the Minister or approving authority —
(a)may, if he thinks fit, specify an initial qualifying base percentage to determine the qualifying base for the first or second year of assessment immediately after the year of assessment relating to the basis period in which the company is approved for the first time or deemed to be approved as a financial sector incentive (standard tier) company; and
(b)shall specify an initial qualifying base percentage to determine the qualifying base for the third year of assessment immediately after the year of assessment relating to the basis period in which the company is approved for the first time or deemed to be approved as a financial sector incentive (standard tier) company, and any subsequent year of assessment.
(4)  Where the initial qualifying base percentage of the financial sector incentive (standard tier) company is 0% and where that company is approved as such for the first time for more than 5 years, the application of such percentage to the specified income or specified loss referred to in regulation 4(4) to determine the qualifying base shall be for a period not exceeding 5 years from the date the company is approved as a financial sector incentive (standard tier) company for the first time, and the Minister or approving authority shall specify the initial qualifying base percentage to be applied for the remaining incentive period.
(5)  The subsequent qualifying base percentage of the financial sector incentive (standard tier) company shall be determined in the following order:
(a)a percentage specified by the Minister or approving authority, if the previous qualifying base percentage is 0%;
(b)the previous qualifying base percentage, if there was no consecutive increase in the specified income or specified loss referred to in regulation 4(4) for the 3 years of assessment immediately preceding the year of assessment relating to the first basis period falling within the subsequent incentive period;
(c)subject to sub-paragraph (d), a percentage calculated in accordance with the following formula:
UNKNOWN
where QB
is the previous qualifying base percentage;
X
is the specified income referred to in regulation 4(4) for the first year of assessment immediately preceding the year of assessment relating to the first basis period falling within the subsequent incentive period; and
Y
is the specified income referred to in regulation 4(4) for the third year of assessment immediately preceding the year of assessment relating to the first basis period falling within the subsequent incentive period;
(d)where the subsequent qualifying base percentage computed in accordance with sub-paragraph (c) is more than 100%, a percentage specified by the Minister or approving authority;
(e)subject to sub-paragraph (f), a percentage calculated in accordance with the following formula:
UNKNOWN
where QB
is the previous qualifying base percentage;
X
is the specified loss referred to in regulation 4(4) for the first year of assessment immediately preceding the year of assessment relating to the first basis period falling within the subsequent incentive period; and
Y
is the specified loss referred to in regulation 4(4) for the third year of assessment immediately preceding the year of assessment relating to the first basis period falling within the subsequent incentive period; and
(f)where the subsequent qualifying base percentage computed in accordance with sub-paragraph (e) is less than 0%, 0%.
(5A)  Notwithstanding paragraph (5), where a company whose approval as a financial sector incentive (standard tier) company referred to in regulation 3(3) or 12 expires on or before 31st December 2010, whose initial qualifying base percentage is a percentage other than 0% or 100%, and whose approval period is extended for a further period under regulation 3(5), the company may —
(a)continue to apply the initial qualifying base percentage to the specified income or specified loss, as the case may be, referred to in regulation 4 derived during the period from 1st January 2009 to any date on or before 31st December 2010 (referred to in this paragraph as “specified date”); and
(b)apply the subsequent qualifying base percentage to the specified income or specified loss, as the case may be, referred to in regulation 4 from the day immediately after the specified date to the last day of the approval period extended under regulation 3(5).
[S 54/2010 wef 01/01/2009]
(6)  Notwithstanding paragraphs (1), (5) and (5A), the Minister or approving authority may in any particular case specify the initial or subsequent qualifying base percentage, or the method to determine the initial qualifying base percentage or subsequent qualifying base percentage, as he thinks fit, in lieu of any percentage or method specified in paragraph (1), (5) or (5A).
(7)  The initial or subsequent qualifying base percentage specified by the Minister or approving authority under paragraph (3), (4), (5), (5A) or (6) shall not exceed 100%.
