Economic Expansion Incentives (Relief from Income Tax) Act

“approved foreign loan” means a loan which is certified under section 57 to be an approved foreign loan;

“approved product” means a product declared under section 20 to be an approved product;

“approved royalties, fees or contributions” means royalties, technical assistance fees or contributions to research and development costs which have been certified under section 61 to be approved royalties, fees or contributions;

“company” means any company incorporated or registered in accordance with the provisions of any written law relating to companies;

“Comptroller” means the Comptroller of Income Tax appointed under the Income Tax Act (Cap. 134);

“expanding enterprise” means any company which has been approved by the Minister and to which an expansion certificate has been issued under section 21;

“expansion certificate” means an expansion certificate issued under section 21;

“expansion day”, in relation to an expanding enterprise, means the date specified in its expansion certificate under section 21(4) or (5);

“export enterprise” means any company which has been approved by the Minister and to which an export enterprise certificate has been issued under section 30;

“export enterprise certificate” means an export enterprise certificate issued under section 30;

“export produce” means the produce of deep-sea fisheries, including fresh or frozen fish, approved under section 29 as export produce;

“export product” means a product approved under section 29 as an export product;

“export year” means the year specified in the export enterprise certificate under section 30(2) or 31;

“foreign loan certificate” means a foreign loan certificate issued under section 57;

“manufacture”, in relation to a product, includes any process or method used in making or developing the product;

“new trade or business” means the trade or business of a pioneer enterprise deemed under section 7 to have been set up and commenced on the day following the end of its tax relief period;

“officer of customs” and “senior officer of customs” have the same meanings as in the Customs Act (Cap. 70);

“old trade or business” means the trade or business of a pioneer enterprise carried on by it during its tax relief period in accordance with section 7, and which either ceases within or is deemed, under that section, to cease at the end of that period;

“pioneer certificate” means a pioneer certificate issued under section 5;

“pioneer enterprise” means any company which has been approved by the Minister and to which a pioneer certificate has been issued under section 5;

“pioneer industry” means an industry declared under section 4 to be a pioneer industry;

“pioneer product” means a product declared under section 4 to be a pioneer product;

“production day”, in relation to a pioneer enterprise, means the date specified in its pioneer certificate under section 5(3)(a) or (5);

“productive equipment” means machinery or plant which would normally qualify for deduction under sections 19, 19A, 20, 21 and 22 of the Income Tax Act (Cap. 134);

“royalties, fees or contributions certificate” means a certificate issued under section 61;

“royalties or technical assistance fees” includes —

“tax” means income tax imposed by the Income Tax Act (Cap. 134).

Where a company engaged in any qualifying activity as defined in section 16 intends to substantially increase the volume of that activity, it may make an application in writing to the Minister to be approved as an expanding service company.

Where the Minister is satisfied that it is expedient in the public interest to do so, he may approve that company as an expanding service company and issue a certificate to the company, subject to such conditions as he thinks fit.

Every certificate issued under this section shall specify a date on or before which the expansion of the qualifying activity shall commence and that date shall be deemed to be the expansion day for the purposes of this Part.

The tax relief period of an expanding service company shall —

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 service company for such further period or periods, not exceeding 5 years at any one time, as he may determine.

The tax relief period of an expanding service company shall not in the aggregate exceed 20 years.

In this Part, unless the context otherwise requires —

“approved project” means a project approved by the Minister under section 67(2);

“chargeable concessionary income” means concessionary income after deducting expenses, donations, allowances or losses allowable under the Income Tax Act (Cap. 134) against the concessionary income;

“chargeable normal income” means normal income after deducting expenses, donations, allowances or losses allowable under the Income Tax Act against the normal income;

“concessionary income” means income subject to tax at the concessionary rate of tax under section 13H, 43A, 43C, 43D, 43E, 43F, 43G, 43H, 43I, 43J, 43K, 43L, 43M, 43N, 43O or 43Pof the Income Tax Act, as the case may be;

“concessionary investment allowance” means an investment allowance given to a company for an approved project from which the concessionary income of the company is derived;

“concessionary investment allowance account” means an account kept by a company for the purpose of calculating the amount of concessionary investment allowance granted under this Part;

“construction operations” means —

“fixed capital expenditure” means capital expenditure to be incurred on an approved project by a company on the following items that are used for carrying out the project —

“investment day”, in relation to a company, means the date specified in its certificate as the date from which the company shall qualify for the investment allowance;

“normal income” means income subject to tax at the rate of tax under section 43(1)(a) of the Income Tax Act (Cap. 134);

“normal investment allowance” means an investment allowance given to a company for an approved project from which the normal income of the company is derived;

“normal investment allowance account” means an account kept by a company for the purpose of calculating the amount of normal investment allowance granted under this Part;

“relevant income”, in relation to a company, means any income which —

“research and development” has the same meaning as in the Income Tax Act (Cap. 134);

“space satellite” means an apparatus placed in orbit relative to the earth for any economic, scientific or technological purpose.

