Economic Expansion Incentives (Relief from Income Tax) Act 1967 · 2020 Revised Edition · Part 4 · Development and Expansion Incentive
21. Application for and issue of certificate to development and expansion company
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Any company engaged in, or which desires to engage in, any qualifying activity may apply in the prescribed form to the Minister for approval as a development and expansion company for that qualifying activity.
company
“company” means any company incorporated or registered in accordance with the provisions of any written law relating to companies;
A company may make an application under subsection (1) to be approved as a development and expansion company for more than one qualifying activity which it is engaged in or desires to engage in.
development and expansion company
“development and expansion company” means a company which has been issued with a certificate under section 21(3);
The Minister may, if the Minister considers it expedient in the public interest to do so, approve the company as a development and expansion company for the qualifying activity and issue to that company a certificate subject to such conditions as the Minister may impose.
qualifying activity
“qualifying activity” means any of the following:(a)any engineering or technical services including laboratory, consultancy and research and development activities;(b)computer-based information and other computer related services;(c)the development or production of any industrial design; and(d)such other services or activities as may be prescribed.
No company may be approved as a development and expansion company on or after 1 January 2029.
Every certificate issued to a development and expansion company must be in respect of a qualifying activity and must specify —
certificate
“certificate” includes a letter or other document issued by the Minister to a company pursuant to an application made by the company under a provision of this Act;
the qualifying activity;
a date as the commencement day of the qualifying activity; and
the concessionary rate of tax to be levied for that qualifying activity for the purposes of this Part.
Where the Minister approves a company as a development and expansion company for 2 or more qualifying activities, the Minister may issue a single certificate in respect of those qualifying activities if —
the tax relief periods of the development and expansion company for all the qualifying activities, as determined by the Minister under section 22, expire on the same day; and
the Minister is satisfied that the development and expansion company is engaged in or desires to engage in all the qualifying activities as part of the same project.
The Minister may, upon the application of any development and expansion company, amend a certificate issued to the company —
by substituting for the commencement day of a qualifying activity specified in the certificate under subsection (5)(b) such earlier or later date as the Minister thinks fit, and upon such substitution the provisions of this Act have effect as if the date so substituted were the company’s commencement day of that qualifying activity; (b)by removing any qualifying activity from the certificate with effect from a date determined by the Minister; or
by adding to the certificate any qualifying activity and a date as its commencement day, if —
the tax relief period for the qualifying activity expires on the same day as the tax relief period or periods for the other qualifying activity or activities already specified in the certificate; and
the Minister is satisfied that the development and expansion company is engaged in or desires to engage in the qualifying activity and the other qualifying activity or activities already specified in the certificate as part of the same project.
Without affecting section 61, the Minister may, on the Minister’s own initiative, remove any qualifying activity from a certificate with effect from a date determined by the Minister, if the Minister is satisfied that the development and expansion company has contravened —
any provision of this Act; or
any condition of its approval as a development and expansion company.
Despite section 43 of the Income Tax Act 1947, tax at the applicable concessionary rate in subsections (10), (11), (13) (read with subsection (13A)) and (15) (whichever is applicable) is levied and must be paid for each year of assessment —
upon the expansion income derived by a development and expansion company from the qualifying activity specified in its certificate during its tax relief period for that activity; or
if the certificate specifies 2 or more qualifying activities, upon the expansion income derived by it from all of those qualifying activities during its respective tax relief periods for those activities.
Subject to subsection (17A), the initial concessionary rate is —
in the case of a development and expansion company approved as such before 19 April 2016, a concessionary rate of not less than 5%, as the Minister may specify in the certificate; or
in any other case, 5%, 10% or 15% as the Minister may specify in the certificate.
Subject to subsection (17A), the Minister may, on the Minister’s own initiative or on the application of a development and expansion company, amend the company’s certificate by substituting the concessionary rate of tax specified in the certificate in accordance with subsection (10), with a concessionary rate of 5%, 10% or 15%, and in that event the concessionary rate is the rate as substituted.
Subsection (11) applies whether the development and expansion company was approved as such before, on or after 4 May 2018.
Subject to subsection (14), the concessionary rate of tax applicable to the expansion income derived by a specified development and expansion company —
from the qualifying activity specified in the company’s certificate during any part of the company’s tax relief period for that activity that is a relevant part (called part X); or
if the certificate specifies 2 or more qualifying activities, from all of those activities during any part of the company’s respective tax relief periods for those activities that is a relevant part (also called part X),is the rate specified by the Minister to the company, which must not be less than [(0.5 × B) + A]%.
