Singapore legislation
Section 14
of Economic Expansion Incentives (Relief from Income Tax) Act
Section 14
Certain dividends exempted from income tax
(1)
As soon as any amount of income of a pioneer enterprise has become exempt under section 13, that amount shall be credited to an account to be kept by the pioneer 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 pioneer 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 pioneer 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 pioneer 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 pioneer 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 13 and subsections (1) to (5), where it appears to the Comptroller that —
any amount of exempted income of a pioneer 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 any direction made under section 9 or the revocation under section 99 of a pioneer certificate issued to the pioneer enterprise, the Comptroller may subject to section 74 of the Income Tax Act (Cap. 134) —
make such assessment or additional assessment upon the pioneer 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 pioneer 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) 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 a pioneer 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, throughout its tax relief period, the beneficial interest in all the issued shares of the pioneer enterprise (or in not less than such proportion of those shares as the Minister may require at the time when the pioneer certificate is issued to that pioneer enterprise) any dividends paid 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 (Cap. 134) shall not apply in respect of any dividend or part thereof so exempt.
(10)
Any holding company may, with the approval of the Minister and subject to such conditions as he may impose, pay such exempt dividends to its shareholders even if it has not held the requisite shareholding in the pioneer enterprise for the whole of the tax relief period.