Long Title

Enacting Formula

Amendment of section 19B
25.  Section 19B of the principal Act is amended —
(a)
by inserting, immediately after subsection (1), the following subsections:
(1A)  Where a company carrying on a trade or business incurs capital expenditure during the basis period for any year of assessment between the year of assessment 2011 and the year of assessment 2015 (both years inclusive) in acquiring one or more intellectual property rights for use in its trade or business, there shall, in addition to any writing-down allowances under subsection (1), be made in respect of all its trades and businesses a writing-down allowance equal to 150% of the lower of the capital expenditure incurred during the basis period on the acquisition of the intellectual property rights and $300,000.
(1B)  For the year of assessment 2011 and the year of assessment 2012, instead of the writing-down allowance under subsection (1A) in respect of each year of assessment, a company shall be allowed a writing-down allowance computed in accordance with the formula
A x 150%,
where A is —
(a)
for the year of assessment 2011, the lower of —
(i)
the capital expenditure incurred during the basis period for that year of assessment on the acquisition of one or more intellectual property rights for use in its trade or business; and
(ii)
$600,000; and
(b)
for the year of assessment 2012, the lower of —
(i)
the capital expenditure incurred during the basis period for that year of assessment on the acquisition of one or more intellectual property rights for use in its trade or business; and
(ii)
the balance after deducting from $600,000 the lower of the amounts specified in paragraph (a)(i) and (ii).
(1C)  Where a company proves to the satisfaction of the Comptroller that it has during or after the basis period for the year of assessment 2011 incurred capital expenditure by way of making one or more instalment payments under an agreement or agreements in acquiring one or more intellectual property rights for use in its trade or business, that is or are signed during the basis period for any year of assessment between the year of assessment 2011 and the year of assessment 2015 (both years inclusive), and an allowance is made under subsection (1A) or (1B), those subsections shall apply with the following modifications:
(a)
a reference to the capital expenditure incurred on the acquisition of one or more intellectual property rights during the basis period for a year of assessment, being the basis period in which the agreement or agreements is or are signed, is a reference to the aggregate of —
(i)
the price or prices (excluding any finance charges) at which it might have purchased the right or all the rights that is or are the subject of the agreement or agreements for cash at the time of the signing of the agreement or agreements; and
(ii)
the capital expenditure incurred on the acquisition of any other intellectual property rights for use in its trade or business during that basis period;
(b)
a reference to the capital expenditure incurred on the acquisition of one or more intellectual property rights during the basis period for a year of assessment excludes the amount of any instalment paid or deposit made by it under that agreement or any of those agreements during the basis period; and
(c)
the allowance referred to in subsection (1A) or (1B) in respect of each right that is the subject of an agreement shall be made to the company for the year of assessment in respect of each basis period during which it paid an instalment or instalments, or made a deposit or deposits, under the agreement, in the proportion which the total amount of the instalment or instalments paid, and deposit or deposits made, during that basis period for that right bears to the total amount of all instalments and deposits under the agreement for that right.”;
(b)
by deleting subsection (2) and substituting the following subsection:
(2)  The total writing-down allowances to be made to a company under subsection (1) and subsection (1A) or (1B) for any year of assessment shall be an amount equal to 20% of the aggregate of —
(a)
the capital expenditure incurred by it on the acquisition of the intellectual property rights; and
(b)
the writing-down allowances under subsection (1A) or (1B).”;
(c)
by inserting, immediately after subsection (2C), the following subsections:
(2D)  No writing-down allowances under subsections (1A) and (1B) shall be made in respect of any intellectual property rights in respect of which the requirement under subsection (2A) has been waived under subsection (2B), or any intellectual property rights approved under subsection (2C).
