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Note: You may download the summary table, as well as
other relevant documents here.
| 1 |
Enhancement to the claim for Industrial Building
Allowance |
To rationalise the current rules for Industrial
Building Allowance, the following enhancements have
been made to the Industrial Building Allowance for
industrial buildings purchased on or after 1st January
2006:
(a) To allow Initial Allowances and Annual Allowances
to purchasers of new industrial buildings with leasehold
interest less than 25 years;
(b) Eligibility to Annual Allowances will be based
on the current use of the building as an industrial
building;
(c) To compute the Annual Allowances on purchased
industrial buildings (both new and used) based on
the purchase price, without reference to the cost
of construction, or residue of expenditure;
(d) To compute the Initial Allowances on new purchased
industrial buildings based on the purchase price,
without reference to the cost of construction;
(e) To remove the 50-year restriction for granting
annual allowance. |
Sections 16, 17, 18 and 24
[Clauses 12, 13, 14 and 17] |
Clause 12 amends section 16 (Initial and annual
allowances for industrial buildings and structures)
—
(a) to restrict subsection (6) (which limits a claim
for annual allowance to the end of the 50th year
after the building was first used) to cases where
the building is constructed or purchased before
1st January 2006;
(b) to insert new subsections (6A) and (6B) to give
an annual allowance to the purchaser of a building
that is used as an industrial building, based on
3% of the capital expenditure incurred by him on
the purchase of the building, if the sale and purchase
agreement for the building is entered into on or
after 1st January 2006;
(c) to restrict subsection (12) (which gives an
initial allowance to the purchaser of an industrial
building or a lease therein of at least 25 years,
based on the lower of the construction cost and
purchase price) to cases where capital expenditure
was incurred towards such purchase before 1st January
2006; and
(d) to insert a new subsection (12A) to give, under
certain circumstances, an initial allowance to a
person who incurs capital expenditure on or after
1st January 2006 on the purchase of a new industrial
building that is based on such capital expenditure.
Unlike subsection (12), the initial allowance may
be given to the purchaser in respect of a leasehold
interest of less than 25 years.
Clause 13 makes consequential amendments to section
17 (Balancing allowances and charges for industrial
buildings and structures) arising from the amendment
of section 16 by clause 12.
Clause 14 makes consequential amendments to section
18 (Definitions for sections 16 and 17) arising
from the amendment of section 16 by clause 12. It
also inserts a new subsection (7A) to provide that
where, in respect of a building which is only partly
an industrial building, it is not practicable for
the Comptroller to determine the capital outlay
for that part of the building that is not an industrial
building, the whole building may be considered as
an industrial building if that part of the building
is one-tenth or less of the entire floor area, or
if the Comptroller is satisfied that it is just
and proper to so consider.
Clause 17 makes a consequential amendment to section
24 (Special provisions as to certain sales) arising
from the amendment of sections 16 and 18 by clauses
12 and 14 respectively. |
| 2 |
Allowing tax deduction for treasury shares transferred
under employee equity-based remuneration scheme |
Where companies have incurred an actual cash outlay
to fulfil their employee stock option and share
award obligations, companies will be allowed to
claim such costs as an expense for the benefit of
employees. Hence, with effect from the year of assessment
2007, a tax deduction will be accorded to a company
if it purchases its own shares into treasury (treasury
shares) and uses these shares for the purposes of
fulfilling its stock option or share award obligations. |
New Section 14P
[Clause 11 ] |
Clause 11 inserts new section 14P to allow a company
a deduction for the costs of acquiring treasury
shares when it transfers such shares to any of its
employees under a share option scheme or share award
scheme, and to provide for the computation of such
costs. |
| 3 |
Tax exemption scheme for funds set up in the form
of companies which are resident in Singapore and
substantially owned by foreign investors |
To support growth in the asset and wealth management
industries, tax exemption will be granted on specified
income in respect of any designated investments
derived by a fund company approved during the period
from 17th February 2006 to 16th February 2011. |
New Section 13R
[Clause 10 ] |
Clause 10 inserts new section13R.
The new section 13R provides for a tax exemption
on the prescribed income of an approved company
which is incorporated and resident in Singapore,
arising from funds managed by a prescribed fund
manager in Singapore. |
| 4 |
Tax exemption for prescribed locally administered
trust and prescribed underlying holding company |
To support growth in the asset and wealth management
industries, tax exemption will be granted on locally-sourced
investment income derived on or after 17th February
2006 and foreign-sourced income received on or after
17th February 2006 by prescribed locally administered
trusts and their prescribed underlying holding companies
administered in Singapore, to the extent the tax
exemption mirrors the tax exemption on locally-sourced
investment income and foreign-sourced income for
individuals. Any distribution made by such trusts
to their beneficiaries out of such locally-sourced
investment income derived on or after 17th February
2006, and foreign-sourced income received on or
after 17th February 2006, will also be tax exempt
in the hands of the beneficiaries. In addition,
any dividend paid by a prescribed underlying holding
company to a prescribed locally administered trust
out of locally-sourced investment income derived
on or after 17th February 2006, and foreign-sourced
income received on or after 17th February 2006,
will be tax exempt. |
New Section 13Q
[Clause 10 ] |
Clause 10 inserts new section13Q.
