One respondent suggested that the Regulations state clearly whether documentation provided to support any ruling request will be retained by the Comptroller, particularly in the event where the Comptroller has declined to make a ruling or is unable to do so.

MOF’s response: Accepted. Paragraph 9 of 7th Schedule has been amended to insert a subparagraph (3) to state clearly that document(s) provided by applicants in support of a ruling request shall be retained by the Comptroller.

A respondent suggested removing the distinction between the situations where the Comptroller may decline a ruling (paragraph 2 of the 7th Schedule) versus the situations where the Comptroller shall not make a ruling (paragraph 3 of the 7th Schedule). Since the Comptroller will be vested with the power to decline to make rulings under paragraph 2, the Comptroller can exercise its discretion and decline to rule even where the application is frivolous or vexation (which is presently under paragraph 3 of the 7th Schedule).

MOF’s response: Not accepted. The distinction is to make clear the situations under which Comptroller would definitely not make a ruling. This is to provide transparency in law so that taxpayers would not need to waste time and resources submitting the application for these situations which Comptroller would definitely not provide rulings. Both Hong Kong and New Zealand have similar provisions in their advance rulings system.

One respondent felt that section 37F(1) (Transfer of loss carry-back between spouses) may be interpreted to mean that the individual may only be allowed to transfer the qualifying deduction for set-off against his or her spouse’s income for the immediate preceding year of assessment only if his or her spouse has actually also previously claimed a qualifying deduction against his or her assessable income in the immediate preceding year of assessment.

MOF’s response: Accepted. We agree with the feedback that the drafting could be clearer. The original draft sought to make clear that the transfer of loss carry-back between spouses under section 37F must have the consent of both parties.

One respondent highlighted that, where income of the REIT does not enjoy tax transparency (i.e. revenue gains from the disposal of real estate), tax is assessed on the REIT in the name of the trustee. The proposed clauses 29 and 37 appear to suggest that withholding tax is also applicable on the distributions made by the trustee out of such income that had been taxed at the trustee level.

MOF’s response: Accepted. We agree with the feedback that the legislation could be clearer. We have inserted a new subsection (4) which states "Subsection (1) shall not apply to any distribution made by the trustee of the real estate investment trust where tax has been paid by that trustee on the income from which the distribution is made" for greater clarity.

A respondent noted that IRAS had issued two Circulars in July 2004 and early June 2005 to spell out the income tax treatment of Limited Liability Partnership (LLP). The two Circulars set out the application of section 24 provisions to a sale of property arising from changes in partnership arrangements under different circumstances (including the sale of property between partnerships). However, the new section 24(5), as crafted, appears to only address the specific situation where a change occurs in a partnership by reason of retirement or death, or the dissolution of the partnership or the admission of a new partner, and not sale of property under other circumstances such as the sale of property between partnerships covered by the IRAS Circulars. The new section also does not appear to be sufficiently comprehensive to give legal effect to the application of section 24 provisions for all circumstances covered by the two IRAS Circulars (for example, the sale of property between partnerships). It is suggested that MOF review the draft section 24(5) against the two IRAS Circulars and consider making appropriate amendment to the draft provision to give effect to policy intent.

MOF’s response: Not accepted. For income tax purposes, partnership assets are owned by the partners, not the partnership. As such, this amendment sufficiently addresses all situations of changes in partners of partnerships for the purposes of section 24 transfers.

The respondent also highlighted that section 24(5), as crafted, treats section 24 as not having been elected in all cases if no election was made under section 24(3) for the provisions in section 24 to apply. In other words, if no election was made, no section 24 treatment would be applied. However, the IRAS Circular states that, for example, that the IRAS may deem section 24 to have been elected for reason of administrative expediency under certain circumstances of partial sale of property. Hence, it is suggested that the new section 24(5) be revised to include provisions which deem application of section 24 treatment under the stated circumstances even if no election were made.

MOF’s response: Not accepted. Section 24(5) is not intended as a provision to deem application of section 24(3) treatment under all circumstances of partial sale of property. With regard to the administrative practice of deeming an election as having been made under section 24, the IRAS supplementary circular on LLP dated 10 June 2005 has clearly explained that it is not policy intent to deem the election under section 24 as having been made in all cases. It is adopted for administrative expediency, which benefits both the partners and IRAS in minimising tax compliance. But where there is an objection by the taxpayer, section 24(5) shall apply.

A respondent pointed out that section 13C provides for tax exemption of non-resident funds. The details of how the exemption is to apply are set out in the Income Tax (Income from Funds Managed for Foreign Investors) Regulations 2003 No. S640/03 (the Regulations). Regulation 3 of the Regulations provides that “subject to regulations 4 and 5, there shall be exempt from tax the specified income derived by a foreign investor from funds managed by any fund manager in Singapore in respect of designated investments” and “fund manager” is defined in section 2 to mean "a company holding a capital markets service licence under the Securities and Futures Act (Cap. 289) for fund management or that it exempted under that Act from holding such a licence”. The substitution in section 13C of 'such fund manager in Singapore as may be prescribed' for 'any fund manager in Singapore' provides the ability for start up fund managers to qualify for the purposes of section 13C.

The respondent commented that with the old wordings, it was clear that provided the fund manager held a licence or was exempt from holding such a licence, he would qualify for the purposes of the Regulations. The changes give rise to uncertainty for both existing / qualifying fund managers and start-up fund managers as nowhere in the Act or in the Regulations, are the “prescribed” conditions for the fund manager set out.

MOF’s response: Feedback noted. The Income Tax (Income from Funds Managed for Foreign Investors) Regulations will be amended in due course to prescribe a start up fund manager. For existing qualifying fund managers, the existing conditions remain unchanged.