For the purposes of subsection (13) —
A is 5%, 10% or 15%, as determined by the Minister;
where A is 5% or 10% —
each part of the company’s tax relief period in subsection (17)(a) to (d) is a relevant part of the company’s tax relief period; and (ii)B is the number of milestone dates for those relevant parts of the tax relief period —
on which the company was a specified development and expansion company; and
that have transpired as of and including the milestone date of part X; and
where A is 15% —
each part of the company’s tax relief period in subsection (17)(c) and (d) is a relevant part of the company’s tax relief period; and
B is the number of milestone dates for those relevant parts of the company’s tax relief period —
on which the company was a specified development and expansion company; and
that have transpired as of and including the milestone date of part X.
The Minister may, on the Minister’s own initiative or on the application of a specified development and expansion company, amend the company’s certificate for any qualifying activity by substituting the rate of tax specified in the certificate in accordance with that subsection (called in this section the initial rate) for expansion income derived from that activity during a part of the tax relief period, with a rate of tax that complies with subsection (16) (called in this section the substituted rate).
Where subsection (14) applies, then the substituted rate applies to the expansion income derived from that activity from and including the date of the substitution up to and including —
the last day of the part of the tax relief period; or
if the substituted rate is itself substituted with some other rate in the part of the tax relief period, the day immediately before the date of substitution of the other rate.
Subject to subsection (17A), the substituted rate for a part of the tax relief period mentioned in subsection (14) must not be less than [(0.5 × B) + A]%, where —
A is 5%, 10% or 15%, as determined by the Minister; and
B is —
where A is 5% or 10%, the number of milestone dates —
on which the company was a specified development and expansion company; and
that have transpired as of and including the date from which the substituted rate is to apply; and
where A is 15% —
if the substitution is in a part of the tax relief period of the company mentioned in subsection (17)(a) or (b) — zero; and
if the substitution is in a part of the tax relief period of the company in subsection (17)(c) or (d) — the number of milestone dates for the parts of the tax relief period in subsection (17)(c) and (d) —
on which the company was a specified development and expansion company; and
that have transpired as of and including the date from which the substituted rate is to apply.
In subsections (13), (13A), (14), (15) and (16), the parts of a tax relief period for a qualifying activity are —
the beginning of the 11th year of the tax relief period to the end of the 15th year of, or the end of, the tax relief period, whichever is earlier;
the beginning of the 16th year of the tax relief period to the end of the 20th year of, or the end of, the tax relief period, whichever is earlier;
the beginning of the 21st year of the tax relief period to the end of the 30th year of, or the end of, the tax relief period, whichever is earlier; and
the beginning of the 31st year of the tax relief period to the end of the 40th year of, or the end of, the tax relief period, whichever is earlier.
For the purposes of subsections (10)(b), (11), (13) and (16), the Minister may, on or after 17 February 2024 —
specify the concessionary rate of 15% in the certificate;
substitute the concessionary rate in the certificate with 15%; or (c)determine A to be 15%, (as the case may be), but only for any expansion income that is derived on or after 1 January 2024.
The expansion income is the income from such qualifying activity or activities (called in this section and section 25 the qualifying income) to which the certificate issued under this section relates that exceeds the average corresponding income.
average corresponding income
“average corresponding income” means the average corresponding income mentioned in section 21(18);
The average corresponding income referred to in subsection (18) is to be determined by taking one‑third of the total of the corresponding qualifying income for the 3 years immediately preceding the commencement day specified in the certificate issued under this section from that qualifying activity or those qualifying activities.
commencement day
“commencement day”, in relation to a qualifying activity that is approved under section 17(3) for a pioneer service company, means the date specified in the pioneer service company’s certificate under section 17(5)(b) or (7)(a) or (c) as the commencement day of that qualifying activity;
Where a development and expansion company which has been approved as such at any time before 29 February 2012, and has been granted a tax relief period of at least 10 years, is granted at any time before that date an extension or a further extension of its tax relief period under section 22(1)(b) or (2), the Minister must compute the average corresponding income for each such extension or further extension in accordance with subsection (21).
The average corresponding income for each extension or further extension referred to in subsection (20) is to be determined by taking one-third of the total of the corresponding qualifying income for the 3 years immediately preceding the date of that extension or further extension of its tax relief period, as the case may be.
Despite subsections (19), (20) and (21), the Minister may, if he or she thinks fit, specify any amount to be the average corresponding income in substitution of the amount determined under those subsections.[19J
In this section —
“milestone date” means the first day of any part of a tax relief period in subsection (17);
“specified development and expansion company” means a development and expansion company that —
was or is approved as such on or after 29 February 2012 under subsection (3); or
was or is granted on or after 29 February 2012 an extension of its tax relief period or periods for any qualifying activity or activities under section 22.
To avoid doubt, in this section, where a development and expansion company was or is granted on or after 29 February 2012 an extension of its tax relief period or periods for any qualifying activity or activities, the company is a specified development and expansion company for the purposes of this section only as from the first day of the extension of the tax relief period or periods.