The new section 13Q provides for a tax exemption
on certain income of a prescribed locally administered
trust and of a prescribed holding company established
for the purposes of such trust. It also provides
that where such income is exempt from tax, the share
of such income to which any beneficiary of the trust
is entitled to receive is also exempt from tax. |
| 5 |
5% concessionary tax rate for qualifying income
derived by general clearing member of OTC derivatives |
To encourage the use of OTC derivatives clearing
facility in Singapore, income derived from the provision
of clearing services in Singapore by approved corporate
clearing members of a Singapore OTC derivatives
clearing facility will be accorded a 5% concessionary
tax rate for a period of 5 years. The window period
for clearing members to apply for the incentive
is from 17th February 2006 to 16th February 2011. |
New Section S43V
Miscellaneous Amendments- Sections 13B(1), (2),
(8)(a), 13E(12)(b), 14C(6), 37B(7) and 37E(17)
[Clauses 34 and 43] |
Clause 34 inserts new section 43V.
The new section 43V enables regulations to be made
to levy a concessionary tax rate of 5% upon specified
income derived on or after 17th February 2006 by
an approved clearing member of a Singapore clearing
house from the provision of over-the-counter derivatives
clearing services using the Singapore clearing house,
subject to conditions.
Clause 43 makes consequential amendments to various
provisions of the Act arising from the insertion
of section 43V by clause 34.
|
| 6 |
Tax exemption scheme for captive insurance companies
carrying on offshore insurance business |
To support the growth of the captive insurance
industry, which contributes to Singapore’s position
as an insurance hub, approved captive insurance
companies will be granted tax exemption on qualifying
income for a period of 10 years. The window period
for approving captive insurance companies is from
17th February 2006 to 16th February 2011. |
Section 43C
[Clause 30] |
Clause 30 amends section 43C (Exemption and concessionary
rate of tax for insurance and reinsurance business)
to enable a tax exemption to be given to qualifying
income derived by an approved insurer from the business
of life assurance. |
| 7 |
Enhancement of the Designated Unit Trust Scheme
(DUT) |
To support growth in the asset and wealth management
industries, the scope of DUT scheme will be expanded
to include unit trusts targeted at sophisticated
and institutional investors such as restricted authorized
schemes under the Securities and Futures Act. Specified
income derived on or after 17th February 2006 by
such unit trusts that are granted the DUT status
will not form part of their statutory income. Individuals
will also enjoy tax exemption on distributions (out
of income derived from Singapore or received in
Singapore on or after 17th February 2006) from unit
trusts that are restricted authorized schemes funds. |
New Section 13(1)(zi)
[Clause 6] |
Clause 6 amends section 13 (Exempt income) to
extend tax exemption to various types of income
derived by individuals such as a distribution made
by a restricted authorised scheme. |
| 8 |
Enhancement of tax incentives for prescribed foreign
trusts |
To support growth in the asset and wealth management
industries, the tax exemption scheme for prescribed
foreign trusts and tax incentive scheme for approved
trustee companies (ATC) scheme are enhanced as follows:
(a) Expand with effect from 17th February 2006 the
scope of persons who can be considered as settlors
and beneficiaries of prescribed foreign trusts by
including foreign persons other than foreign individuals
and foreign companies; and
(b) Extend the tax exemption scheme for prescribed
foreign trusts to such trusts administered by companies
exempted from the requirement to hold a trust business
licence in respect of the carrying on of trust business
in Singapore under the Trust Companies Act. Specified
income derived on or after 17th February 2006 by
such trusts will be tax exempt; and
(c) Extend the ATC scheme to companies exempted
from the requirement to hold a trust business licence
in respect of the carrying on of trust business
in Singapore under the Trust Companies Act and which
are administering prescribed foreign trusts in Singapore.
Specified income derived on or after 17th February
2006 by such companies which are approved as ATCs
will be taxed at the concessionary tax rate of 10%. |
Sections 13G and 43J
[Clauses 8 and 31] |
Clause 8 amends section 13G (Exemption of income
of foreign trust) —
(a) to extend the tax exemption in that section
to the share of income in a prescribed foreign trust
of a beneficiary who or which is —
(i) any entity (not being an individual or company)
that is neither a resident of Singapore nor constituted
or registered under Singapore law; or
(ii) a trustee of another prescribed foreign trust;
and
(b) to provide that the share of income in a prescribed
foreign trust that a foreign account of a philanthropic
purpose trust is entitled to receive is also tax
exempt.
Clause 31 amends section 43J (Concessionary rate
of tax for trustee company) to extend the definition
of “trustee company” to include a company that is
exempted under the Trust Companies Act 2005 (Act
11 of 2005) from holding a trust business licence |
| 9 |
Extension of qualifying debt securities (QDS)
incentive scheme and tax exemption on locally-sourced
investment income of individuals, to cover discount
debt securities with tenure of more than 1 year |
To encourage the development of our capital market,
discount from discount debt securities with tenure
of more than one year, which are issued from 17th
February 2006 to 31st December 2008, will qualify
for tax incentive under the QDS scheme.
The scope of tax exemption on locally-sourced investment
income derived by individuals will also be expanded
to include discount from debt securities with tenures
of more than one year, unless such income is derived
though a partnership in Singapore or is derived
from the carrying on of a trade, business or profession.
The scope of specified income derived by a designated
unit trust (DUT) that do not form part of its statutory
income under the DUT scheme will be expanded to
include discount from QDS with tenure of more than
1 year. |
Sections 10(20A), 13(1)(aa), (zi)(i), 42(6) ,(7),
43N(1), (2) and 45A(2)
[Clauses 2(k), 6(a), (e), 27, 33 and 35] |
Clause 2 amends section 10 (Charge of income tax)
to extend subsection (20A) (which deems certain
types of income as the income of a unit holder of
a designated unit trust or approved CPF unit trust
if he is not a foreign investor) to a discount from
qualifying debt securities which are issued during
the period from 17th February 2006 to 31st December
2008 and which have a tenure of more than 1 year.