(2E)  Where writing-down allowances have been made to any company under subsection (1A) or (1B) in respect of the acquisition of any intellectual property rights and any of the following events occurs within 5 years from the acquisition of such intellectual property rights:
(a)
the rights come to an end without being subsequently revived;
(b)
the company sells, transfers or assigns all or any part of those rights;
(c)
the company permanently ceases to carry on the trade or business,
the following provisions shall apply:
(i)
no writing-down allowance in respect of such intellectual property rights shall be made to that company under subsections (1A) and (1B) for the year of assessment relating to the basis period in which the event occurs and for any subsequent year of assessment; and
(ii)
if any of those events occurs within the period of one year from the acquisition of the intellectual property rights, any writing-down allowances made under subsection (1A) or (1B) shall be brought to charge as if the allowances were not made, and be deemed as income for the year of assessment relating to the basis period in which the event occurs.”;
(d)
by deleting the words “Where writing-down allowances have been made to any company under this section” in subsection (4) and substituting the words “Subject to subsection (4A), where writing-down allowances have been made to any company under subsection (1) or (2C)”;
(e)
by deleting the words “any writing-down allowances made under subsections (1) and (2C) shall be brought to charge as if the writing-down allowances were not made, and deemed as income for the year of assessment relating to the basis period in which the event occurs.” in subsection (4) and substituting the following words:
, where (on the occurrence of the event referred to in paragraph (b)) the price at which the rights were sold, transferred or assigned exceeds the amount of the writing-down allowances yet to be allowed on the date of the event, there shall be made on the company for the year of assessment relating to the basis period in which the event occurs a charge of an amount equal to the lower of —
(i)
the excess; and
(ii)
the writing-down allowances made under subsections (1) and (2C).”;
(f)
by inserting, immediately after subsection (4), the following subsection:
(4A)  Where parts of any intellectual property right are sold, transferred or assigned by the company at different times and at least one sale, transfer or assignment occurs before the end of the writing-down period, subsection (4) shall apply to each sale, transfer and assignment with the following modifications:
(a)
the reference to the amount of writing-down allowances yet to be allowed for the year of assessment relating to the basis period in which the event occurs, is a reference to an amount ascertained in accordance with the formula
A – B,
where A
is the amount of writing-down allowances yet to be allowed for the intellectual property right on the date of the first of such sales, transfers or assignments; and
B
is the aggregate of the prices of the parts of that right previously sold, transferred or assigned by the company,
or zero, if the amount ascertained by that formula is less than or equal to zero; and
(b)
the reference to the writing-down allowances made under subsections (1) and (2C) is a reference to the balance of such allowances made under subsections (1) and (2C) in respect of that right after deducting the total amount of any charges made under this section in respect of that right.”;
(g)
by deleting the words “subsections (1) and (2C)” wherever they appear in subsections (10) and (10A) and substituting in each case the words “subsections (1), (1A), (1B) and (2C)”;
(h)
by deleting the words “31st October 2013” in subsection (10) and substituting the words “the last day of the basis period for the year of assessment 2015”;
(i)
by deleting the words “or 14E” in subsection (10A)(a)(i) and substituting the words “, 14E or 14S”;
(j)
by inserting, immediately after subsection (10B), the following subsections:
(10C)  No writing-down allowance under subsections (1A) and (1B) shall be made to any company in respect of any amount of capital expenditure incurred on the acquisition of intellectual property rights for which an investment allowance has been claimed under Part X of the Economic Expansion Incentives (Relief from Income Tax) Act (Cap. 86).
(10D)  No allowance under subsections (1A) and (1B) shall be made to any company in respect of any instalment paid by it under any agreement to acquire any intellectual property right that is signed before the basis period for the year of assessment 2011.”;
(k)
by inserting, immediately after the words “commercial value” in the definition of “intellectual property rights” in subsection (11), the words “, or the grant of protection of a plant variety”; and
(l)
by inserting, immediately after subsection (11), the following subsection:
(12)  In subsections (1A) and (1B), a reference to capital expenditure incurred on the acquisition of intellectual property rights excludes any such expenditure to the extent that it is subsidised by grants or subsidies from the Government or a statutory board.”.