(8)  A financial sector incentive (standard tier) company shall submit to the Comptroller a report from an external auditor, certifying that the initial qualifying base percentage of the company presents fairly the initial qualifying base percentage as prescribed in these Regulations, together with its return of income within the period specified under section 62 of the Act, except where —
(a)the initial qualifying base percentage is 100%;
(b)the financial sector incentive (standard tier) company is a company which —
(i)was incorporated or registered on or after 1st January 2004;
(ii)has not taken over any undertaking or business from any person in Singapore; and
(iii)has not derived any income during the period from the date of its incorporation or registration to the date it is approved as a financial sector incentive (standard tier) company; or
(c)the financial sector incentive (standard tier) company is a company which —
(i)was incorporated or registered on or after 1st January 2004;
(ii)has not taken over any activity referred to in regulation 4 from any person in Singapore; and
(iii)was approved as a financial sector incentive (standard tier) company within 2 years from the date of commencement in Singapore of any activity referred to in regulation 4 by the company.
[S 835/2010 wef 01/01/2004]
(9)  In this regulation —
“initial qualifying base percentage”, in relation to a financial sector incentive (standard tier) company, means the percentage used to compute the qualifying base referred to in regulation 4(4) in the period for which the company is approved for the first time or deemed to be approved as a financial sector incentive (standard tier) company;
“previous incentive income”, in relation to a financial sector incentive (standard tier) company, means specified previous income derived by the company which was subject to tax at the rate of tax of 10% in each of the 3 years of assessment immediately preceding the year of assessment relating to the basis period in which the company is approved for the first time or deemed to be approved as a financial sector incentive (standard tier) company;
“previous non-incentive income”, in relation to a financial sector incentive (standard tier) company, means specified previous income derived by the company which was subject to tax at the rate of tax under section 43 (1) (a) of the Act in each of the 3 years of assessment immediately preceding the year of assessment relating to the basis period in which the company is approved for the first time or deemed to be approved as a financial sector incentive (standard tier) company;
“previous qualifying base percentage”, in relation to a financial sector incentive (standard tier) company, means the qualifying base percentage which was applied to the period during which the company was approved as a financial sector incentive (standard tier) company immediately preceding the date at which the subsequent qualifying base percentage is determined;
“specified previous income” means —
(a)in the case of previous incentive income, the aggregate of the following:
(i)interest income from the activities specified in the First Schedule, after deducting any interest expense allowable under the Act which is attributable to such interest income;
(ii)all fees, commissions and other income from the activities specified in the First Schedule, after deducting any direct expense allowable under the Act which is attributable to such fees, commissions or other income; and
(iii)profits or loss from the disposal of equity securities, debt securities or secondary loans specified in the First Schedule, after deducting any specific provision allowable under the Act for the diminution in value of such securities or loans, and adding any taxable specific provision for diminution in value of such securities or loans which is written back; and
(b)in the case of previous non-incentive income, the aggregate of the following:
(i)interest income from the activities specified in regulation 4(1), after deducting any interest expense allowable under the Act which is attributable to such interest income;
(ii)all fees, commissions and other income from the activities specified in regulation 4(1), (2A), (2B), (2C), (2D), (2E), (2F) and (2G), after deducting any direct expense allowable under the Act which is attributable to such fees, commissions or other income; and
(iii)profits or loss from the disposal of equity securities, debt securities or secondary loans specified in regulation 4(1), after deducting any specific provision allowable under the Act for the diminution in value of such securities or loans, and adding any taxable specific provision for diminution in value of such securities or loans which is written back;
“subsequent qualifying base percentage”, in relation to a financial sector incentive (standard tier) company, means the percentage used to compute the qualifying base referred to in regulation 4(4) in the next immediate subsequent incentive period of the company.
(10)  A financial sector incentive (standard tier) company shall cease to apply the initial qualifying percentage or subsequent qualifying percentage on its specified income derived or specified loss incurred, as the case may be, on or after 1st January 2011.
[S 638/2011 wef 01/01/2011]