Clause 6 amends section 13 (Exempt income)-
(a) to extend tax exemption to a discount derived
by certain non-residents from qualifying debt securities
which are issued during the period from 17th February
2006 to 31st December 2008 and which have a tenure
of more than 1 year;
(b) to extend tax exemption to various types of
income derived by individuals such as a discount
from debt securities irrespective of the tenure.
Clause 27 amends section 42 (Rates of tax upon individuals)
to extend the 10% concessionary tax rate under subsection
(6) to a discount derived by a body of persons from
qualifying debt securities which are issued during
the period from 17th February 2006 to 31st December
2008 and which have a tenure of more than 1 year,
subject to conditions.
Clause 33 amends section 43N (Concessionary rate
of tax for income derived from debt securities)
to extend the 10% concessionary tax rate under subsection
(1) to a discount derived by any company from qualifying
debt securities which are issued during the period
from 17th February 2006 to 31st December 2008 and
which have a tenure of more than 1 year, subject
to conditions. |
| 10 |
Tax treatment of prescribed financial arrangements
based on specified Islamic finance concepts |
To further promote Islamic financing activities,
the tax treatment of Shariah-compliant prescribed
financing arrangements entered into by a financial
institution on or after 17th February 2006 will
be harmonised with conventional arrangements to
ensure a level playing field with respect to tax. |
New Section 34B
[Clause 20 ] |
Clause 20 inserts new section 34B.
The new section 34B provides for the tax treatment
of prescribed Islamic financial arrangements. Sections
10, 12, 13, 14, 15, 43Q and 45 of the Act shall
apply to such arrangement as if a reference to interest
were a reference to the prescribed return in lieu
of interest (the effective return) under such arrangement.
The effective return is to be excluded from the
consideration for the sale and purchase of any asset
under such arrangement. This is without prejudice
to any provision of the Act which provides that
the consideration for a sale or purchase is taken
to be an amount other than the actual consideration. |
| 11 |
Enhancement to writing down allowances granted
under sections 19B of Income Tax Act |
To help boost Singapore’s attractiveness as an
intellectual property (IP) Hub, the writing down
allowances (WDA) under section 19B of Income Tax
Act will be awarded to economic owners who are companies
acquiring on or after 17th February 2006 but before
1st November 2008 approved IP with sole, exclusive
or substantial economic rights.
The current section 19B of Income Tax Act stipulates
an expiry date of 31st October 2008 for WDA claims,
regardless when the IP is acquired. In recognition
that any company can acquire the IP rights prior
to 31st October 2008 on staggered/instalment payment
basis, section 19B will be amended to allow the
claim for WDA under section 19B for the full cost
of acquisition, even when the subsequent payments
are made after 31st October 2008.
|
Section 19B
[Clause 15] |
Clause 15 amends section 19B (Writing down allowances
for intellectual property rights) —
(a) to insert a new subsection (2B) to empower the
Minister or such person as he may appoint to waive,
in respect of any intellectual property rights acquired
on or after 17th February 2006, the requirement
under subsection (2A) that the company to which
the writing down allowance is to be made must provide
an undertaking that it is the assignee of the intellectual
property right, and that it must make the claim
in the manner and subject to the conditions specified
by the Comptroller; and
(b) to provide that no writing down allowances shall
be made for any capital expenditure incurred in
respect of intellectual property rights that are
acquired after 31st October 2008.<> |
| 12 |
Enhancement to writing down allowances granted
under sections 19C of Income Tax Act |
To foster interest in the formation of collaborative
research networks, the writing down allowances for
cost sharing agreements entered into and approved
on or after 17th February 2006 will be accelerated
to a writing down period of 1 year.
To align the treatments for collaborative and in-house
R&D, and to provide certainty to companies on their
tax liabilities, in the event of disposal of rights,
only the amount of proceeds from the disposal up
to the writing down allowances granted previously
under section 19C would be recovered. |
Section 19C
[Clause 16] |
Clause 16 amends section 19C (Writing-down allowances
for approved cost-sharing agreement for research
and development activities) —
(a) to allow a one year (instead of over a period
of 5 years) write off for expenditure incurred under
any cost sharing agreement entered into and approved
on or after 17th February 2006; and
(b) to provide that the amount of consideration
from the sale, assignment or disposal of any rights,
technology or know-how under any approved cost sharing
agreement which may be treated as a trading receipt
shall not exceed the amount of expenditure allowable
under the section. |
| 13 |
Tax incentives to grow creative industries |
To encourage more creation and exploitation of
IP, the existing scope of section 10(14) has been
expanded to include all Singapore-sourced qualifying
income received for the assignment of or for the
rights to use the copyright in any literary, dramatic,
musical or artistic work.
To complement the efforts of the National Research
Foundation, the concession under section 10(16)
is extended to cover qualifying income from Industrial
Design and Interactive and Digital Media sectors
To encourage enterprising inventors and creators
to move beyond freelancing to even formalize his
business in the form of a company wholly-owned by
him, section 10(16) is now expanded to include to
companies wholly owned by the inventor/ creator.
