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Contents  

Long Title

Part I PRELIMINARY

Part II ADMINISTRATION

Part III IMPOSITION OF INCOME TAX

Part IV EXEMPTION FROM INCOME TAX

Part V DEDUCTIONS AGAINST INCOME

Part VI CAPITAL ALLOWANCES

Part VII ASCERTAINMENT OF CERTAIN INCOME

Part VIII ASCERTAINMENT OF STATUTORY INCOME

Part IX ASCERTAINMENT OF ASSESSABLE INCOME

Part X ASCERTAINMENT OF CHARGEABLE INCOME AND PERSONAL RELIEFS

Part XI RATES OF TAX

Part XII DEDUCTION OF TAX AT SOURCE

Part XIII ALLOWANCES FOR TAX CHARGED

Part XIV RELIEF AGAINST DOUBLE TAXATION

Part XV PERSONS CHARGEABLE

Husband and wife

Trustees, agents and curators

Part XVI RETURNS

Part XVII ASSESSMENTS AND OBJECTIONS

Part XVIII APPEALS

Part XIX COLLECTION, RECOVERY AND REPAYMENT OF TAX

Part XX OFFENCES AND PENALTIES

Part XXI MISCELLANEOUS

FIRST SCHEDULE Institution, Authority, Person or Fund Exempted

SECOND SCHEDULE Rates of Tax

THIRD SCHEDULE

FOURTH SCHEDULE Name of Bond, Securities, Stock or Fund

FIFTH SCHEDULE Child Relief

SIXTH SCHEDULE Number of Years of Working Life of Asset

SEVENTH SCHEDULE Advance Rulings

Legislative History

Comparative Table

 
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On 22/10/2017, you requested the version in force on 01/09/2007 incorporating all amendments published on or before 19/08/2017.
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PART VII
ASCERTAINMENT OF CERTAIN INCOME
Profits of Insurers
26.
—(1)  Subject to section 34A, this section has effect notwithstanding anything to the contrary in this Act except that nothing in this section shall affect the chargeability to tax of any income of an insurer under section 10.
[28/92]
Separate accounts to be maintained for business of insuring and reinsuring offshore risks
(2)  An insurer shall maintain separate accounts for the income derived by it from carrying on offshore life business or the business (other than the business of life assurance) of insuring and reinsuring offshore risks.
[7/79; 9/80; 20/91]
Insurers other than life insurers
(3)  In the case of an insurer whether mutual or proprietary (other than a life insurer) where the gains or profits accrue in part outside Singapore, the gains or profits on which tax is payable shall be ascertained by —
(a)
taking the gross premiums and interest and other income received or receivable in Singapore (less any premiums returned to the insured and premiums paid on reinsurances);
(b)
deducting from the balance so arrived at a reserve for unexpired risks at the percentage adopted by the insurer in relation to its operations as a whole for such risks at the end of the period for which the gains or profits are being ascertained;
(c)
adding thereto a reserve similarly calculated for unexpired risks outstanding at the commencement of that period; and
(d)
from the net amount so arrived at, deducting the actual losses (less the amount recovered in respect thereof under reinsurance), the distribution expenses and management expenses incurred in the production of the income referred to in paragraph (a) and, in respect of a branch in Singapore, a fair proportion of the expenses of its head office.
[Act 7/2007, wef Y/A 2006 & Sub Ys/A:2007-ACT-7]
(4)  For the purposes of subsection (3), in ascertaining the gains or profits derived by an insurer from carrying on the business (other than the business of life assurance) of insuring and reinsuring offshore risks or any other risks for the purposes of any concessionary rate of tax or exemption from tax prescribed by regulations made under section 43C —
(a)
no income other than income from premiums or from such dividends, interest and gains or profits realised from the sale of investments as may be specified in those regulations shall be included;
(b)
income in respect of dividends, interest and gains or profits realised from the sale of investments shall be apportioned in such manner as may be prescribed by those regulations; and
(c)
any item of expenditure not directly attributable to that business shall be apportioned in such manner as may be prescribed by those regulations.
[7/79; 9/80; 20/91; 26/93; 21/2003]
Export credit insurers
(5)  In the case of an insurer engaged primarily in the business of export credit insurance, the gains or profits on which tax is payable shall be ascertained by such underwriting accounting method as the Comptroller may approve.
[1/82]
Life insurers
(6)  In the case of a life insurer, whether mutual or proprietary, the gains or profits on which tax is payable shall be ascertained by taking the aggregate of —
(a)
in the case of insurance funds established and maintained for Singapore policies, the amount computed in the following manner:
(i)
taking the amount allocated out of the participating fund by way of bonus to the participating policies in accordance with section 17(6)(b) of the Insurance Act (Cap. 142);
(ii)
adding thereto the amount allocated to the surplus account of the participating fund in accordance with section 17(6)(c) or (7) of the Insurance Act;
(iii)
deducting from the balance so arrived at any receipt of the participating fund which is not chargeable to tax and adding thereto any expense of the participating fund which is not deductible for the purposes of this Act;
(iv)
adding thereto the amount relating to investment income earned on assets representing the balance in the surplus account, after deducting any receipt which is not chargeable to tax and not allowing as a deduction any expense which is not deductible for the purposes of this Act; and
(v)
adding thereto the balance so arrived at the life insurance surplus in relation to the non-participating fund and the investment-linked fund;
(b)
in the case of shareholders’ fund established in Singapore, the income therein less any expenses (including management expenses) incurred in the production of such income; and
