Income Tax (Amendment) Bill

This Act may be cited as the Income Tax (Amendment) Act 2006.

Section 2(g) shall be deemed to have come into operation on 10th December 2002.

Sections 3(b) and (c), 21 (in relation to section 34A) and 26(f), (g), (h) and (j) shall be deemed to have come into operation on 1st January 2005.

Section 9 shall be deemed to have come into operation on 18th February 2005.

Sections 3(d) and (e), 13, 14, 15, 18, 26(a) and 29 shall be deemed to have come into operation on 1st January 2006.

Sections 2(k), 6(a), (e) (in relation to section 13(1)(zi)) and (h), 8, 10 (in relation to sections 13Q and 13R), 16(a), 17, 21 (in relation to section 34B), 28, 31, 32, 34, 35 (in relation to section 43V), 36 and 44(f) (in relation to section 43V) shall be deemed to have come into operation on 17th February 2006.

Sections 2(a) to (f) (except in relation to the addition of “19A” in the definition of “A” under section 10(4)(a) for the purpose of section 13A), 10 (in relation to section 13S), 35 (in relation to section 43W) and 44(f) (in relation to section 43W) shall be deemed to have come into operation on 1st March 2006.

Sections 2(h), (i) and (j) and 23 shall be deemed to have come into operation on 1st April 2006.

Sections 33 and 44(a) and (e) shall be deemed to have come into operation on 1st November 2006.

Sections 6(e) (in relation to section 13(1)(zj)) and (i), 19(b) (except in relation to subsections (6) and (8)(d)), (c), (d), (e) (except in relation to subsections (3)(d) and (8)(d)), (f) and (l) (in relation to the definition of “insurer”) and 30(d)), (e) and (f) shall have effect for the year of assessment 2005 and subsequent years of assessment.

Section 19(b) (in relation to subsections (6) and (8)(d)) and (e) (in relation to subsections (3)(d) and (8)(d)) shall have effect for the year of assessment 2005.

Sections 6(f) and 19(a), (g) to (k), (l) (except in relation to the definition of “insurer”) and (m) to (p) shall have effect for the year of assessment 2006 and subsequent years of assessment.

Sections 2(b) (in relation to the addition of “19A” in the definition of “A” under section 10(4)(a) for the purpose of section 13A), 7, 11 (except in relation to section 14P(8)), 24, 25, 26(b), (c), (d), (e), (i) and (k) and 43 shall have effect for the year of assessment 2007 and subsequent years of assessment.

Sections 5 (except in relation to the addition of the words “or professional” to section 11(2) to apply that provision to professional associations), 10 (in relation to section 13T), 22 (in relation to section 35(16)(b)), 27, 30(a) (in relation to section 43(2A)(b)), 35 (in relation to section 43X), 38 and 44(f) (in relation to section 43X) shall have effect for the year of assessment 2008 and subsequent years of assessment.

This Act may be cited as the Income Tax (Amendment) Act 2006.

Section 2(g) shall be deemed to have come into operation on 10th December 2002.

Sections 3(b) and (c), 21 (in relation to section 34A) and 26(f), (g), (h) and (j) shall be deemed to have come into operation on 1st January 2005.

Section 9 shall be deemed to have come into operation on 18th February 2005.

Sections 3(d) and (e), 13, 14, 15, 18, 26(a) and 29 shall be deemed to have come into operation on 1st January 2006.

Sections 2(k), 6(a), (e) (in relation to section 13(1)(zi)) and (h), 8, 10 (in relation to sections 13Q and 13R), 16(a), 17, 21 (in relation to section 34B), 28, 31, 32, 34, 35 (in relation to section 43V), 36 and 44(f) (in relation to section 43V) shall be deemed to have come into operation on 17th February 2006.

Sections 2(a) to (f) (except in relation to the addition of “19A” in the definition of “A” under section 10(4)(a) for the purpose of section 13A), 10 (in relation to section 13S), 35 (in relation to section 43W) and 44(f) (in relation to section 43W) shall be deemed to have come into operation on 1st March 2006.