The above enhancements take effect from 1st April
2006. |
Section 10(14), (16) and(18)
[Clause 2(h), (i) and (j)] |
Clause 2 amends section 10 (Charge of income tax)
—
(a) to extend the tax concession under subsection
(14) to cover any income derived by an author, composer
or choreographer, or a company all of whose issued
shares are beneficially owned by him, from the assignment
or licensing of copyright in works, irrespective
of the person from whom such payments are received;
(b) to extend the tax concession under subsection
(16) to cover specified income derived from the
assignment or licensing of any approved intellectual
property by any company all of whose issued shares
are beneficially owned by the owner of the intellectual
property. |
| 14 |
Introduction of a new Maritime Finance Incentive
scheme (MFI) |
To encourage the development of ship financing
activities which contributes to Singapore’s position
as an maritime hub, the MFI scheme is introduced
from 1st March 2006. Under this scheme, tax exemption
will be granted for a period of 10 years on qualifying
income of Approved Ship Investment Vehicles while
a concessionary tax rate of 10% will be granted
to Approved Ship Investment Managers.
The window period for applying MFI status is from
1st March 2006 to 28th February 2011. |
New Sections 13S & 43W
Miscellaneous Amendments- Sections 10(4), (5),
(5A), 13B(1), (2), (8)(a), 13E(12)(b), 14C(6),
37B(7) and 37E(17) [Clauses 2, 10, 34 and 43(c)]
|
Clause 2 amends section 10 (Charge of income
tax) to exempt from tax a specified amount of
balancing charge made to an approved shipping
investment enterprise within the meaning of new
section 13S;
Clause 10 inserts new section 13S.
The new section 13S provides for a tax exemption
on income derived by an approved shipping investment
enterprise from the chartering or finance leasing
of ships for a period not exceeding 10 years.
Clause 34 inserts new section 43W.
The new section 43W enables regulations to be
made to levy a concessionary tax rate of 10% upon
specified income derived on or after 1st March
2006 by an approved shipping investment manager
from managing an approved shipping investment
enterprise or from other prescribed services carried
out for such enterprise, subject to conditions.
Clause 43 makes consequential amendments to various
provisions of the Act arising from the insertion
of section 43W by clause 34. |
| 15 |
Review of tax relief for NSmen |
(a) To align the recognition given to NSmen with
their contributions in the work year, the basis
period to determine the NSmen Tax Relief was changed
from the preceding calendar year to the preceding
work year.
(b) To recognize the additional contributions and
sacrifices by NS Key Command and Staff Appointment
Holders (KAHs), an additional NSmen relief of $2,000
will be granted with effect from the year of assessment
2007 to NS KAHs over and above what they would normally
receive as NSmen. |
Section 39(2A), (2B)
[Clause 25(b) to (e), (i) and (k)] |
Clause 25 amends section 39 (Relief and deduction
for resident individual and Hindu joint family)
—
(a) to allow an additional tax relief of $2,000
to an individual who is a NS key command and staff
appointment holder at any time during the basis
period; and
(b) to change the basis period for determining the
tax relief for operationally ready national servicemen
from the preceding calendar year to a period beginning
from 1st April of the year preceding the year of
assessment and ending on 31st March of the subsequent
year. |
| 1 |
Tax treatment of mutual concerns set up as companies
limited by guarantee |
To facilitate the application of mutuality treatment
to companies limited by guarantee, the Act will
be amended to subject companies limited by guarantee
that operates as a mutual trade association to
the rules under section 11(2) of Income Tax Act.
The company limited by guarantee will have to satisfy
certain conditions before it is regarded as a mutual
trade association.
For the purpose of administering the 50% test,
the "receipts from Singapore members" will be used
as the denominator and if the organisation has
non-Singapore membership and it fails the 50% test,
only the receipts from Singapore members will be
taxed.
Receipts from third parties will be taxed in all
cases. |
Section 11
[Clause 5]
|
Clause 5 amends section 11(Ascertainment of income
of clubs, trade associations, etc.) to provide
that an approved company limited by guarantee that
carries on a trade association, and has more than
half of its receipts by way of entrance fees and
subscriptions from certain members in Singapore,
shall be deemed to carry on a business. |
| 2 |
Revision of the amount of penalty for failure
to file return and give notice of chargeability |
To strongly discourage taxpayers from avoiding
to pay tax by not submitting their income tax returns,
a new penalty will be introduced to impose a penalty
of double the amount of tax which has been undercharged
for the failure to file tax returns within 3 years
from the deadline to file the tax return.
The new penalty will only be imposed on taxpayers
who, without any reasonable excuse, fail to file
their returns within 3 years from the deadline
to file the return, and is not targeted at taxpayers
with valid reasons for late filings. |
Sections 62, 94, 94A and 101
[Clauses 38, 39, 40 and 41]
|
Clause 38 makes a consequential amendment to
section 62 (Notice of chargeability and returns)
arising from the insertion of new section 94A by
clause 40.
Clause 39 makes consequential amendments to section
94 (General penalties) arising from the insertion
of new section 94A by clause 40.
Clause 40 inserts new section 94A —
(a) to provide for the offence of failure to make
a return of income which is currently included
in section 94; and
(b) to enhance the penalty for failing to make
a return of income for any year of assessment for
3 years or more.
