Singapore legislation
Section 97G
of Economic Expansion Incentives (Relief from Income Tax) Act
Section 97G
Deduction of losses incurred overseas by eligible investment company
(1)
Any company, incorporated and resident in Singapore, desirous of investing in an overseas company —
which is developing or using a new technology in relation to a product, process or service; or
for the purpose of acquiring for use in Singapore any technology from the overseas company or for the purpose of gaining access to any overseas market for itself or any of its subsidiaries,may make an application in respect of the investment in that overseas company in the prescribed form to the Minister to be approved as an eligible investment company.
(2)
Where the Minister is satisfied in respect of any application under subsection (1) that —
the technology, if introduced in Singapore, or the access which would be gained to any overseas market, would promote or enhance the economic or technological development of Singapore; and
not less than 50% of the paid-up capital of the company which makes the application is beneficially owned by citizens or permanent residents of Singapore unless the Minister otherwise decides,he may approve the company as an eligible investment company and issue a certificate to the company subject to such conditions as he may impose.
(3)
Any company approved by the Minister under subsection (2) shall maintain the shareholding referred to in subsection (2)(b) throughout the period during which it holds shares in the overseas company.
(4)
Where, in the basis period for any year of assessment, an eligible investment company incurs any loss on the sale of any share in, or from the liquidation of, an overseas company, that loss shall be treated as if it were a loss incurred from a trade or business carried on by the eligible investment company.
(5)
The loss referred to in subsection (4) in relation to any overseas company shall be allowed as a deduction against the statutory income of the eligible investment company for any year of assessment in accordance with section 37 of the Income Tax Act (Cap. 134), subject to the following provisions:
any gain made or loss incurred on the sale of any share in that overseas company which occurred during the period of less than 2 years from the date of issue of the share shall be disregarded;
any gain made or loss incurred on the sale of any share in, or from the liquidation of, that overseas company which occurred after 8 years from the date of approval under this section of the eligible investment company in respect of that overseas company shall be disregarded;
no deduction under this section shall be allowed unless the total losses in respect of the sale of any share in, or from the liquidation of, that overseas company up to the end of the basis period for that year of assessment exceed the total gains made in respect of the sale of any share in, or from the liquidation of, that overseas company up to the end of that basis period; and
the amount of deduction under this section shall not exceed the excess of the total losses over the total gains referred to in paragraph (c).
(6)
Where in the basis period for any year of assessment an eligible investment company makes a gain from the sale of any share in, or from the liquidation of, an overseas company and where any loss in relation to that overseas company has been allowed as a deduction to the eligible investment company under this section for any previous year of assessment, such gain shall, so far as it is not chargeable to tax as a revenue or trading receipt, be deemed to be income of the eligible investment company chargeable to tax for that year of assessment, except that —
no gain shall be so deemed to be income unless the total amount of the losses allowed for previous years of assessment exceed the total amount of the gains deemed to be income for previous years of assessment;
the amount of the gain chargeable to tax shall not exceed the excess of the total amount of the losses allowed for previous years of assessment over the total amount of the gains deemed to be income for previous years of assessment; and
the losses and gains referred to in subsection (5)(a) and (b) shall be disregarded.
(7)
For the purposes of this section, the loss shall be the excess of the purchase price of the shares —
over the proceeds from the sale; and where the open market value at the date of the sale (or the value of net asset backing as determined by the Comptroller in the case of a company not quoted on any stock exchange) of the shares is greater than the sale proceeds, that value shall be deemed to be the proceeds from the sale; or
over the proceeds from the liquidation,as the case may be.
(8)
For the purposes of this section, the gain shall be the excess of —
the proceeds from the sale; and where the open market value at the date of the sale (or the value of net asset backing as determined by the Comptroller in the case of a company not quoted on any stock exchange) of the shares is greater than the sale proceeds, that value shall be deemed to be the proceeds from the sale; or
the proceeds from the liquidation,as the case may be, over the purchase price of the shares.
(9)
For the purposes of this section, in computing the gain or loss from the sale of any share, the shares allotted on an earlier date shall be deemed to have been sold first.
(10)
The deduction under this section shall be available only to a person to whom shares are allotted by an overseas company on or after 1st April 1993 and shall not be available to any transferee of such shares.
(11)
Notwithstanding anything in this section, where it appears to the Comptroller that any deduction under this section ought not to have been given to an eligible investment company by reason of the revocation under section 99 of a certificate issued to that company, the Comptroller may, subject to section 74 of the Income Tax Act (Cap. 134), make such assessment or additional assessment upon the eligible investment company or any of its shareholders as may be necessary in order to recover any tax which should have been payable by the eligible investment company or any of its shareholders.