For the purposes of this Part, fixed capital expenditure shall not be deemed to be incurred by a company unless —

Where a company proposes to carry out a project —

Where the Minister considers it expedient, having regard to the economic, technical and other merits of the project, he may approve the project and issue the company with a certificate which shall qualify the company for an investment allowance as stipulated in the certificate in respect of the fixed capital expenditure for the approved project subject to such terms and conditions as he thinks fit.

For the purposes of subsection (2), the Minister may approve any investment allowance in respect of the fixed capital expenditure to be incurred on any productive equipment to be used outside Singapore for any project under subsection (1)(h).

Every certificate issued under this section shall specify a date as the investment day from which the company shall be entitled to investment allowance under this Part.

The Minister may, in his discretion, upon the application of a company amend its certificate by substituting for the investment 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 investment day in relation to that certificate.

The investment allowance granted under section 67 shall be a specified percentage, not exceeding 100% of the amount (which may be subject to a specified maximum) of the fixed capital expenditure incurred on each item specified by the Minister under subsection (2) on an approved project if the fixed capital expenditure is incurred —

The Minister —

Where any question arises as to whether a particular item qualifies as one of the items under subsection (2)(a), it shall be determined by the Minister whose decision shall be final.

In subsection (1), “specified” means specified by the Minister.

Where in the basis period for a year of assessment a company has incurred fixed capital expenditure, the company shall be given for that year of assessment an investment allowance in respect of such amount of the fixed capital expenditure as qualifies for the investment allowance under the terms and conditions of its certificate and in accordance with section 68.

Notwithstanding subsection (1), no investment allowance shall be given to a company for an approved project from which relevant income of the company is derived.

Where any investment allowance is given to a company for an approved project from which only normal income of the company is derived, the investment allowance shall be credited to an account to be called a “normal investment allowance account” which shall be kept by the company for the purposes of this Part.

Where any investment allowance is given to a company for an approved project from which only concessionary income of the company is derived, the investment allowance shall be credited to an account to be called a “concessionary investment allowance account” which shall be kept by the company for the purposes of this Part.

Where a company derives both normal income and concessionary income at the same time from an approved project, the investment allowance shall be credited wholly to the normal investment allowance account or wholly to the concessionary investment allowance account as the Minister, or such person as he may appoint, may direct.

Notwithstanding subsections (1) to (4), where a company has incurred, on or after 1st January 1996, fixed capital expenditure for a project approved under section 67(1)(e), the Minister may, if he is satisfied that it is expedient in the public interest to do so, direct that an investment allowance be given to the company for such expenditure, and such investment allowance shall be credited into a normal investment allowance account.

Notwithstanding section 71, as from the relevant date, where the income of a company which is derived from an approved project is subject to tax as concessionary income instead of as normal income —

Notwithstanding section 71, as from the relevant date, where the income of a company which is derived from an approved project is subject to tax as normal income instead of as concessionary income —

Notwithstanding section 71(4), where the Comptroller is satisfied that a company has permanently ceased to derive any concessionary income in the basis period for any year of assessment —

In this section —

“relevant date” means the date in the basis period relating to any transitional year on which the income of an approved project is subject to tax as concessionary income instead of as normal income, or vice versa;

“transitional year” means any year of assessment relating to the basis period in which the income of an approved project is from the relevant date subject to tax as concessionary income instead of as normal income, or vice versa.

During its qualifying period or within 2 years after the end of its qualifying period, a company shall not, without the written approval of the Minister, sell, lease out or otherwise dispose of any assets in respect of which an investment allowance has been given.

Where during its qualifying period, or within 2 years after the end of its qualifying period, a company has sold, leased out or otherwise disposed of any assets in respect of which an investment allowance has been given, an amount equal to the aggregate of the investment allowance given in respect of that asset shall be recovered in the following manner:

Notwithstanding subsection (2), the Minister may waive wholly or partly the recovery of the investment allowance.