Clause 41 makes a consequential amendment to section
101 (Sanction for prosecution) arising from the
insertion of new section 94A by clause 40. |
| 3 |
Cut in personal income tax (PIT) rates from the
year of assessment 2007 |
To legislate the reduction in the top marginal
PIT rate from the year of assessment 2007 to 20%
as announced in 2005 Budget Statement. The marginal
tax rates of the other income brackets will also
be correspondingly reduced. |
2nd Schedule
[Clause 42]
|
Clause 42 deletes and substitutes Part A of the
Second Schedule to provide for the tax rates applicable
to a resident individual or a Hindu joint family
for the year of assessment 2007 and subsequent
years of assessment. |
| 4 |
Policy Clarifications on Group Relief (GR) and
Carry-back Relief System |
To provide greater clarity, the Income Tax Act
will be amended to:
(a) Allow current year unabsorbed industrial building
allowances of section 10E companies to be transferred
under the Group Relief (GR) system;
(b) Disallow companies to transfer under the GR
system or carry back under the carry-back relief
system, their qualifying deductions relating to
income that is granted tax remission, except under
specific circumstances. |
Sections 37C and 37E
[Clauses 23 and 24 ]
|
Clause 23 amends section 37C (Group relief for
Singapore companies) —
(a) to allow a company to which section 10E applies
to transfer under the group relief system its un-utilised
industrial building allowances for the current
year; and
(b) to disallow a transfer under the group relief
system of qualifying deductions relating to any
income the tax on which is remitted, unless the
Minister otherwise approves.
Clause 24 amends section 37E (Carry-back of capital
allowances and losses) to disallow the carrying
back of qualifying deductions relating to any income
the tax on which is remitted, subject to certain
exceptions. |
| 5 |
Taxation of insurers following the adoption of
the Risk Based Capital (RBC) framework implemented
by MAS |
With the implementation of the RBC framework
for insurers by MAS and the application of Financial
Reporting Standard (FRS) 39 with effect from 1st
January 2005, the Income Tax Act has to be amended
to clarify the changes to the taxation basis of
insurers. The following changes are made:
(a) For life insurers’ financial statements beginning
on or after 1st January 2005:
i. To tax the surplus of the par fund based on
the actual distributions made to policyholders
and shareholders;
ii. To accept the policy liabilities computed under
RBC for tax-deduction without the need to make
further adjustments; and
iii. To continue the current tax treatment of taxing
the surplus attributable to par policyholders at
10%;
(b) To follow the tax treatment stipulated for
companies adopting FRS 39 for accounting purposes
in respect of unrealized gains/losses, as well
as the transitional adjustments. |
Sections 26 and 43(9)
[Clauses 18 and 29(c) and (d)]
|
Clause 18 amends section 26 (Profits of insurance
companies) —
(a) to modify the basis of taxation of life insurers
in light of the adoption by such insurers of a
risk based capital framework. In the case of participating
funds, a life insurer shall be chargeable to tax
on the surplus of such funds based on actual distributions
made to policyholders and shareholders;
(b) to extend the application of the section to
a person (including a foreign partnership) permitted
under the Insurance Act to carry on insurance business
in Singapore under a foreign insurer scheme;
(c) to make consequential amendments arising from
the change in the treatment of financial assets
and liabilities for income tax purposes following
the adoption of Financial Reporting Standard 39
(FRS 39) for accounting purposes;
(d) to enable the Comptroller to make adjustments
to the tax liability of a life insurer in a case
where, immediately before the life insurer ceases
business permanently without transferring the business
to any person in Singapore, there is an amount
remaining in the participating fund which is not
allocated by way of bonus to any participating
policy;
(e) to empower the Minister to make regulations
for the purposes of the section and to provide
that the tax treatment of the income of an insurer
derived before the year of assessment 2006 shall
be in accordance with section 26 in force immediately
before the amendment to the section; and
(f) to define or redefine certain terms used in
the section.
Clause 29 amends section 43 (Rate of tax upon companies
and others) to replace references to “insurance
company” in subsection (9) (which specifies the
tax rate for certain types of income of life insurance
companies) with “insurer” to cover entities other
than companies carrying on life insurance business. |
| 6 |
Manner of computing and assessing income derived
by members of Lloyd’s through syndicates formed
to carry on insurance business in Singapore |
A new section is introduced to clarify and effect
the tax treatment of members of Lloyd’s through
syndicates formed to carry on insurance business
in Singapore. This section provides the manner
of computing and assessing the income derived by
such members. |
New Section 26A
[Clause 19]
|
Clause 19 inserts a new section 26A to provide
for the manner of ascertaining and assessing the
income from a business of insuring and reinsuring
risks carried on by a member of Lloyd’s through
a syndicate formed to carry on such business in
Singapore. It also provides that the tax chargeable
on the income of a non-resident member from those
syndicates of which he is a member shall be aggregated
with that of other non-resident members of those
syndicates, and assessable in the name of the agent
who shall, among other things, make returns of
income when required by the Comptroller. |
| 7 |
Improve clarity on the tax treatment of trust |
Tax treatment of trusts will be clarified as
follows:
(a) Trading income derived by trusts will be taxed
at the trustee level. This will be a final tax.
Subsequent distributions by the trustee will no
longer retain the original character of the income.
Distributions will be exempt in the hands of beneficiaries;
(b) Where passive income is derived by a normal
trust and distributed in the year it is earned
or when beneficiary is entitled to the income in
the year it is earned (as in non-discretionary
trust), beneficiaries will be regarded as deriving
the income directly and hence all concessions,
exemptions and credits attached to the income will
be given to beneficiaries;
(c) Where passive income is derived by a normal
trust and not distributed within the year, the
trustee will be taxed on the income. This will
be a final tax. Subsequent distributions by the
trustee will no longer retain the original character
of the income. Distributions will however be tax-exempt
in the hands of beneficiaries. |
Sections 13(1)(zg)(ii), 13T, 35(16)(b), 40(6),
43(2A)(b), 43X, and 50B
Miscellaneous Amendments- Sections 13B(1), (2),
(8)(a), 13E(12)(b), 14C(6), 37B(7) and 37E(17)
[Clauses 6(e), 10, 21, 26, 29(a), 34, 37 and
43]
|
Clause 6 amends section 13 (Exempt income) to
clarify that any trust distribution out of trade
or business income (other than in respect of a
real estate investment trust) is exempt from tax
in the hands of the beneficiaries since tax is
payable on such income by the trustee;
Clause 10 inserts new section 13T.
