Singapore legislation
Section 14G
Section 14G
Provisions by banks and qualifying finance companies for doubtful debts and diminution in value of investments
(1)
Subject to this section, for the purpose of ascertaining the income for the basis period for any year of assessment of a bank or qualifying finance company, there is allowed as a deduction an amount in respect of the provision for doubtful debts arising from its loans and the provision for diminution in the value of its investments in securities, made in that basis period.
(2)
Where in the basis period for any year of assessment —
any amount of the provisions is written back, that amount is treated as having been allowed as a deduction under this section and is deemed to be a trading receipt of the bank or qualifying finance company for that basis period;
the bank or qualifying finance company permanently ceases to carry on business in Singapore, any provisions in the account of the bank or qualifying finance company as at the date of the cessation are deemed to be a trading receipt of the bank or qualifying finance company for that basis period.
(2A)
If, for a basis period beginning on or after 1 January 2018, the relevant amount for the bank or qualifying finance company is a negative amount, then, for the purpose of subsection (1), the bank or qualifying finance company is treated as having made in that basis period provisions for doubtful debts arising from its loans and for the diminution in the value of its investments in securities, of an amount equal to that amount expressed as a positive amount.
(2B)
If, for a basis period beginning on or after 1 January 2018, the relevant amount for the bank or qualifying finance company is a positive amount, then, for the purpose of subsection (2)(a), the bank or qualifying finance company is treated as having written back in that basis period an amount of its provisions that is equal to that amount.
(2C)
The relevant amount for the bank or qualifying finance company in subsections (2A) and (2B) is an amount computed using the formula A + B + C, where —
A is —
if a loss is recognised, in accordance with FRS 109 or SFRS(I) 9 (as the case may be), in the profit and loss account of the bank or qualifying finance company for that basis period in respect of its loans that are not credit‑impaired, owing to any provisions made for expected credit losses arising from those loans, the amount of that loss expressed as a negative amount; or
if a gain is recognised, in accordance with FRS 109 or SFRS(I) 9 (as the case may be), in the profit and loss account of the bank or qualifying finance company for that basis period in respect of its loans that are not credit‑impaired, owing to a write‑back of any provisions made for expected credit losses arising from those loans, the amount of that gain expressed as a positive amount;
B is —
if a loss is recognised, in accordance with FRS 109 or SFRS(I) 9 (as the case may be), in the profit and loss account of the bank or qualifying finance company for that basis period in respect of its investments in securities that are not credit‑impaired, owing to any provisions made for expected credit losses arising from those securities, the amount of that loss expressed as a negative amount; or
if a gain is recognised, in accordance with FRS 109 or SFRS(I) 9 (as the case may be), in the profit and loss account of the bank or qualifying finance company for that basis period in respect of its investments in securities that are not credit‑impaired, owing to a write‑back of any provisions made for expected credit losses arising from those securities, the amount of that gain expressed as a positive amount; and
C is —
if an MAS notice mentioned in subsection (6A) requires the bank or qualifying finance company to make for that basis period an amount of allowance for loans or investments in securities that are not credit‑impaired, and that amount is recognised in the retained earnings account of the bank or qualifying finance company as required by that MAS notice, that amount expressed as a negative amount; or
if an MAS notice mentioned in subsection (6A) requires the bank or qualifying finance company to reverse an amount of any allowance mentioned in sub‑paragraph (i) for a basis period, and that amount is recognised in the retained earnings account of the bank or qualifying finance company as required by that MAS notice, that amount expressed as a positive amount.
(2D)
For the purpose of subsection (2)(b), if the bank or qualifying finance company permanently ceases to carry on business in Singapore in a basis period beginning on or after 1 January 2018, then the amount that is deemed as its trading receipts for that basis period is the sum of —
any provisions in its expected credit loss allowance account in respect of loans and securities that are not credit‑impaired at the date of the cessation; and
any provisions at that date in the reserve account that it is required to maintain by an MAS notice.
(2E)
Where, in any basis period that begins on a day before 1 January 2018 —
the bank or qualifying finance company prepares or maintains financial accounts in accordance with FRS 109 or SFRS(I) 9 (as the case may be), even though it is only required to do so in a later basis period; and
the relevant amount for it is a negative amount,then, for the purpose of subsection (1), the bank or qualifying finance company is treated as having made in that basis period provisions for doubtful debts arising from its loans and for the diminution in the value of its investments in securities, of an amount equal to that amount expressed as a positive amount.
(2F)
Where, in any basis period that begins on a day before 1 January 2018 —
the bank or qualifying finance company prepares or maintains financial accounts in accordance with FRS 109 or SFRS(I) 9 (as the case may be), even though it is only required to do so in a later basis period; and
the relevant amount for it is a positive amount,then, for the purpose of subsection (2)(a), the bank or qualifying finance company is treated as having written back in that basis period an amount of its provisions that is equal to that amount.
(2G)
The relevant amount for the bank or qualifying finance company in subsections (2E) and (2F) is an amount computed using the formula A + B, where A and B have the meanings given by subsection (2C).
(2H)
The Minister may make regulations to provide for any transitional matter in connection with the application of subsections (2A) to (2G) to a bank or qualifying finance company for the year in which it first becomes a qualifying person within the meaning of section 34AA, including substituting a provision in place of subsection (5).