Sections 2(h), (i) and (j) and 23 shall be deemed to have come into operation on 1st April 2006.

Sections 33 and 44(a) and (e) shall be deemed to have come into operation on 1st November 2006.

Sections 6(e) (in relation to section 13(1)(zj)) and (i), 19(b) (except in relation to subsections (6) and (8)(d)), (c), (d), (e) (except in relation to subsections (3)(d) and (8)(d)), (f) and (l) (in relation to the definition of “insurer”) and 30(d)), (e) and (f) shall have effect for the year of assessment 2005 and subsequent years of assessment.

Section 19(b) (in relation to subsections (6) and (8)(d)) and (e) (in relation to subsections (3)(d) and (8)(d)) shall have effect for the year of assessment 2005.

Sections 6(f) and 19(a), (g) to (k), (l) (except in relation to the definition of “insurer”) and (m) to (p) shall have effect for the year of assessment 2006 and subsequent years of assessment.

Sections 2(b) (in relation to the addition of “19A” in the definition of “A” under section 10(4)(a) for the purpose of section 13A), 7, 11 (except in relation to section 14P(8)), 24, 25, 26(b), (c), (d), (e), (i) and (k) and 43 shall have effect for the year of assessment 2007 and subsequent years of assessment.

Sections 5 (except in relation to the addition of the words “or professional” to section 11(2) to apply that provision to professional associations), 10 (in relation to section 13T), 22 (in relation to section 35(16)(b)), 27, 30(a) (in relation to section 43(2A)(b)), 35 (in relation to section 43X), 38 and 44(f) (in relation to section 43X) shall have effect for the year of assessment 2008 and subsequent years of assessment.

Section 10 of the Income Tax Act (referred to in this Act as the principal Act) is amended —

by inserting, immediately after the words “section 13A” in the 2nd line of subsection (4)(a), the words “or by an approved shipping investment enterprise within the meaning of section 13S”;

by deleting the 8th to 11th lines of subsection (4)(a) and substituting the following words: “where Ais the amount of allowances under section 19 or 19A made to the enterprise in respect of the Singapore ship against any income exempt from tax under section 13A or 13S;”;

by deleting the words “would be income of a shipping enterprise within the meaning of section 13A or income of an approved international shipping enterprise within the meaning of section 13F” in the 2nd, 3rd and 4th lines of subsection (4)(b) and substituting the words “is exempt from tax under section 13A or 13F, or the income derived from the chartering or finance leasing of which is exempt from tax under section 13S”;

by deleting the words “or 13F” in the 12th line of subsection (4)(b) and substituting the words “, 13F or 13S”;

by inserting, immediately after the words “section 13F” in subsection (5), the words “or the income derived from the chartering or finance leasing of which is exempt from tax under section 13S”;

by inserting, immediately after subsection (5), the following subsection:“(5A) In subsections (4) and (5), “finance leasing” has the same meaning as in section 13S(20).”;

by inserting, immediately after subsection (6), the following subsection:“(6A) For the avoidance of doubt, section 10(5) in force immediately before 10th December 2002 shall continue to apply to any gains or profits directly or indirectly derived by the exercise, assignment or release of any right or benefit to acquire shares (including stocks) in a company granted to a person before 1st January 2003, whether in his name or in the name of his nominee or agent, where the right or benefit was obtained by that person by reason of any office or employment held by him.”;

by deleting the words “from a person carrying on in Singapore the business of publishing, of recording music or of producing cinematograph films, choreographic works or plays” in the 4th, 5th and 6th lines of subsection (14);

by deleting subsection (16) and substituting the following subsection:“(16) For the purposes of subsection (1)(a) and (f), the income derived by an individual who is the inventor, author, proprietor, designer or creator (as the case may be) of an approved intellectual property or approved innovation, or by any company in which he beneficially owns all the issued shares, from any royalties or other payments received as consideration for the assignment of or the rights in the approved intellectual property or approved innovation shall be deemed to be —