Subject to subsection (2), where for any year of assessment a normal investment allowance account of a company is in credit and the company has for that year of assessment any chargeable normal income —

Where, for any year of assessment, a company has any chargeable concessionary income and the normal investment allowance account is in credit, the company may elect for any amount of the chargeable concessionary income, not exceeding the credit in the normal investment allowance account, to be exempt from tax and the normal investment allowance account to be debited with such amount.

A company shall make the election under subsection (2) for any year of assessment at the time of lodgment of the return of income for that year of assessment, except that the election for the year of assessment 1994 shall be made before 1st April 1995.

Where, for any year of assessment, a concessionary investment allowance account of a company is in credit and the company has, for that year of assessment any chargeable concessionary income —

Any amount of chargeable normal income of a company debited from the normal investment allowance account under section 69(5)(d) or any amount of chargeable concessionary income of a company debited from the concessionary investment allowance account under section 69(6)(d) or (7)(a) shall be exempt from tax.

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 section 73 as if it were a notice of assessment given under those provisions.

Section 44 of the Income Tax Act shall not apply in respect of any dividend or part thereof which is exempted from tax under this Part.

Subject to subsection (2), the Minister may, if he considers it expedient in the public interest to do so, by order declare an industry, which is not being carried on in Singapore on a scale adequate to the economic needs of Singapore and for which in his opinion there are favourable prospects for development, to be a pioneer industry and any specific product of that industry to be a pioneer product.

Before making any order under subsection (1), the Minister shall —

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.

The Minister may revoke any order made under this section but any such revocation shall not affect the operation of any pioneer certificate issued to any pioneer enterprise before the revocation.

Any company which is desirous of producing a pioneer product may make an application in writing to the Minister to be approved as a pioneer enterprise in such form and with such particulars as may be prescribed.

Where the Minister is satisfied that it is expedient in the public interest to do so and, in particular, having regard to the production or anticipated production of the pioneer product from all sources of production in Singapore, he may approve that company as a pioneer enterprise and issue a pioneer certificate to the company, subject to such conditions as he thinks fit.

Every pioneer certificate issued under this section shall specify —

The date specified under subsection (3)(a) shall be deemed to be the production day of the pioneer enterprise for the purposes of this Act.

The Minister may, in his discretion, upon the application of any pioneer enterprise, amend its pioneer certificate by substituting for the production day specified therein such earlier or later date as he thinks fit and thereupon the provisions of this Act shall have effect as if the date so substituted were the production day in relation to that pioneer enterprise.

During its tax relief period, a pioneer enterprise shall not carry on any trade or business other than the trade or business relating to the relevant pioneer product, unless the Minister has given his permission in writing therefor.

Where the carrying on of a separate trade or business has been permitted under subsection (1), separate accounts shall be maintained in respect of that trade or business and in respect of the same accounting period.

Where the carrying on of such separate trade results in a loss in any accounting period, the loss shall be brought into the computation of the income of the pioneer enterprise for that period unless the Comptroller, having regard to all the circumstances of the case, is satisfied that the loss was not incurred for the purpose of obtaining a tax advantage.

Where the carrying on of such separate trade results in a profit in any accounting period, and the profit, computed in accordance with the provisions of the Income Tax Act (Cap. 134) as modified by this section, amounts to less than 5% of the full sum receivable from the sale of goods or the provision of services, the statutory income from that source shall be deemed to be 5% (or such lower rate as the Ministermay specify in any particular case) of the full sum so receivable and the income of the pioneer enterprise shall be abated accordingly.

Where in the opinion of the Comptroller the carrying on of such separate trade is subordinate and incidental to the carrying on of the trade or business relating to the relevant pioneer product, the income or loss arising from such activities shall be deemed to form part of the income or loss of the pioneer enterprise.

In this section, “relevant pioneer product” means the pioneer product specified in its pioneer certificate.

The income of a pioneer enterprise in respect of its old trade or business shall be ascertained in accordance with the provisions of the Income Tax Act after making such adjustments as may be necessary in consequence of any direction given under section 9.

In determining the income of a pioneer enterprise referred to in subsection (1), the allowances provided for in sections 16, 17, 18, 19, 20, 21 and 22 of the Income Tax Act shall be taken into account notwithstanding that no claim for such allowances has been made.