(c)
in the case of insurance funds established and maintained for offshore policies, the amount computed in the following manner:
(i)
taking the amount allocated out of the participating fund by way of bonus to the participating policies in accordance with section 17(6)(b) of the Insurance Act (Cap. 142);
(ii)
adding thereto the amount allocated to the surplus account of the participating fund in accordance with section 17(6)(c) or (7) of the Insurance Act;
(iii)
deducting from the balance so arrived at any receipt of the participating fund which is not chargeable to tax and adding thereto any expense of the participating fund which is not deductible for the purposes of this Act;
(iv)
adding thereto the amount relating to investment income earned on assets representing the balance in the surplus account, after deducting any receipt which is not chargeable to tax and not allowing as a deduction any expense which is not deductible for the purposes of this Act;
(v)
adding thereto the offshore life insurance surplus in relation to the non-participating fund and the investment-linked fund; and
(vi)
deducting from the balance so arrived at such income that is subject to tax at the concessionary rate of tax prescribed by regulations made under section 43C.
[Act 7/2007, wef Y/A 2005 & Sub Ys/A:2007-ACT-7]
(7)  Notwithstanding subsection (6), in the case of a life insurer which has income subject to tax at the concessionary rate of tax prescribed by regulations made under section 43C, in ascertaining the income for the purposes of those regulations —
(a)
only such part of the following income as may be specified in those regulations shall be included:
(i)
the amount in relation to insurance funds established and maintained for offshore policies, computed in the following manner:
(A)
taking the amount allocated out of the participating fund by way of bonus to the participating policies in accordance with section 17(6)(b) of the Insurance Act (Cap. 142);
(B)
adding thereto the amount allocated to the surplus account of the participating fund in accordance with section 17(6)(c) or (7) of the Insurance Act;
(C)
deducting from the balance so arrived at any receipt of the participating fund which is not chargeable to tax and adding thereto any expense of the participating fund which is not deductible for the purposes of this Act;
(D)
adding thereto the amount relating to investment income earned on assets representing the balance in the surplus account, after deducting any receipt which is not chargeable to tax and not allowing as a deduction any expense which is not deductible for the purposes of this Act; and
(E)
adding thereto the offshore life insurance surplus in relation to the non-participating fund and the investment-linked fund; and
(ii)
the income of the shareholders’ fund established in Singapore as is attributable to the offshore life business; and
[Act 7/2007, wef Y/A 2006 & Sub Ys/A:2007-ACT-7]
(b)
the income referred to in paragraph (a) and any item of expenditure not directly incurred in the production of such income shall be apportioned in such manner as may be prescribed by those regulations.
[28/92]
(8)  In ascertaining the gains or profits of a life insurer whether mutual or proprietary —
(a)
the Comptroller shall determine the manner and extent to which —
(i)
any allowances under section 19, 19A, 20, 21, 22 or 23 and expenses and donations allowable under this Act are to be deducted; and
(ii)
any losses incurred by the insurer may be deducted under section 37;
(b)
the allowances under section 19, 19A, 20, 21, 22 or 23 or the losses under section 37 in respect of such part of the income of the company as is apportioned to the policyholders of the insurer in accordance with regulations made under section 43(9) or 43C in any year of assessment —
(i)
shall only be available for deduction against such part of the income as is so apportioned in accordance with regulations made under section 43(9) or 43C for that year of assessment, as the case may be; and
(ii)
the balance of such allowances or losses shall be added to, and be deemed to form part of, the corresponding allowances or losses, if any, for the next succeeding year of assessment and any subsequent year of assessment in accordance with section 23 or 37, as the case may be;
(c)
section 37B shall apply, with the necessary modifications, in relation to the deduction of allowances under section 19, 19A, 20, 21, 22 or 23 or the losses under section 37 in respect of such part of the income of the insurer (being a company) as is subject to tax at the rate of tax under section 43(1)(a) and of such part of the income of the insurer (being a company) as is apportioned to the shareholders of the insurer in accordance with regulations made under section 43C; and for the purpose of such application any reference in section 37B to income of a company subject to tax at a lower rate of tax or income of the company subject to tax at a lower rate of tax, as the case may be, shall be read as a reference to such part of the income of the insurer as is apportioned to the shareholders of the insurer in accordance with regulations made under section 43C; and
(d)
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, the Comptroller may make such adjustment to the tax liability of the life insurer as he thinks fit.
[Act 7/2007, wef Y/A 2006 & Sub Ys/A:2007-ACT-7]
Composite insurers
(9)  In the case of an insurer carrying on life insurance business in conjunction with any other insurance business, the assessment of the gains or profits on which tax is payable shall be made in one sum, but the gains or profits arising from the life insurance business shall be computed in accordance with subsections (6), (7) and (8) as if such life insurance business were a separate business from the other insurance business carried on by the insurer.