The new section 13T provides that a trust distribution
in the hands of a beneficiary shall be exempt from
tax if it would have been exempt from tax under
any provision of Part IV (Exemption from Income
Tax) if derived or received directly by the beneficiary
rather than the trustee. This would enable the
beneficiary to enjoy a tax exemption in respect
of such income even though it is not so exempt
when first derived or received by the trustee.
This does not apply to the income of a real estate
investment trust, a designated unit trust, an approved
CPF unit trust, a foreign trust or a locally administered
trust as most or all of such income already enjoys
separate exemptions under the Act.
Clause 21 inserts a new subsection (16) in section
35 (Basis for computing statutory income) to exclude
from the statutory income of a beneficiary under
a trust certain trade or business income of the
trustee. Such income shall be assessable in the
hands of the trustee.
Clause 26 makes a consequential amendment to section
40 arising from the insertion of new section 50B
by clause 37.
Clause 29 amends section 43 (Rate of tax upon companies
and others) to disapply subsection (2) (which allows
the Comptroller to charge a lower tax rate on,
or to exempt from tax, any share of trust income
which a beneficiary is entitled to) to trust income
from any trade or business carried on by a trustee.
This is to place the trust in the same position
as any entity that engages in a similar trade or
business.
Clause 34 inserts new section 43X.
The new section 43X provides that a trust distribution
in the hands of a beneficiary shall, if it would
have been subject to a concessionary tax rate under
any provision of Part XI (Rates of Tax) if derived
or received directly by the beneficiary rather
than the trustee, be subject to the same concessionary
tax rate. This would enable the beneficiary to
enjoy the concessionary tax rate in respect of
such income even though it is not subject to tax
at that rate when first derived or received by
the trustee. The section does not apply to the
income of a real estate investment trust, a designated
unit trust, an approved CPF unit trust, a foreign
trust or a locally administered trust as most or
all of such income already enjoys separate concessionary
rates under the Act.
Clause 37 inserts new section 50B which provides
that where a trustee is allowed a tax credit under
Part XIV (Relief Against Double Taxation) in respect
of income received from overseas, that credit shall
be given to a beneficiary of the trust who is entitled
to a share of the income. The credit of the beneficiary
shall be computed as if the beneficiary rather
than the trustee had received the income directly.
The amount of the credit is thus ascertained by
reference to the tax chargeable on the income of
the beneficiary rather than the trustee. The section
does not apply to the income of a real estate investment
trust, a designated unit trust, an approved CPF
unit trust, a foreign trust or a locally administered
trust as most or all of such income in the hands
of the beneficiary already enjoys separate exemptions
or concessionary rates under the Act.
Clause 43 makes consequential amendments to various
provisions of the Act arising from the insertion
of section 43X by clause 34. |
| 8 |
Distinguish tax treatment of Real Estate Investment
Trusts (REITs) from other trusts |
The tax regime for REITs listed on Singapore
Exchange is distinct from other trusts. A listed
REIT enjoys tax concessions such as tax transparency
treatment on rental income and lower concessionary
tax rate on REITs distributions to qualifying non-resident
institutional investors.
The Income Tax Act is amended to distinguish listed
REITs, which are incentivised, from normal trusts
and to grant Comptroller of Income Tax control
over the income sources to which tax transparency
treatment shall be applied to listed REITs. |
Sections 13(1)(zg)(iii), 13(1)(zh), 35(16)(a)
and 43(2A)(a) and (b)
[Clauses 6(e), 21, 29 (a) and (b)]
|
Clause 6 amends section 13 (Exempt income) —
(a) to clarify that any distribution of trade or
business income of a real estate investment trust
listed on the Singapore Exchange (other than certain
types of income such as rental income and interest
income ancillary to the management or holding of
real property) is exempt from tax in the hands of
the unitholders, since tax is payable on such income
by the trustee;
(b) to restrict the tax exemption for any distribution
of income of a real estate investment trust that
is authorised under the Securities and Futures Act
and whose units are offered to the public, to the
distribution of certain types of income such as rental
income and interest income ancillary to the management
or holding of real property.
Clause 21 inserts a new subsection (16) in section
35 (Basis for computing statutory income) to exclude
from the statutory income of a beneficiary under
a trust certain trade or business income of the trustee.
Such income shall be assessable in the hands of the
trustee.
Clause 29 amends section 43 (Rate of tax upon companies
and others) —
(a) to disapply subsection (2) (which allows the
Comptroller to charge a lower tax rate on, or to
exempt from tax, any share of trust income which
a beneficiary is entitled to) to trust income from
any trade or business carried on by a trustee. This
is to place the trust in the same position as any
entity that engages in a similar trade or business.