Where the tax relief period of a pioneer enterprise referred to in subsection (1) expires during the basis period for any year of assessment, for the purpose of determining the income in respect of its old trade or business and its new trade or business for that year of assessment, there shall be deducted allowances provided for in sections 16, 17, 18, 19, 20, 21 and 22 of the Income Tax Act notwithstanding that no claim for such allowances has been made; and for the purpose of computing such allowances —

Where in any year of assessment full effect cannot, by reason of an insufficiency of profits for that year of assessment, be given to the allowances mentioned in subsection (1A), then the balance of the allowances shall be added to, and be deemed to form part of, the corresponding allowances, if any, for the next succeeding year of assessment and, if no such corresponding allowances fall to be made for that year, shall be deemed to constitute the corresponding allowances for that year, and so on for subsequent years of assessment.

Notwithstanding subsections (1) and (1A), where a pioneer enterprise has incurred or has given a written undertaking to the Minister to incur afixed capital expenditure of not less than $150 million and —

Where the carrying on of a separate trade or business by a pioneer enterprise referred to in subsection (3) has been permitted under section 8(1), and an industrial building, plant or machinery is used both for the purposes of that trade or business and the trade or business relating to the relevant pioneer product, subsection (3) shall apply to that building, plant or machinery.

Where a pioneer enterprise has, before 16th August 1991, incurred a fixed capital expenditure of not less than $1,000 million, subsection (3) shall apply to that enterprise in respect of that expenditure notwithstanding that the enterprise has not complied with paragraphs (a) and (b) of that subsection.

Where a pioneer enterprise referred to in subsection (3) or (3B) is the holder of 2 pioneer certificates in respect of different periods of time, and capital expenditure has been incurred in respect of any industrial building, plant or machinery which is jointly used in carrying on the trade or business of the 2 pioneer industries, no deduction shall be made in respect of such expenditure under any of the provisions contained in sections 16, 17, 18, 19, 19A, 20, 21 and 22 of the Income Tax Act (Cap. 134) until after the expiration of the tax relief period that is later in time.

In subsections (3) and (3B), “fixed capital expenditure” means capital expenditure in connection with a pioneer product, on factory building (excluding land) in Singapore and on any new plant or new machinery used in Singapore and, subject to the approval of the Minister, on any secondhand plant or secondhand machinery used in Singapore.

Subject to section 14(6), where any statement issued under section 12 has become final and conclusive, the amount of the income shown by the statement shall not form part of the statutory income of the pioneer enterprise for any year of assessment and shall be exempt from tax.

The Comptroller may, in his discretion and before such a statement has become final and conclusive, declare that a specified part of the amount of such income is not in dispute and such an undisputed amount of income is exempt from tax, pending such a statement becoming final and conclusive.

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.

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.

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.

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.

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.

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.

Notwithstanding section 13 and subsections (1) to (5), where it appears to the Comptroller that —

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.

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.

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.

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.

Where a pioneer enterprise has, during its tax relief period, incurred a loss for any year, that loss shall be deducted as provided for in section 37(2) and (2A) of the Income Tax Act but only against the income of the pioneer enterprise as ascertained under section 10, except that the balance of any such loss which remains unabsorbed at the end of its tax relief period is available to the new trade or business in accordance with that Act.

Notwithstanding section 7(a), the balance of any allowance as provided for in section 10 which remains unabsorbed at the end of the tax relief period of the pioneer enterprise is available to the new trade or business in accordance with the Income Tax Act.

“commencement day”, in relation to a pioneer service company, means the date specified under section 17(3) or (4) in the certificate issued to that company under that section;

“pioneer service company” means a company which has been issued with a certificate under section 17;

“qualifying activity” means any of the following:

Where a company is engaged in any qualifying activity, the company may apply in the prescribed form to the Minister for approval as a pioneer service company.

The Minister may, if he considers it expedient in the public interest to do so, approve the application and issue the company with a certificate subject to such terms and conditions as he thinks fit.

Every certificate issued under this section shall specify a date as the commencement day from which the company shall be entitled to tax relief under this Part.

The Minister may, in his discretion, upon the application of the company, amend its certificate by substituting for the commencement 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 commencement day in relation to that certificate.

“commencement day”, in relation to a post-pioneer company, means the date specified under section 19B(3) in the certificate issued to that company under that section;

“post-pioneer company” means a company which has been issued with a certificate under section 19B(2);

“qualifying activity”, in relation to a post-pioneer company, means its trade or business in respect of which tax relief had been granted under Part II, III or VI and any other trade or business approved by the Minister.

