Clause 7

Subject to this section, for the purpose of ascertaining the income for the basis period for any year of assessment of a bank, there shall be 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 shall be treated as having been allowed as a deduction under this section and shall be deemed to be a trading receipt of the bank for that basis period;

the bank permanently ceases to carry on business in Singapore, any provisions in the account of the bank as at the date of the cessation shall be deemed to be a trading receipt of the bank for that basis period:Provided that the total amount deemed as trading receipts under this subsection shall not exceed the total amount of all deductions previously allowed under this section.(3) Where in a scheme of amalgamation involving two or more banks whereby the whole or substantially the whole of the undertaking of any bank (referred to in this subsection as the transferor bank) is transferred to another bank (referred to in this subsection as the transferee bank), the Minister may, if he thinks fit and on such conditions as he may impose, by order declare that any provisions in the account of the transferor bank which have been transferred to the transferee bank shall not be deemed under subsection (2)(b) to be a trading receipt of the transferor bank; and the provisions so declared shall for the purposes of this section be treated as having been allowed to the transferee bank as a deduction under this section.(4) Subject to subsection (5), the total amount of the provisions to be allowed as a deduction under this section for any year of assessment shall not exceed the lowest of —

25% of the qualifying profits for the basis period for that year of assessment;

1/4% of the prescribed value of the loans and investments in securities in the basis period for that year of assessment; or

2% 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 subsection (2).(5) No deduction shall be 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 subsection (2), is in excess of 2% of the prescribed value of the loans and investments in securities for the relevant basis period for that year of assessment.(6) For the purposes of this section —“bank” means a bank licensed under the Banking Act (Cap. 19) or a merchant bank approved by the Monetary Authority of Singapore;“loan” means any loan or advance made or granted by a bank, including an overdraft except for —

loans to and placements with financial institutions in Singapore or any other country;

loans to the Government of Singapore or the government of any other country;

loans to and placements with the Monetary Authority of Singapore or the central bank or other monetary authority of any other country;

loans to statutory bodies or corporations guaranteed by the Government of Singapore or the government of any other country; and

such other loans or advances as may be prescribed;“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;“provisions” means the provision for doubtful debts arising from the loans of a bank and the provision for diminution in the value of its investments in securities;“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 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;“securities” means —

debentures, stocks, shares, bonds or notes excluding —

those issued or guaranteed by the Government of Singapore or the government of any other country;

stocks and shares held by a bank and issued by any company in which 5% or more of its issued capital is beneficially owned, directly or indirectly, by the bank at any time during the basis period for the relevant year of assessment;

any right or option in respect of any debentures, stocks, shares, bonds or notes referred to in paragraph (a); or

units in any unit trust within the meaning of section 10B.”.