—(1) Where a company resident in Singapore receives income in Singapore from outside Singapore (referred to in this section as the income) for which tax credit has been allowed against the tax payable in respect of such income and pays dividends out of such income, the provisions of this section shall have effect.
(2) As soon as a tax credit has been allowed, an amount of the income computed in accordance with the formula
is the tax credit allowed;
is the tax rate applicable to a company under section 43(1); and
is the foreign tax paid,
shall be credited to a special account (referred to in this section as the account) to be kept by the company for the purposes of this section.
(3) Where the account is in credit at the date on which any dividends are paid by the company out of the income which has been credited to that account, an amount equal to such dividends or to the credit in that account, whichever is the less, shall be debited to the account.
(4) So much of the amount of any dividends debited to the account as is received by a shareholder of the company shall, if the Comptroller is satisfied with the entries in the account, be exempt from tax in the hands of the shareholder.
(5) Any dividends debited to the account shall be treated as having been distributed to the shareholders of the company or any particular class of the shareholders in accordance with the proportion of their shareholdings in the company.
(6) Section 44 shall not apply to any dividends or part thereof which are exempt from tax under this section.
(7) Where an amount has been received by way of dividends from a company by a shareholder and the amount is exempt from tax under this section, if that shareholder is a company, any dividends paid by that company to its shareholders, to the extent that the Comptroller is satisfied that those dividends are paid out of that amount, shall be exempt from tax in the hands of those shareholders, and section 44 shall not apply to any such dividend or part thereof.
(8) Notwithstanding subsections (4) and (7), no dividend paid on any share of a preferential nature shall be exempt from tax under this section in the hands of the shareholder.
(9) A company shall deliver to the Comptroller a statement of the account made up to any date specified by him whenever called upon to do so by notice in writing.
(10) Notwithstanding subsections (1) to (9), where it appears to the Comptroller that any dividend which has been exempted from tax in the hands of any shareholder, ought not to have been so exempted, the Comptroller may, within the year of assessment or within 6 years (if the year of assessment is 2007 or a preceding year of assessment) or 4 years (if the year of assessment is 2008 or a subsequent year of assessment) after the expiration thereof —
make such assessment or additional assessment upon any such shareholder as may be necessary in order to make good any loss of tax; or
direct the company to debit the account with such amount as the circumstances require.
[11/94; 32/95; 37/2002; 53/2007]
(11) In this section —
“foreign tax” means —
Commonwealth income tax within the meaning of section 48(1);
foreign tax within the meaning of section 50(1); or
as the case may be;
(12) This section shall —
only apply to income received on or after 1st January 1991;
not apply to income on which tax has been levied at the rate of 10% or such other concessionary rate as may be prescribed under section 13H, 43A, 43C, 43D, 43E, 43F, 43G, 43H, 43I, 43J, 43K, 43L (repealed), 43N, 43O, 43P, 43Q, 43R, 43S, 43T, 43U, 43V, 43W, 43X, 43Y or 43Z, or the regulations made thereunder or section 19B of the Economic Expansion Incentives (Relief from Income Tax) Act (Cap. 86) in force immediately before the date of commencement of the Economic Expansion Incentives (Relief from Income Tax) (Amendment) Act 2004 (Act 11 of 2004) or section 19J of the Economic Expansion Incentives (Relief from Income Tax) Act; and
not apply to income derived from Malaysia and received in Singapore by a company resident in Singapore where the company in paying any dividend out of such income declares itself to be a resident of Malaysia under paragraph 3 of Article VII of the Income Tax (Singapore — Malaysia) (Avoidance of Double Taxation Agreement) Order.
[28/92; 26/93; 1/98; 37/2002; 21/2003; 11/2004; 49/2004; 34/2005; 7/2007; 53/2007]