An exception is made in the case of certain types
of income distributed by a trustee of a real estate
investment trust listed on the Singapore Exchange,
such as rental income and interest income ancillary
to the management or holding of real property;
(b) to restrict subsection (3B) (which applies a
10% tax rate on distribution by a trustee of a real
estate investment trust listed on the Singapore Exchange
to certain non-resident persons) to the distribution
of certain types of income such as rental income
and interest income ancillary to the management or
holding of real property. |
| 9 |
Tax treatment arising from the adoption of FRS
39 for accounting purpose |
With effect from 1st January 2005, all companies
with annual periods beginning on or after 1st January
2005 have to adopt the Financial Reporting Standard
(FRS) 39- Financial Instruments: Recognition & Measurement
and recognise all financial instruments on their
financial statements. IRAS has issued a circular
on 30th December 2005 to explain the changes to
the treatment of financial assets and liabilities
for income tax purposes arising from the adoption
of FRS 39 for accounting purpose. |
New Section 34A
[Clause 20]
|
Clause 20 inserts new section 34A.
The new section 34A provides for changes to the basis
of computing profits of financial instruments arising
from the adoption of FRS 39 by companies in Singapore.
It provides that, with certain specified exceptions,
any amount to be brought into account in respect
of any financial instrument of a person subject to
the section is that which, in accordance with FRS
39, is recognised in determining the profit or loss
or expense in respect of that financial instrument.
The section applies to all persons required to comply
with FRS 39, unless he makes an election not to be
subject to it. A person who so elects may subsequently
revoke his election and the revocation is irrevocable.
A person not required to comply with FRS 39 may apply
to the Comptroller to be subject to the section. |
| 10 |
Amendment of section 13O to clarify the additional
requirements imposed on a settlor of a philanthropic
purpose trust |
The amendment is to make clear additional requirements
to be satisfied by a settlor of a philanthropic
purpose trust injecting funds or assets into a
foreign account of the trust, where such settlor
is a foreign company . |
Section 13O
[Clause 9]
|
Clause 9 redefines the expression “foreign account” in
section 13O (Exemption of income of foreign account
of philanthropic purpose trust) by adding further
requirements which a foreign company injecting
funds into such account must satisfy e.g. it must
not carry on business in Singapore or beneficially
own more than 20% of the issued shares of a company
incorporated in Singapore. |
| 11 |
Tax treatment of trusts - giving credit under
section 46 (1)(b) of Income Tax Act |
Refer to item 7 |
Section 46 (1)(b)
[Clause 36]
|
Clause 36 makes consequential amendments to section
46 (Tax deducted from dividends, interests, etc.)
arising from the amendments of sections 13, 35
and 43 by clauses 6, 21 and 29 respectively. With
the amendments made to sections 13, 35 and 43,
the income (other than franked dividends derived
from Singapore) is taxed either in the hands of
the trustee or beneficiary and there is therefore
no need to grant a tax credit to the beneficiary |
| 12 |
Clarification of the definition of deposit under
sections 13(1)(t) and 13(1)(zd), and expansion
of scope of locally sourced investment income of
individuals qualifying for tax exemption to include
income from structured products |
The amendment is to define deposits in accordance
with the Banking Act and MAS' Guidelines on Deposits
(released on 7th October 2004), with effect from
the year of assessment 2006. In connection with
this amendment, the list of financial instruments
qualifying for tax exemption under the locally-sourced
investment income regime for individuals will also
be expanded to include structured products with
effect from the year of assessment 2006. |
New Section 13(1)(zj)
Amendment to Section 13(16)
[Clause 6(e), (f) and (i)]
|
Clause 6 amends section 13 (Exempt income) —
(a) to extend tax exemption to various types of income
derived by individuals such as income from structured
products;
(b) to clarify the definition of “deposit” used in
subsection (1)(t) and (zd). |
| 13 |
Amendment to section 11(2) of Income Tax Act
to clarify the income tax treatment of professional
associations. |
The amendment is to make clear in the Income
Tax Act that professional associations will be
subjected to the treatment under section 11(2)
of the Income Tax Act. Strictly, this is not a
change in tax treatment from the practice today. |
Section 11
[Clause 5]
|
Clause 5 amends section 11(Ascertainment of income
of clubs, trade associations, etc.) to clarify
that the tax treatment in subsection (2) also applies
to a professional association. |
| 14 |
Amendment of definition of “qualifying company” under
section 43(10) of Income Tax Act |
The amendment is make clear that to qualify for
the exemption on chargeable income (excluding Singapore
franked dividend) of up to the first $100,000 for
a qualifying year of assessment under section 43(6A),
the total share capital of the qualifying company
is to be beneficially held, directly or indirectly
by no more than 20 shareholders all of whom are
individuals. |
Section 43(10)
[Clause 29(e)]
|
Clause 29 amends section 43 (Rate of tax upon
companies and others) to provide, for the purposes
of subsection (6A) (which gives a tax exemption
on the first $100,000 of certain normal chargeable
income of a qualifying company), that a company
is a qualifying company only if its total share
capital during the basis period for each of its
first 3 years of assessment is beneficially held
directly or indirectly by no more than 20 shareholders
all of whom are individuals. |
| 15 |
Amendment of section 13A of Income Tax Act to
include income from offshore oil and gas activity |
The amendment is to include operation outside
the limits of the port of Singapore of a Singapore
ship, being a dredger, seismic ship or vessel used
for offshore oil or gas activity, as a qualifying
activity for the purpose of granting tax exemption