[28/92]
(9A)  For the purposes of this section, the Minister may make regulations —
(a)
to provide for such transitional, supplementary and consequential matters as he may consider necessary or expedient; and
(b)
generally to give effect to or for carrying out the purposes of this section.
[Act 7/2007, wef Y/A 2006 & Sub Ys/A:2007-ACT-7]
(9B)  Notwithstanding the amendment of this section by the Income Tax (Amendment) Act 2007, section 26 in force immediately before the amendment shall apply to the income of an insurer derived before the year of assessment 2006.
[Act 7/2007, wef Y/A 2006 & Sub Ys/A:2007-ACT-7]
Definitions
(10)  In this section and section 43C —
“income of the shareholders’ fund” means —
(a)
gains or profits on the sale of investments of the shareholders’ fund, whether derived from Singapore or elsewhere; and
(b)
investment income and other income of the shareholders’ fund derived from Singapore or received in Singapore from outside Singapore;
“insurer” means —
(a)
a company registered under the Insurance Act (Cap.142) to carry on insurance business in Singapore; or
(b)
a person (including a partnership) permitted under the Insurance Act to carry on insurance business in Singapore under a foreign insurer scheme;
[Act 7/2007, wef Y/A 2005 & Sub Ys/A:2007-ACT-7]
“investment-linked fund” means an insurance fund for investment-linked policies established and maintained under section 17(1A) of the Insurance Act;
[Act 7/2007, wef Y/A 2006 & Sub Ys/A:2007-ACT-7]
“investment-linked policies”, “non-participating policies” and “participating policies” have the same meanings as in the First Schedule to the Insurance Act;
[Act 7/2007, wef Y/A 2006 & Sub Ys/A:2007-ACT-7]
“life insurance surplus”, in relation to the non-participating fund and the investment-linked fund of an insurer, means the amount ascertained —
(a)
by taking the aggregate of —
(i)
the gross premiums (including consideration paid or payable for the purchase of annuities) from Singapore non-participating and Singapore investment-linked policies of any life insurance fund established and maintained under the Insurance Act (less any premiums returned to the insured and premiums paid or payable on reinsurance);
(ii)
the net decrease between the beginning and ending values of the policy liabilities of any life insurance fund established and maintained under the Insurance Act relating to Singapore non-participating and Singapore investment-linked policies of the period for which the gains or profits are ascertained, both values being determined in accordance with that Act; and
(iii)
the investment income and gains or profits derived from the sale of investments and other income, whether derived from Singapore or elsewhere, of any life insurance fund established and maintained under the Insurance Act relating to Singapore non-participating and Singapore investment-linked policies; and
(b)
by deducting from that aggregate —
(i)
distribution expenses and management expenses incurred in the production of the income referred to in paragraph (a) and, in respect of a branch in Singapore, a fair proportion of the expenses of its head office;
(ii)
policy moneys paid or payable in respect of Singapore non-participating and Singapore investment-linked policies (less any amount recovered or recoverable in respect thereof under reinsurance);
(iii)
moneys paid or payable on the surrender of Singapore non-participating and Singapore investment-linked policies; and
(iv)
the net increase between the beginning and ending values of the policy liabilities of any life insurance fund established and maintained under the Insurance Act relating to Singapore non-participating and Singapore investment-linked policies of the period for which the gains or profits are ascertained, both values being determined in accordance with that Act;
[Act 7/2007, wef Y/A 2006 & Sub Ys/A:2007-ACT-7]
“life policy” has the same meaning as in the Insurance Act;
“non-participating fund” means an insurance fund established and maintained under section 17(2) of the Insurance Act (Cap. 142) which comprises wholly of non-participating policies;
[Act 7/2007, wef Y/A 2006 & Sub Ys/A:2007-ACT-7]
“offshore life business” means the business of insuring or reinsuring the liability under any of the following life policies of any life insurance fund established under the Insurance Act:
(a)
in relation to direct life insurance, any life policy other than a Singapore life policy;
(b)
in relation to facultative life reinsurance, a policy issued to reinsure liability under any life policy referred to in paragraph (a); and
(c)
in relation to treaty life reinsurance, a reinsurance policy where —
(i)
the ceding party is a company incorporated outside Singapore and not resident in Singapore, or is not a permanent establishment in Singapore; or
(ii)
the liability in respect of any life policy referred to in paragraph (a) is ceded by a party which is a company incorporated and resident in Singapore or a permanent establishment in Singapore;
“offshore life insurance surplus”, in relation to the non-participating fund and the investment-linked fund of an insurer, means the amount ascertained —
(a)
by taking the aggregate of —
(i)
the gross premiums (including consideration paid or payable for the purchase of annuities) from offshore non-participating and offshore investment-linked policies of any life insurance fund established and maintained under the Insurance Act (less any premiums returned to the insured and premiums paid or payable on reinsurance);
(ii)
the net decrease between the beginning and ending values of the policy liabilities of any life insurance fund established and maintained under the Insurance Act relating to offshore non-participating and offshore investment-linked policies of the period for which the gains or profits are ascertained, both values being determined in accordance with that Act; and
