Section 25
Ascertainment of income from qualifying activities
of Economic Expansion Incentives (Relief from Income Tax) Act 1967
(1)
Subject to subsections (4) and (6) —
the qualifying income of a development and expansion company derived from a qualifying activity; or
where the certificate issued to a development and expansion company under section 21(3) specifies 2 or more qualifying activities, the total qualifying income of the development and expansion company derived from all of those qualifying activities,is ascertained in accordance with the provisions of the Income Tax Act 1947, after making the deductions and adjustments in subsection (2).
(2)
The deductions and adjustments for subsection (1) are as follows:
the deduction of intellectual property income derived from any qualifying activity or qualifying activities;
such adjustments as may be necessary to give effect to any direction given under section 28.
(3)
To avoid doubt, intellectual property income deducted under subsection (1) (read with subsection (2)) remains chargeable to tax under the Income Tax Act 1947.
(4)
In determining the qualifying income of a development and expansion company mentioned in subsection (1)(a) or the total qualifying income of a development and expansion company mentioned in subsection (1)(b) for the basis period for any year of assessment —
the allowances provided for in sections 16 to 22 of the Income Tax Act 1947 for capital expenditure incurred for the purposes of the qualifying activity or all the qualifying activities must be taken into account even though no claim for such allowances has been made;
the allowances referred to in paragraph (a) for that year of assessment must firstly be deducted against the qualifying income of the company from the qualifying activity or the total qualifying income of the company from all the qualifying activities, and any unabsorbed allowances must be deducted against the other income of the company subject to tax at a different rate of tax under this Act or the Income Tax Act 1947 in accordance with subsection (6);
the balance (if any) of the allowances after the deduction in paragraph (b) is available for deduction for any subsequent year of assessment in accordance with sections 22A and 23 of the Income Tax Act 1947 and must be made in the manner provided in that paragraph;
any loss incurred in carrying out the qualifying activity, or any net loss incurred in carrying out all the qualifying activities, for that basis period must be deducted in accordance with subsection (6) against the other income of the company subject to tax at a different rate of tax under this Act or the Income Tax Act 1947;
the balance (if any) of the losses after the deduction in paragraph (d) is available for deduction for any subsequent year of assessment in accordance with section 37 of the Income Tax Act 1947 firstly against the qualifying income of the company from the qualifying activity or the total qualifying income of the company from all the qualifying activities, and any balance of the losses must be deducted against the other income of the company subject to tax at a different rate of tax under this Act or the Income Tax Act 1947 in accordance with subsection (6);
any unabsorbed donation for that year of assessment must be deducted in accordance with subsection (6) against the other income of the company subject to tax at a different rate of tax under this Act or the Income Tax Act 1947; and
the balance (if any) of the donations after the deduction in paragraph (f) is available for deduction for any subsequent year of assessment in accordance with section 37 of the Income Tax Act 1947 firstly against the qualifying income of the company from the qualifying activity or the total qualifying income of the company from all the qualifying activities, and any balance of the donations must be deducted against the other income of the company subject to tax at a different rate of tax under this Act or the Income Tax Act 1947 in accordance with subsection (6).
(5)
In subsection (4), a reference to allowances for capital expenditure incurred for the purposes of a qualifying activity excludes any such allowance that is attributable to or apportioned by the Comptroller to intellectual property income.
(6)
Section 37A of the Income Tax Act 1947 applies, with the necessary modifications, in relation to —
the deduction of the allowances provided for in sections 16 to 22 of that Act; and
the losses or donations under section 37 of that Act in respect of —
the qualifying income or the total qualifying income of the development and expansion company; and
such part of the development and expansion company’s income as is subject to tax at a different rate of tax under this Act or the Income Tax Act 1947.
(7)
For the purpose of the application under subsection (6), any reference in section 37A of the Income Tax Act 1947 to income of a company subject to tax at a higher or lower rate of tax or income of the company subject to tax at a higher or lower rate of tax (as the case may be) is a reference to the qualifying income or the total qualifying income of the development and expansion company.[19M