PART IV 1
EXPANSION OF ESTABLISHED ENTERPRISES
1 From year of assessment 1967.
Power and procedure for declaring an industry and a product an approved industry and an approved product
—(1) Subject to subsection (2), where the Minister is satisfied that the increased manufacture of the product of any industry would be of economic benefit to Singapore, he may, if he considers it expedient in the public interest to do so, by order, declare that industry to be an approved industry and the product thereof to be an approved product for the purposes of this Part.
(2) Before making any order under subsection (1), the Minister shall —
cause a notice to be published in the Gazette setting out the order which it is proposed to make and inviting any person who may object to the making of the order to give notice in writing of his objection and the grounds thereof to the Minister on or before such date (not being a date less than 30 days from the date of publication of the notice) as may be specified in the notice; and
consider any objection which has been received pursuant to the notice.
(3) The Minister may, if he considers it necessary, call for further particulars of the grounds of any such objection from any person who has given due notice of the objection.
(4) The Minister may revoke any order made under this section but any such revocation shall not affect the operation of any expansion certificate issued to any expanding enterprise before the revocation.
—(1) Any company intending to incur new capital expenditure for the purpose of the manufacture or increased manufacture of an approved product may, where the expenditure exceeds $10 million, make an application in writing to the Minister to be approved as an expanding enterprise, in such form and with such particulars as may be prescribed.
(2) Where the Minister is satisfied that it is expedient in the public interest to do so, he may approve that company as an expanding enterprise and issue an expansion certificate to the company, subject to such conditions as he thinks fit.
(3) In this Part, “new capital expenditure” means expenditure incurred by a company in the purchase of productive equipment which is intended to increase its production or profitability.
(3A) Any expenditure incurred in the purchase of productive equipment which is not new shall be deemed not to be new capital expenditure unless it is proved to the satisfaction of the Minister that —
the purchase of the productive equipment is economically justifiable; and
the purchase price represents a fair open market value of the productive equipment.
(4) Every expansion certificate issued under this section shall specify the date on or before which the productive equipment shall be put into operation and that date shall be deemed to be the expansion day for the purposes of this Part.
(5) The Minister may, in his discretion, upon the application of any expanding enterprise, amend its expansion certificate by substituting for the expansion day specified therein such earlier or later date as he thinks fit and thereupon the provisions of this Part shall have effect as if the date so substituted were the expansion day in relation to that expanding enterprise.
—(1) The tax relief period of an expanding enterprise shall —
commence on its expansion day; or
if the expansion day falls within the tax relief period specified in any certificate previously issued to the enterprise under Part II or VI for the same or similar product, commence on the day immediately following the expiry of that tax relief period,
and shall continue for such period, not exceeding 10 years, as the Minister may, in his discretion, determine.
(2) The Minister may, where he is satisfied that it is expedient in the public interest to do so and subject to such terms and conditions as he may impose, extend the tax relief period of an expanding enterprise for such further period or periods, not exceeding 5 years at any one time, as he may determine, except that the tax relief period of the expanding enterprise shall not in the aggregate exceed 20 years.
Application of section 9 to expanding enterprise
23. Section 9 shall apply, with the necessary modifications, to an expanding enterprise as it applies to a pioneer enterprise.
—(1) Subject to the provisions of this Act, an expanding enterprise is entitled, during its tax relief period, to relief in the manner provided by this section.
(2) The income of the expanding enterprise in respect of its trade or business to which its expansion certificate relates (referred to in this Part as the expansion income) shall be ascertained, for any accounting period during its tax relief period, in accordance with the provisions of the Income Tax Act [Cap. 134] and any regulations made under this Act.
(2A) In determining the income of the expanding enterprise, the allowances provided for in sections 16, 17, 18, 19, 19A, 20, 21 and 22 of the Income Tax Act shall be taken into account notwithstanding that no claim for such allowances has been made.
(3) Where an expanding enterprise carries on trading activities other than those to which its expansion certificate relates, the expansion income to be ascertained for the purposes of this section shall be determined in such manner as appears to the Comptroller to be reasonable in the circumstances.
(4) Where in the opinion of the Comptroller the carrying on of such trading activities is subordinate or incidental to the carrying on of the trade or business to which its expansion certificate relates, the income or loss arising from such activities shall be deemed to form part of the expansion income of the expanding enterprise.