(iii)
the investment income and gains or profits derived from the sale of investments and other income, whether derived from Singapore or elsewhere, of any life insurance fund established and maintained under the Insurance Act relating to offshore non-participating and offshore investment-linked policies; and
(b)
by deducting from that aggregate —
(i)
distribution expenses and management expenses incurred in the production of the income referred to in paragraph (a) and, in respect of a branch in Singapore, a fair proportion of the expenses of its head office;
(ii)
policy moneys paid or payable in respect of offshore non-participating and offshore investment-linked policies (less any amount recovered or recoverable in respect thereof under reinsurance);
(iii)
moneys paid or payable on the surrender of offshore non-participating and offshore investment-linked policies; and
(iv)
the net increase between the beginning and ending values of the policy liabilities of any life insurance fund established and maintained under the Insurance Act (Cap. 142) relating to offshore non-participating and offshore investment-linked policies of the period for which the gains or profits are ascertained, both values being determined in accordance with that Act;
[Act 7/2007, wef Y/A 2006 & Sub Ys/A:2007-ACT-7]
“offshore life policy” means a policy issued in respect of offshore life insurance business;
“offshore risk” means any risk outside Singapore and —
(a)
in relation to direct general insurance or facultative general reinsurance, the insured is not a person resident in Singapore or a permanent establishment in Singapore; and
(b)
in relation to treaty general reinsurance, not less than 75% of the total risk in terms of gross premiums is outside Singapore,
and where any such risk is in transit in Singapore, it shall be deemed to be outside Singapore;
“participating fund” means an insurance fund established and maintained under section 17(2) of the Insurance Act which comprises wholly or partly of participating policies;
[Act 7/2007, wef Y/A 2006 & Sub Ys/A:2007-ACT-7]
“policy liabilities”, in relation to the non-participating fund and the investment-linked fund of an insurer, means liabilities in respect of policies for which the non-participating fund and investment-linked fund are established and maintained under section 17 of the Insurance Act;
[Act 7/2007, wef Y/A 2006 & Sub Ys/A:2007-ACT-7]
“policy moneys” has the same meaning as in the Insurance Act;
“Singapore life policy” means a life policy as described in the definition of “Singapore policy” in the Insurance Act (Cap. 142).
[28/92]
Ascertainment of income of member of Lloyd’s syndicate
26A.
—(1)  Where a business of insuring and reinsuring risks is carried on by any member of Lloyd’s through a syndicate formed to carry on the business in Singapore —
(a)
the income of the member of Lloyd’s from the syndicate in the basis period for any year of assessment shall be deemed to be the share to which he was entitled during that period in the income of the syndicate; and
(b)
the statutory income of the member of Lloyd’s from the syndicate shall be computed in accordance with section 35 by treating his share of the income of the syndicate as if it were income of a trade, business, profession or vocation carried on or exercised by him.
(2)  Section 36 shall not apply to any Lloyd’s Scottish limited partnership carrying on a business of insuring and reinsuring risks in Singapore, and sections 35 and 43(1)(b) shall apply, with the necessary modifications, to such partnership as if it were a person (other than a company) not resident in Singapore.
(3)  Section 53 shall apply, with the necessary modifications, to any non-resident member of Lloyd’s carrying on a business of insuring and reinsuring risks through any syndicate formed to carry on that business in Singapore as that section applies to a person not resident in Singapore.
(4)  The tax chargeable for any year of assessment on the income of any non-resident member of Lloyd’s carrying on a business of insuring and reinsuring risks through all syndicates formed to carry on the business in Singapore of which he is a member shall be aggregated with that of all other non-resident members of Lloyd’s of those syndicates, and assessable in the name of the agent.
(5)  The agent shall —
(a)
when required by the Comptroller by notice published in the Gazette under section 62(1) or by notice in writing under section 62(3), make a return of income for the year of assessment specified in the notice and furnish such particulars as may be required for the purpose of ascertaining the income, if any, for which any member of Lloyd’s carrying on a business of insuring and reinsuring risks through any syndicate formed to carry on the business in Singapore, is chargeable to tax; and
(b)
if a return is not made under paragraph (a) for any year of assessment, furnish to the Comptroller an estimate of the aggregate amount of chargeable income of every non-resident member of Lloyd’s carrying on a business of insuring and reinsuring risks through any syndicate formed to carry on the business in Singapore, within 3 months after the end of the accounting period relating to that year of assessment of that member.
(6)  In this section —
“agent” means Lloyd’s of London (Asia) Pte Ltd or such other person as the Comptroller may determine;
“Council of Lloyd’s” means the Council of Lloyd’s established by the Lloyd’s Act 1982 of the United Kingdom;
“Lloyd’s” means the society of underwriters known in the United Kingdom as Lloyd’s and incorporated by the Lloyd’s Act 1871 of the United Kingdom;
“Lloyd’s Scottish limited partnership” means a limited partnership formed under the laws of the Scotland which is a member of Lloyd’s;