the amount of the royalties or other payments remaining after the deductions allowable under Parts V and VI have been made; or

an amount equal to 10% of the gross amount of royalties or other payments,whichever is the less.”;

by deleting the definition of “rights in the approved invention or approved innovation” in subsection (18) and substituting the following definition:“ “rights in the approved intellectual property or approved innovation” means the rights relating to any patent, copyright, trade mark, industrial design, layout-design of integrated circuit, or know-how of an approved intellectual property or approved innovation, where a substantial part of the work in producing the approved intellectual property or innovation is undertaken in Singapore.”; and

by deleting paragraph (f) of subsection (20A) and substituting the following paragraph:“(f)discount from —

qualifying debt securities issued during the period from 27th February 2004 to 16th February 2006 which mature within one year from the date of issue of those securities; or

qualifying debt securities issued during the period from 17th February 2006 to 31st December 2008; and”.

Section 10C of the principal Act is amended —

by deleting “$25,000” in subsection (1)(b) and substituting the words “the specified amount”;

by deleting subsection (7);

by deleting the words “subsection (7) shall apply, with the necessary modifications,” in subsection (8) and substituting the words “subsection (1)(b) shall apply”;

by deleting “$5,000” in paragraph (a) of the definition of “relevant amount” in subsection (12) and substituting “$4,500”;

by deleting “$85,000” in paragraph (b) of the definition of “relevant amount” in subsection (12) and substituting “$76,500”; and

by inserting, immediately after the definition of “relevant employer” in subsection (12), the following definition:“ “specified amount” means —

in relation to the year 2005, the difference between $85,000 and the total ordinary wages paid to the employee in that year; and for this purpose, any amount of ordinary wages paid to the employee for any month in the year in excess of $5,000 shall be disregarded;

in relation to the year 2006 and every subsequent year, the difference between $76,500 and the total ordinary wages paid to the employee in that year; and for this purpose, any amount of ordinary wages paid to the employee for any month in the year in excess of $4,500 shall be disregarded;”.

Section 10J(1) of the principal Act is amended by deleting the words “whether to hold as treasury shares or otherwise,” and substituting the words “and such shares are deemed cancelled under section 76B of the Companies Act (Cap. 50),”.

Section 11 of the principal Act is amended by deleting subsections (2) and (3) and substituting the following subsections:“(2) Where a body of persons, whether corporate or unincorporate, carries on a trade or professional association in such circumstances that more than half of its receipts by way of entrance fees and subscriptions from Singapore members are claimed or claimable as allowable deductions for the purposes of section 14 —

the body of persons shall be deemed to carry on a business;

the whole of its income from transactions with Singapore members and persons who are not members (including entrance fees and subscriptions) shall be deemed to be receipts from a business; and

the body of persons shall be chargeable in respect of the profits from the business.

For the purposes of subsection (2), “body of persons” includes a company limited by guarantee approved by the Minister or such person as he may appoint, subject to such conditions as he may impose.

In this section —“members”, in relation to a body of persons, means those persons who are entitled to vote at a general meeting of the body at which effective control is exercised over its affairs;“Singapore members” means members that are ––

persons, other than companies, resident in Singapore;

companies incorporated in Singapore (excluding branches or offices located outside Singapore); or

in the case of companies incorporated outside Singapore, the branches or offices of the companies located within Singapore.”.