(3)
The total amount deemed as trading receipts under subsection (2), (2B), (2D), (2F) or (4A)(f) must not exceed the total amount of all deductions previously allowed under this section.
(4)
Where in a scheme of amalgamation involving 2 or more banks or finance companies whereby the whole or substantially the whole of the undertaking of any bank or finance company is transferred to another bank or finance company, the Minister may, if he or she thinks fit and on such conditions as he or she may impose, by order declare that any provisions in the account of the transferor bank or transferor finance company which have been transferred to the transferee bank or transferee finance company are not deemed under subsection (2)(b) to be a trading receipt of the transferor bank or transferor finance company; and the provisions so declared are for the purposes of this section treated as having been allowed to the transferee bank or transferee finance company as a deduction under this section.
(4A)
Where —
loans or securities are transferred by a bank or qualifying finance company (called in this subsection the transferor) to another person (called in this subsection the transferee);
the transfer is not pursuant to a scheme of amalgamation;
provision for doubtful debts arising from those loans, or provision for diminution in the value of investments in those securities, is also transferred by the transferor to the transferee; and
a deduction of an amount in respect of that provision was previously allowed under this section to the transferor,then —
in a case where both the transferor and the transferee are in the business of lending money on the date of the transfer, the deduction previously allowed to the transferor is treated, for the purposes of this section, as having been allowed to the transferee under this section; and
in any other case, the provision is treated as a trading receipt of the transferor for the basis period in which the date of transfer falls.
(5)
Subject to subsection (6), the total amount of the provisions to be allowed as a deduction under this section for any year of assessment must not exceed the lowest of —
25% of the qualifying profits for the basis period for that year of assessment;
1/2% of the prescribed value of the loans and investments in securities in the basis period for that year of assessment; and
3% of the prescribed value of the loans and investments in securities in the basis period for that year of assessment, less the total amount of all deductions previously allowed under this section which have not been deemed to be trading receipts under subsections (2), (2B), (2D), (2F) and (4A)(f).
(6)
No deduction is allowed for any year of assessment —
where there are no qualifying profits in the basis period for that year of assessment; or
where the total amount of all deductions previously allowed under this section, which have not been deemed to be trading receipts under subsections (2), (2B), (2D), (2F) and (4A)(f), is in excess of 3% of the prescribed value of the loans and investments in securities for the relevant basis period for that year of assessment.
(6AA)
6AA
Subsections (5) and (6) do not apply to any bank or qualifying finance company for the years of assessment 2021 and 2022.
(6AB)
6AB
For the purposes of subsections (5) and (6) —
a reference to a loan is to a loan that has been disbursed by the bank or qualifying finance company, but does not include —
a loan to and placement with any financial institution in Singapore or any other country;
a loan to the Government or the government of any other country;
a loan to and placement with the Monetary Authority of Singapore or the central bank or other monetary authority of any other country;
a loan to any statutory body or corporation guaranteed by the Government or the government of any other country; or
such other loan or advance as may be prescribed by rules made under section 7; and
a reference to securities does not include securities issued or guaranteed by the Government or the government of any other country.
(6A)
The provisions in this section apply to any allowance made by a bank or qualifying finance company for loans or securities as required by an MAS notice, as they apply in relation to a provision for doubtful debts arising from loans, or for diminution in the value of investments in securities, of the bank or qualifying finance company.
(6B)
No deduction is allowed under subsection (1) starting from the year of assessment for a basis period that begins on or after 1 January 2024.
(7)
In this section —
Definition
“bank” means a bank or merchant bank licensed under the Banking Act 1970;
Definition
“capital funds” has the meaning given by the Finance Companies Act 1967;
Definition
“credit‑impaired” and “expected credit loss” have the same meanings as in FRS 109 or SFRS(I) 9, as the case may be;
Definition
“FRS 109” and “SFRS(I) 9” have the meanings given by section 34AA(15);
Definition
“loan” means any loan, advance or credit facility made or granted by a bank or qualifying finance company, including an overdraft;
Definition
“MAS notice” means a notice or direction of the Monetary Authority of Singapore given under —
section 55 of the Banking Act 1970;
section 55 of the Banking Act 1970 as applied by section 55ZJ of that Act; or
section 30 of the Finance Companies Act 1967;
Definition
“Monetary Authority of Singapore” means the Monetary Authority of Singapore established under section 3 of the Monetary Authority of Singapore Act 1970;
Definition
“prescribed value of loans and investments in securities”, in relation to the basis period for any year of assessment, means the value (ascertained in such manner as the Comptroller may determine) of the loans and investments in securities (excluding any loan or investment in respect of which any deduction has been allowed under any other section of this Act) as at the last day of each month in that basis period added together and divided by the number of months in that basis period;
Definition
“provisions” means the provision for doubtful debts arising from the loans of a bank or qualifying finance company and the provision for diminution in the value of its investments in securities;
Definition
“qualifying finance company” means a company licensed under the Finance Companies Act 1967 to carry on financing business;
Definition
“qualifying profit” means the net profit (excluding any extraordinary gain which is not subject to tax) as shown in the audited accounts of the bank or qualifying finance company before deducting provision for taxation, tax paid, any extraordinary loss not allowed as a deduction, provision for doubtful debts arising from loans and provision for diminution in value of investments in securities;
Definition
“securities” means debentures, bonds or notes.[14I