“member of Lloyd’s” means a person admitted to membership of Lloyd’s as an underwriting member and includes, where the context so requires, any person who has ceased to be a member of Lloyd’s and any administrator, administrative receiver, committee, curator bonis, executor, liquidator, manager, personal representative, supervisor or trustee in bankruptcy, or any other person by law entitled or bound to administer the affairs of the member or former member concerned;
“syndicate” means a member of Lloyd’s or a group of members of Lloyd’s underwriting insurance business at Lloyd’s through the agency of a Lloyd’s underwriting agent to which member or group a particular syndicate number is assigned by or under the authority of the Council of Lloyd’s.
Profits of non-resident shipowner or charterer
27.
—(1)  Where a non-resident person carries on the business of shipowner or charterer, the income on which tax is payable shall be ascertained as provided in this section.
(2)  Where, for any period, the non-resident person produces a certificate complying with subsection (3) —
(a)
the profits accruing in Singapore from the business for that period shall be deemed to be a sum bearing the same ratio to the sums receivable in respect of the carriage of passengers, mails, livestock and goods shipped in Singapore as the total profits for that period bear to the total sum receivable by him in respect of the carriage of passengers, mails, livestock and goods, as shown by the certificate; and
(b)
the depreciation allowable against such profits shall similarly be deemed to be a sum bearing the same ratio to the sum receivable in respect of the carriage of passengers, mails, livestock and goods shipped in Singapore as the total depreciation for the period bears to the total sum receivable by him in respect of the carriage of passengers, mails, livestock and goods, as shown by the certificate.
(3)  The certificate referred to in subsection (2) shall —
(a)
be one issued by or on behalf of the income tax authority of the place of residence of the non-resident person;
(b)
be acceptable for the purposes of this section only where the Comptroller is satisfied that the relevant income tax authority —
(i)
computes and assesses the full profits of the non-resident person from his shipping business on a basis not materially different from the basis of assessment provided by this Act for the assessment of a resident of Singapore carrying on a similar business; and
(ii)
accepts any certificate issued by the Comptroller for the purpose of computing the profits derived by a resident of Singapore from carrying on the business of a shipowner or charterer and assesses the income of that resident on the basis of and without making any adjustment to the profits or loss or the allowance for depreciation as stated in the certificate issued by the Comptroller and in the same manner as the income of the non-resident person is assessed under subsection (2);
(c)
contain, in respect of the relevant accounting period, the following information:
(i)
the ratio of the profits or, where there are no profits, of the loss, as computed for the purposes of income tax by that authority, without making any allowance by way of depreciation, to the total sum receivable in respect of the carriage of passengers, mails, livestock and goods;
(ii)
the ratio of the allowance for depreciation as computed by that authority to that total sum receivable in respect of the carriage of passengers, mails, livestock and goods.
[5/83]
(4)  Where, for any period, a non-resident person does not, for any reason, produce a certificate complying with subsection (3), the profits accruing in Singapore shall be deemed to be a sum equal to 5% of the full sum receivable on account of the carriage of passengers, mails, livestock and goods shipped in Singapore.
(5)  Where a non-resident person has been assessed under subsection (4) because a certificate had not been issued at the time of assessment, he shall be entitled, on the subsequent production of such a certificate to claim at any time within 2 years after the end of such year of assessment, or such further time as the Comptroller may consider reasonable in the circumstances, that his liability to tax for the year be determined on the basis provided by subsection (2).
(6)  Where the Comptroller decides that the call of a ship belonging to a particular non-resident shipowner or charterer at a port in Singapore is casual and that further calls by that ship or others in the same ownership are improbable, this section shall not apply to the profits of that ship and no tax shall be chargeable on them.
(7)  Notwithstanding anything in subsections (1) to (6), if in computing the profits derived by a resident in Singapore from carrying on the business of a shipowner or charterer, the tax authority of a foreign country determines such profits to be an amount which exceeds 5% of the full sum receivable on account of the carriage of passengers, mails, livestock and goods shipped in that foreign country, the Minister may if he thinks fit direct that, in computing the profits derived in Singapore by a non-resident shipowner or charterer who is resident in that foreign country, the Comptroller shall determine the amount of such profits in such manner as may be substantially similar to that adopted by the tax authority of that foreign country.
[37/75]
Profits of non-resident air transport and cable undertakings
28.  Where a non-resident person carries on the business of air transport or of transmission of messages by cable or by any form of wireless apparatus, he shall be assessable to tax as if he were a non-resident shipowner and section 27 shall apply, with the necessary modifications, to the computation of the gains or profits of the business.
