Clause 4

by deleting subsections (4) and (5) and substituting the following subsections:“(4) Where an amount of dividends exempt from tax under subsection (3) has been received by a shareholder which is a holding company, the amount shall be credited to a designated account to be kept by the holding company for the purposes of this section.(4A) Where the designated account is in credit at the date on which any dividends are paid by the holding company out of the income which has been credited to the designated account, an amount equal to the dividends or to the credit in that account, whichever is the less, shall be debited to the designated account.(4B) So much of the amount of any dividends debited to the designated account as is received by a shareholder of the holding company shall, if the Comptroller is satisfied with the entries in the designated account, be exempt from tax in the hands of the shareholder.(4C) Where an amount of dividends exempt from tax under subsection (4B) has been received on or after 11th July 1997 by a shareholder which is a relevant holding company, any dividends paid by the relevant holding company to its shareholders, to the extent that the Comptroller is satisfied that those dividends are paid out of such amount, shall be exempt from tax in the hands of those shareholders.(4D) Notwithstanding subsections (3), (4B) and (4C), no dividend paid on any share of a preferential nature shall be exempt from tax in the hands of the shareholder.(5) The overseas enterprise or the holding company shall deliver to the Comptroller a statement of the account or designated account, as the case may be, made up to any date specified by him, if the Comptroller so requires by written notice.”;

by deleting the words “subsection (9) applies” in subsection (6)(b) and substituting the words “subsection (4B) applies or by a relevant holding company to which subsection (4C) applies”; (c)by deleting the words “to debit its account, kept in accordance with subsection (1),” in the first and second lines of subsection (6)(ii) and substituting the words “or any such shareholders to debit its account or designated account, as the case may be,”; and (d)by deleting subsections (8) and (9) and substituting the following subsections:“(8) Section 44 of the Income Tax Act (Cap. 134) shall not apply to any dividends or part thereof which are exempt from tax under this section.(9) For the purposes of this section, the Minister or such person as he may appoint may approve as a holding company any company which owns less than 50% beneficial interest in the issued share capital of the company paying the dividends at the time such dividends are received by the company.(10) Subsections (4) to (8) shall apply, with the necessary modifications, to any dividends received by a relevant holding company where the Comptroller is satisfied that such dividends are paid out of any income exempt from tax under this section.(11) In this section —“holding company” means a company which owns not less than 50% beneficial interest in the issued share capital of the overseas enterprise paying the dividends at the time such dividends are received by the company, and includes a company approved under subsection (9);“relevant holding company” means any holding company of another holding company.”.