Any company which is —

The Minister may, if he considers it expedient in the public interest to do so, approve the application and issue the company with a certificate subject to such terms and conditions as he may impose.

Every certificate issued to a post-pioneer company under this section shall specify —

The Minister may, in his discretion, upon an application of a post-pioneer company, amend its certificate by substituting for the commencement day specified therein such other date as he thinks fit and thereupon the provisions of this Part shall have effect as if that date were the commencement day in relation to that certificate.

Notwithstanding section 43 of the Income Tax Act (Cap. 134), tax at such concessionary rate, not being less than 10% as the Minister may specify, shall be levied and paid for each year of assessment upon the income derived by a post-pioneer company during its tax relief period from its qualifying activities.

The tax relief period of a post-pioneer company shall commence on its commencement day and shall continue for a period not exceeding 5 years as the Minister may determine.

The Minister may, subject to such terms and conditions as he may impose, extend the tax relief period of a post-pioneer company for such further period or periods as the Minister may determine except that the tax relief period of the company shall not in the aggregate exceed 10 years.

Where during its tax relief period a post-pioneer company carries on any trade or business other than its qualifying activities, separate accounts shall be maintained in respect of that other trade or business and in respect of the same accounting period and the income from that other trade or business shall be computed and assessed in accordance with the Income Tax Act (Cap. 134) with such adjustments as the Comptroller thinks reasonable and proper.

Where in the opinion of the Comptroller the carrying on of such other trade or business is subordinate or incidental to the carrying on of the qualifying activities of the post-pioneer company, the income or loss arising from such other trade or business shall be deemed to form part of the income or loss of the post-pioneer company in respect of its qualifying activities.

As soon as any amount of income of a post-pioneer company has been subject to tax at the concessionary rate under section 19B, the net amount of the income after deduction of the tax shall be credited to a special account (referred to in this section as the account) to be kept by the post-pioneer company for the purposes of this section.

Where the account is in credit at the date on which any dividends are paid by the post-pioneer company out of the net amount of the income credited to that account, an amount equal to those dividends or to that credit, whichever is the less, shall be debited to the account.

So much of the amount of any dividends so debited to the account as is received by a shareholder of the post-pioneer company shall, if the Comptroller is satisfied with the entries in the account, be exempt from tax in the hands of the shareholder.

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.

Section 44 of the Income Tax Act (Cap. 134) shall not apply in respect of any dividends or part thereof which are debited to the account.

Where an amount of dividends debited to the account has been received by a shareholder, and 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 post-pioneer company (or in not less than such proportion of those shares as the Minister may require at the time when the post-pioneer certificate is issued to the post-pioneer company) 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 such amount, shall be exempt from tax in the hands of those shareholders; and section 44 of the Income Tax Act shall not apply to any such dividends or part thereof so exempt.

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 post-pioneer company for the whole of the tax relief period.

A company shall deliver to the Comptroller a copy of the account made up to any date specified by him whenever called upon to do so by notice in writing.

Notwithstanding subsections (1) to (6), where it appears to the Comptroller that —

The qualifying income of a post-pioneer company shall, subject to subsections (2) and (3), be ascertained in accordance with the provisions of the Income Tax Act (Cap. 134) after making such adjustments as may be necessary in consequence of any direction given under section 19G.

In determining the qualifying income of the post-pioneer company for the basis period for any year of assessment —

Section 37B of the Income Tax Act shall apply, with the necessary modifications, in relation to the deduction of the allowances provided for in sections 16, 17, 18, 19, 19A, 20, 21 and 22 of that Act or the losses under section 37 of that Act in respect of the qualifying income of the post-pioneer company and such part of its income as is subject to tax at the rate of tax under section 43(1)(a) of that Act.

For the purpose of an application under subsection (3), any reference in section 37B of the Income Tax Act (Cap. 134) to —

In this section, “qualifying income” means the income of a post-pioneer company in respect of its qualifying activities.

“commencement day”, in relation to a development and expansion company, means the date specified under section 19J(3) in the certificate issued to the company under that section;

“development and expansion company” means a company which has been issued with a certificate under section 19J(2);

“qualifying activity” means any of the following: (a)the manufacturing or increased manufacturing of any product from any industry that would be of economic benefit to Singapore;