Income from certain dividends to include tax thereon
29.  The income of a person from a dividend (other than a dividend paid by virtue of section 44(3)) paid by a company liable to tax under this Act or Commonwealth income tax within the meaning of section 48(5), shall, where any such tax has been deducted therefrom, be the gross amount before making such deduction; where no such deduction has been made, the income shall be deemed to be such a gross amount as after deduction of tax at the maximum rate deductible at the date of payment would be equal to the amount received.
[32/95]
Certain undistributed profits may be treated as distributed
30.  Where it appears to the Comptroller that, with a view to the avoidance or reduction of tax, a company has not distributed to its shareholders as dividend profits made in any period which could be distributed without detriment to the company’s business, he may treat any such undistributed profits as distributed, and the persons concerned shall be assessable accordingly.
Income arising from settlements
31.
—(1)  Where under the terms of any settlement and during the life of the settlor any income, or assets representing it, will or may become payable or applicable to or for the benefit of any relative of the settlor and at the commencement of the year of assessment such relative is unmarried and has not attained the age of 21 years, such income or assets shall be deemed to be income of the settlor and not income of any other person.
(2)  If and so long as the terms of any settlement are such that —
(a)
any person has or may have power, whether immediately or in the future, and whether with or without the consent of any other person, to revoke or otherwise determine the settlement or any provision thereof; and
(b)
in the event of the exercise of the power, the settlor or the wife or husband of the settlor will or may become beneficially entitled to the whole or any part of the property then comprised in the settlement, or of the income arising from the whole or any part of the property so comprised,
all income arising under the settlement from the property comprised in the settlement shall be deemed to be income of the settlor and not income of any other person.
(3)  Subsection (2) shall not apply by reason only that the settlor or the wife or husband of the settlor will or may become beneficially entitled to any income or property relating to the interest of any beneficiary under the settlement in the event that the beneficiary should die before him.
(4)  Where in any year of assessment the settlor or any relative of the settlor or any person under the direct or indirect control of the settlor or of any of his relatives, whether by borrowing or otherwise, makes use of any income arising or of any accumulated income which has arisen under a settlement to which he is not entitled thereunder, then the amount of such income or accumulated income so made use of shall be deemed to be income of the settlor for that year of assessment and not income of any other person.
(5)  Where under the terms of any settlement to which this section applies any tax is charged on and paid by the person by whom the settlement is made, that person shall be entitled to recover from any trustee or other person to whom income is paid under the settlement the amount of the tax so paid, and for that purpose to require the Comptroller to furnish a certificate specifying the amount of tax so paid; and any certificate so furnished shall be conclusive evidence of the facts appearing therein.
(6)  If any question arises as to the amount of any payment of income or as to any apportionment of income under this section that question shall be decided by the Comptroller whose decision shall be final.
(7)  This section shall apply to every settlement wheresoever it was made or entered into and whether it was made or entered into before or after 1st January 1960 and shall (where there is more than one settlor or more than one person who made the settlement) have effect in relation to each settlor as if he were the only settlor.
(8)  In this section —
“child” shall include a step-child, a child who has been de facto adopted by the settlor or by the husband or by the wife of the settlor, whether or not such adoption has been registered in accordance with the provisions of any written law, and a child of whom the settlor has the custody or whom he maintains wholly or partly at his own expense;
“relative” means any person who is a wife, grandchild, child, brother, sister, uncle, aunt, nephew, niece or cousin of the settlor;
“settlement” includes any disposition, trust, covenant, agreement, whether reciprocal or collateral, arrangement or transfer of assets or income, but does not include —
(a)
a settlement which in the opinion of the Comptroller is made for valuable and adequate consideration;
(b)
a settlement resulting from an order of a court; or
(c)
any agreement made by an employer to pay to an employee or to the widow or any relative or dependant of such employee after his death such remuneration or pension or lump sum as in the opinion of the Comptroller is fair and reasonable;
“settlor”, in relation to a settlement, includes any person by whom the settlement was made or entered into, directly or indirectly, and any person who has provided or undertaken to provide funds or credit, directly or indirectly, for the purpose of the settlement, or has made with any other person a reciprocal arrangement for that other person to make or enter into the settlement.
Valuation of trading stock on discontinuance or transfer of trade or business
32.
—(1)  In computing for any purpose of this Act the gains or profits of a trade or business which has been discontinued or transferred, any trading stock belonging to the trade or business at the discontinuance or transfer thereof shall be valued as follows:
(a)
in the case of any such trading stock —
(i)
which is sold or transferred for valuable consideration to a person who carries on or intends to carry on a trade or business in Singapore; and
(ii)
the cost whereof may be deducted by the purchaser as an expense in computing for any such purpose the gains or profits of that trade or business,
the value thereof shall be taken to be the amount realised on the sale or the value of the consideration given for the transfer; and
(b)
in the case of any other such trading stock, the value thereof shall be taken to be the amount which it would have realised if it had been sold in the open market at the discontinuance or transfer of the trade or business.
(2)  In computing for any purpose of this Act the gains or profits of the purchaser of the trading stock of any trade or business which has been discontinued or transferred, such trading stock shall be valued as provided in subsection (1).
(3)  Any question arising under subsection (1) regarding the value attributable to the trading stock belonging to any trade or business which has been discontinued or transferred shall be determined by the Comptroller.
(4)  In this section, “trading stock”, in relation to any trade or business, means property of any description, whether movable or immovable, being either —
(a)
property such as is sold in the ordinary course of trade or business or would be so sold if it were mature or if its manufacture, preparation or construction were complete; or
(b)
materials such as are used in the manufacture, preparation or construction of any such property as is referred to in paragraph (a).
Comptroller may disregard certain transactions and dispositions
33.
—(1)  Where the Comptroller is satisfied that the purpose or effect of any arrangement is directly or indirectly —
(a)
to alter the incidence of any tax which is payable by or which would otherwise have been payable by any person;
(b)
to relieve any person from any liability to pay tax or to make a return under this Act; or
(c)
to reduce or avoid any liability imposed or which would otherwise have been imposed on any person by this Act,
the Comptroller may, without prejudice to such validity as it may have in any other respect or for any other purpose, disregard or vary the arrangement and make such adjustments as he considers appropriate, including the computation or recomputation of gains or profits, or the imposition of liability to tax, so as to counteract any tax advantage obtained or obtainable by that person from or under that arrangement.
(2)  In this section, “arrangement” means any scheme, trust, grant, covenant, agreement, disposition, transaction and includes all steps by which it is carried into effect.
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(3)  This section shall not apply to —
(a)
any arrangement made or entered into before 29th January 1988; or
(b)
any arrangement carried out for bona fide commercial reasons and had not as one of its main purposes the avoidance or reduction of tax.
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Discretion no bar to appeal
34.  Nothing in section 30, 32 or 33 shall prevent the decision of the Comptroller in the exercise of any discretion given to him by any such section from being questioned in an appeal against an assessment in accordance with Part XVIII.
Adjustment on change of basis of computing profits of financial instruments
34A.
—(1)  Notwithstanding the provisions of this Act, the amount of any profit or loss (as the case may be) or expense to be brought into account for the basis period for any year of assessment in respect of any financial instrument of a qualifying person for the purposes of sections 10, 14, 14I and 37 is that which, in accordance with FRS 39, is recognised in determining any profit or loss (as the case may be) or expense in respect of that financial instrument for that year of assessment.
(2)  Notwithstanding subsection (1), the profit or loss or expense in respect of the financial instrument referred to in the following paragraphs shall, for the purposes of sections 10, 14, 14I and 37, be computed as follows:
(a)
where a qualifying person to whom section 10(12)(b) applies derives interest from a negotiable certificate of deposit or derives a gain or profit from the sale thereof, his income therefrom shall be treated in the manner set out in section 10(12);
(b)
where a qualifying person derives interest from debt securities and the interest is chargeable to tax under section 10(1)(d), such interest shall be computed based on the contractual interest rate and not the effective interest rate;
(c)
any amount of profit or expense in respect of a loan for which no interest is payable shall be disregarded;
(d)
where the creditor and debtor of a loan agreement are not dealing with each other at arm’s length, only the interest income or the interest expense based on the contractual interest rate shall be chargeable to tax or allowed as a deduction, as the case may be;
(e)
in a case where section 14(1)(a) applies, only the interest expense incurred based on the contractual interest rate shall be allowed as a deduction under section 14(1)(a);
(f)
any amount of profit or loss in respect of a hedging instrument where the underlying asset or liability is employed or intended to be employed as capital shall be disregarded;
(g)
where a bank or qualifying finance company within the meaning of section 14I is unable to make provision for the amount of impairment losses in respect of a group of financial assets in accordance with FRS 39, but is required to make such provision by the Monetary Authority of Singapore, section 14I shall apply for a period of 5 years, or such further period as the Minister may allow, beginning from the year of assessment relating to the basis period in which the bank or qualifying finance company is first required to prepare financial accounts in respect of its trade or business in accordance with FRS 39.