on income of a shipping enterprise under section
13A of the Income Tax Act. This change will take
effect from the year of assessment 2007. |
S13A(16)
[Clause 7]
|
Clause 7 amends section 13A (Exemption of shipping
profits) to extend the tax exemption in that section
to income from the use outside the limits of the
port of Singapore of a Singapore ship as a dredger,
seismic ship or vessel used for offshore oil or
gas activity. |
| 16 |
Enhancements to the Artefact Donation Scheme
(ADS) and Public Art Tax Incentive Scheme (PATIS) |
To include other forms of public art under the
scheme and to liberalise the scheme so that more
arts, culture and heritage related organizations
will be able to benefit from it. The following
enhancements will be made:
(a) To extend the Approved Museum status beyond
museums to collecting institutions;
(b) To enhance the Public Sculpture Donation Scheme
(PSDS) to incorporate other forms of public art,
besides sculptures (to reflect this enhancement,
PSDS will be renamed PATIS) as well as monies or
services given towards the installation or maintenance
of the sculptures or work of art. |
Section 37(3) and 37(16)
[Clause 22 ]
|
Clause 22 amends section 37 (Assessable income)
to expand the types of donations qualifying for
double deduction to include any approved donation
of a work of art to an approved museum, a work
of art to an approved recipient for public display,
any sculpture to an approved recipient for public
display indoors, and money or services for installing
or maintaining any sculpture or work of art for
public display. It also defines museums to include
collecting institutions. |
| 17 |
Repeal of section 43L of Income Tax Act (Concessionary
tax rate for qualifying income derived by approved
art and antique dealers) |
The concession is no longer relevant and it shall
lapse with effect from 1st November 2006. |
Section 43L
Miscellaneous Amendments- Sections 13B(1),
(2), (8)(a), 13E(12)(b), 14C(6), 37B(7),
37E(17), 44(20)(e)(ii) and 43D
[Clauses 32 and 43(a) and(b)]
|
Clause 32 repeals section 43L (Concessionary
rate of tax for art and antique dealers) which
is no longer required.
Clause 43 makes consequential amendments to various
provisions of the Act arising from the repeal of
section 43L by clause 32. |
| 18 |
Changes to Central Provident Fund (CPF) contributions |
(a) To align the tax relief quantum for CPF contributions
on Additional Wages (AW) to the mandatory CPF contributions
required by CPF Act. The amount of tax relief granted
in respect of the AW on which CPF contributions
are made would be subject to a ceiling of (17 times
monthly CPF salary ceiling less total Ordinary
Wages subject to CPF contributions in the year),
or actual AW, whichever is less;
(b) The CPF salary ceiling has been revised from
$5,000 to $4,500 in 2006. The amendments are consequential
to this change;
(c) The CPF Voluntary Contribution (VC) cap and
the self-employed tax relief cap has been revised
from $28,050 to $25,245. |
Sections 10C and 39
[Clauses 3, 25(a), (f), (g), (h) and (j)]
|
Clause 3 amends section 10C (Excess provident
fund contributions, etc. deemed to be income) to
provide that tax relief for mandatory contributions
to the CPF in respect of additional wages shall
be a sum computed in a specified manner instead
of a fixed sum. It also makes consequential amendments
to section 10C arising from the change to the maximum
amount of ordinary wages in respect of which mandatory
contributions to the CPF are to be made.
Clause 25 amends section 39 (Relief and deduction
for resident individual and Hindu joint family)
to revise the limit of relief given to a self-employed
individual in respect of his voluntary contributions
to the CPF. |
| 19 |
Extension of Parenthood Tax Rebate (PTR) to parents
of legitimised children |
To recognize parents’ effort to give their child
an intact family during the child’s early years:
(a) To grant PTR to parents of a legitimised Singapore
citizen child if the natural parents marry when
the child is below 6 years old; and
(b) To grant PTR to parents of an adopted Singapore
citizen child only if the child is below 6 years
old at the point of adoption. |
Section 42A
[Clause 28]
|
Clause 28 amends section 42A (Rebate for second,
third and fourth child of family) —
(a) to grant a tax rebate to an individual who
has an illegitimate second, third or fourth child
of the family born to him on or after 1st January
2004, if the individual becomes lawfully married
to the other natural parent of the child before
the child reaches 6 years of age; and
(b) to provide that a tax rebate will only be granted
to an individual who adopts a second, third or
fourth child of the family on or after 1st January
2006 if the child is adopted before he reaches
6 years of age. |
| 20 |
Amendment of section 10 of Income Tax Act to
clarify tax treatment of gains or profits from
any right or benefit granted prior to 1st January
2003 to any person to acquire shares in a company,
by reason of any office or employment held by him |
For the avoidance of doubt on the taxability
of gains or profits from any right or benefit granted
before 1st January 2003 to any person, by reason
of any office or employment held by him, to acquire
shares in a company, section 10(6A) of Income Tax
Act is inserted to clarify that such gains or profits
shall be treated in accordance with section 10(5)
of Income Tax Act in force immediately before 10th
December 2002. |
Section 10(6A)
[Clause 2(g) ]
|
Clause 2 amends section 10 (Charge of income
tax) to state for the avoidance of doubt that section
10(5) in force immediately before 10th December
2002 shall apply to any gains or profits from any
right or benefit granted to a person before 1st
January 2003 to acquire shares in a company, by
reason of any office or employment held by him. |
| 21 |
Applicability of section 10J (Shares buyback)
provisions |
The amendment is to provide that section 10J
shall not apply when a company buys back its own
shares and hold them in treasury instead of cancelling
them. |
Section 10J
[Clause 4]
|
Clause 4 amends section 10J (Shares buyback)
to make it inapplicable to a case where shares
bought back by a company are held in treasury. |
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