(5) The expansion income so ascertained shall be compared with the average corresponding income (referred to in this section as the pre-relief income) of the expanding enterprise as determined in subsection (6) and relief shall be given to the following extent:
where the pre-relief income equals or exceeds the expansion income, no relief shall be given;
where the expansion income exceeds the pre-relief income, the amount of the excess shall not form part of the statutory income of the expanding enterprise for any year of assessment and shall be exempt from tax.
(5A) The amount of exempt income shall not, unless the Minister in his discretion otherwise decides, exceed the sum which bears the same proportion to the expansion income as the new capital expenditure on productive equipment bears to the total of such new capital expenditure and the value at original cost of the productive equipment owned or used by the expanding enterprise prior to its expansion.
(6) For the purposes of subsection (5), the average corresponding income of an expanding enterprise, in relation to a certificate issued under section 21, shall be determined by taking one-third of the total of the corresponding income of the expanding enterprise for the 3 years immediately preceding the expansion day specified in that certificate.
(6A) Where an expanding enterprise has carried on the trade or business to which its certificate relates for less than 3 years immediately prior to its expansion day or where the expanding enterprise has no corresponding income for any of those 3 years, the Minister may specify such amount to be its average corresponding income as he thinks fit.
(7) Where an expanding enterprise has been approved as a pioneer enterprise or as an export enterprise or as both, the total amount of income exempted under this section and Part II or VI shall not exceed 100% of the expansion income.
(8) The provisions of this section which were in force immediately before 30th November 1984 shall continue to apply to an expanding enterprise in respect of any certificate issued before that date to that enterprise under section 21.
—(1) As soon as any amount of expansion income has become exempt under section 24, that amount shall be credited to an account to be kept by the expanding enterprise for the purposes of this section.
(2) Where that account is in credit at the date on which any dividends are paid by the expanding enterprise out of income which has been exempted, an amount equal to those dividends or to that credit, whichever is the less, shall be debited to the account.
(3) So much of the amount of any dividends so debited to that account as is received by a shareholder of the expanding enterprise shall, if the Comptroller is satisfied with the entries in the account, be exempt from tax in the hands of the shareholder.
(3A) Notwithstanding subsection (3), where a dividend is paid on any share of a preferential nature, it shall not be so exempt in the hands of the shareholder.
(4) Any dividends debited to that account shall be treated as having been distributed to the shareholders of the expanding enterprise or any particular class of those shareholders in the same proportions as the shareholders were entitled to payment of the dividends giving rise to the debit.
(5) The expanding enterprise shall deliver to the Comptroller a copy of that account, made up to a date specified by him, whenever called upon to do so by notice in writing sent by him to its registered office, until such time as he is satisfied that there is no further need for maintaining the account.
(6) Notwithstanding section 24 and subsections (1) to (5), where it appears to the Comptroller that —
any amount of exempted income of an expanding enterprise; or
any dividend exempted in the hands of any shareholder, including any dividend paid by a holding company to which subsection (9) applies,
ought not to have been exempted by reason of a direction under section 9 (as applied to this Part by section 23) or the revocation under section 99 of an expansion certificate issued to the expanding enterprise, the Comptroller may, subject to section 73 of the Income Tax Act [Cap. 134] —
make such assessment or additional assessment upon the expanding enterprise or any such shareholder as may appear to be necessary in order to counteract any profit obtained from any such amount; or
direct the expanding enterprise to debit its account, kept in accordance with subsection (1), with such amount as the circumstances require.
(7) Parts XVII and XVIII of the Income Tax Act (relating to objections and appeals) and any regulations made thereunder shall apply, with the necessary modifications, to any direction given under subsection (6) as if it were a notice of assessment given under those provisions.
(8) Section 44 of the Income Tax Act shall not apply in respect of any dividend or part thereof which is debited to the account required to be kept for the purposes of this section.
(9) Where an amount has been received by way of dividend from an expanding enterprise by a shareholder and the amount is exempt from tax under this section, if that shareholder is a company (referred to in this section as the holding company) which holds, at the time any dividend is declared, the beneficial interest in all the issued shares of the expanding enterprise (or in not less than such proportion of those shares as the Minister may approve), any dividends paid on or after 1st January 1970 by the holding 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 of the Income Tax Act shall not apply in respect of any dividend or part thereof so exempt.