(3)  A person who is required to prepare or maintain financial accounts in accordance with FRS 39 may, subject to such conditions as the Comptroller may specify, elect in accordance with subsection (4) not to be subject to this section; and if the person so elects, he shall not be treated as a qualifying person from the year of assessment relating to the basis period during which he is first required to prepare financial accounts in accordance with FRS 39.
(4)  The election referred to in subsection (3) shall be made by the person by notice in writing to the Comptroller —
(a)
at the time of lodgment of the return of income for the year of assessment referred to in subsection (3); or
(b)
such further time as the Comptroller may allow.
(5)  A person who has made an election under subsection (3) may at any time revoke the election by notice in writing to the Comptroller; and if the person so revokes, he shall be treated as a qualifying person from the year of assessment relating to the basis period during which the revocation is made or such year of assessment as the Comptroller may approve.
(6)  The revocation under subsection (5) shall be irrevocable.
(7)  A person who is not required to prepare or maintain financial accounts in accordance with FRS 39 may apply to the Comptroller in writing for approval to be subject to this section and, if the Comptroller approves the application, that person shall be treated as a qualifying person from the year of assessment relating to the basis period during which the approval is granted or such later year of assessment as the Comptroller may approve.
(8)  This section shall have effect for any basis period beginning on or after 1st January 2005.
(9)  For the purposes of this section, the Minister may make regulations —
(a)
to provide for such transitional, supplementary and consequential matters as he may consider necessary or expedient; and
(b)
generally to give effect to or for carrying out the purposes of this section.
(10)  In this section —
“contractual interest rate”, in relation to any financial instrument, means the interest rate specified in the financial instrument;
“debt securities” has the same meaning as in section 43N(4);
“FRS 39” means the financial reporting standard known as Financial Reporting Standard 39 (Financial Instruments: Recognition and Measurement) issued in May 2003 by the Council on Corporate Disclosure and Governance appointed by the Minister under section 200A of the Companies Act (Cap. 50);
“Monetary Authority of Singapore” means the Monetary Authority of Singapore established under section 3 of the Monetary Authority of Singapore Act (Cap. 186);
“qualifying person”, in relation to any year of assessment, means —
(a)
a person who is required to prepare or maintain financial accounts in accordance with FRS 39 and who has not made an election under subsection (3) for that year of assessment; or
(b)
a person who is treated as a qualifying person under subsection (5) or (7) for that year of assessment.
(11)  Any term used in this section and not defined in this section but defined in FRS 39 shall have the same meaning as in FRS 39.
Islamic financing arrangements
34B.
—(1)  This section shall apply to any prescribed Islamic financing arrangement entered into on or after 17th February 2006 between any person and a financial institution.
(2)  Subject to such exceptions, adaptations and modifications as may be prescribed, sections 10, 12, 13, 14, 15 and 45 and regulations made under section 43Q shall apply in relation to any prescribed Islamic financing arrangement as if a reference in any of those provisions to interest accrued, derived, received or incurred in relation to any loan, deposit or mortgage were a reference to the effective return of the arrangement.
(3)  Where under a prescribed Islamic financing arrangement, an asset is sold by one party to the arrangement to the other party, the effective return of the arrangement shall be excluded in determining for the purposes of this Act the consideration for the sale and purchase of the asset.
(4)  Subsection (3) does not affect the operation of any provision of this Act which provides that the consideration for a sale or purchase is to be taken for any purpose to be an amount other than the actual consideration.
(5)  For the purposes of this section, the Minister may make regulations —
(a)
to prescribe anything that is required or authorised to be prescribed under this section;
(b)
to provide for such transitional, supplementary and consequential matters as he may consider necessary or expedient; and
(c)
generally to give effect to or for carrying out the purposes of this section.
(6)  In this section —
“effective return”, in relation to a prescribed Islamic financing arrangement, means the prescribed return in lieu of interest that has or is accrued, derived, received or incurred under the arrangement;
“financial institution” means —
(a)
any institution in Singapore that is licensed or approved by the Monetary Authority of Singapore, or exempted from such licensing or approval, under any written law administered by the Monetary Authority of Singapore; or
(b)
any institution outside Singapore that is licensed or approved, or exempted from such licensing or approval, under any written law administered by its financial supervisory authority for the carrying on of financial activities;
“Islamic financing arrangement” means a financing arrangement which is ––
(a)
endorsed by any Shari’ah council or body, or by any committee formed for the purpose of providing guidance on compliance with Shari’ah law; and
(b)
permitted under any written law in Singapore or elsewhere.