Section 13 of the principal Act is amended —

by deleting paragraph (aa) of subsection (1) and substituting the following paragraph:“(aa)subject to subsection (2A) and such conditions as may be prescribed by regulations, the discount from any qualifying debt securities —

issued during the period from 27th February 2004 to 16th February 2006 which mature within one year from the date of issue of those securities; or

issued during the period from 17th February 2006 to 31st December 2008,by —

any person who is not resident in Singapore and who does not have any permanent establishment in Singapore; or

any person who is not resident in Singapore and who carries on any operation in Singapore through a permanent establishment in Singapore where the funds used by that person to acquire the qualifying debt securities are not obtained from the operation;”;

by deleting the word “including” in subsection (1)(ze)(v) and substituting the word “excluding”;

by inserting, immediately before the word “offered” in subsection (1)(ze)(v), the words “the units of which are”;

by deleting the word “and” at the end of subsection (1)(zf);

by deleting paragraph (zg) of subsection (1) and substituting the following paragraphs:“(zg)any distribution made by any trustee-manager of a registered business trust;

any distribution made by any trustee of a real estate investment trust of any income of the kinds referred to in section 43(2A)(a)(i), (ii) and (iii) to an individual, except where such distribution is derived by the individual through a partnership in Singapore or is derived from the carrying on of a trade, business or profession;

the following income derived from Singapore on or after 17th February 2006 by any individual:

any discount from debt securities;

any distribution made by any restricted authorised scheme out of income derived from Singapore or received in Singapore on or after 17th February 2006, that is income or deemed to be income of the individual, except distribution made out of Singapore dividends from which tax is deducted or deductible under section 44,except where such income is derived through a partnership in Singapore or is derived from the carrying on of a trade, business or profession; and

any income derived from Singapore by an individual from any structured product offered by a financial institution on or after 7th October 2004, except where such income is derived through a partnership in Singapore or is derived from the carrying on of a trade, business or profession.”;

by deleting the definition of “deposit” in subsection (16) and substituting the following definition:“ “deposit” means —

in relation to any standard savings, current or fixed deposit account referred to in subsection (1)(zc), any deposit of moneys, but does not include —

any deposit of moneys the interest from which is determined by the performance of any securities or by the fluctuations in currency exchange rates or by any combination thereof; or

any other prescribed deposit; or

in relation to any deposit of moneys referred to in subsection (1)(t) or (zd) which is made on or after 7th October 2004 and which matures on or after 2nd June 2005, a deposit which falls within the meaning of deposit in section 4B of the Banking Act (Cap. 19) and is treated as such by the Monetary Authority of Singapore for the purposes of that section;”;

by inserting, immediately after the definition of “qualifying debt securities” in subsection (16), the following definitions:“ “real estate investment trust” has the same meaning as in section 43(10);“registered business trust” and “trustee-manager” have the same meanings as in the Business Trusts Act (Cap. 31A);”;

by inserting, immediately after the definition of “related party” in subsection (16), the following definition:“ “restricted authorised scheme” means a collective investment scheme constituted as a unit trust authorised under regulations made under the Securities and Futures Act (Cap. 289) for the purpose of section 305 of that Act;”; and

by deleting the full-stop at the end of the definition of “Singapore Government securities” in subsection (16) and substituting a semi-colon, and by inserting immediately thereafter the following definition:“ “structured product” means a sum of money paid on terms under which —

it may not be repaid in full and the return from which is, partly or wholly, determined by the performance of any embedded derivative instrument; and

its repayment may be in money or money’s worth.”.

Section 13A of the principal Act is amended —

by inserting, immediately after the words “income of a shipping enterprise” in subsections (3) and (5A), the words “from the operation of Singapore ships or foreign ships”;

by inserting, immediately after “19,” in subsections (3)(a) and (11), “19A,”; and

by deleting the definitions of “income of a shipping enterprise” and “operation of Singapore ships” in subsection (16) and substituting the following definition:“ “operation” means —

in relation to a Singapore ship —

the carriage of passengers, mails, livestock or goods outside the limits of the port of Singapore;

towing or salvage operations outside the limits of the port of Singapore;

the charter of the ship for use outside the limits of the port of Singapore; or

for the year of assessment 2007 and subsequent years of assessment, the use outside the limits of the port of Singapore of the ship as a dredger, seismic ship or vessel used for offshore oil or gas activity; and

in relation to a foreign ship, the carriage of passengers, mails, livestock or goods shipped in Singapore, except where such carriage arises solely from transhipment from Singapore;”.

Section 13G of the principal Act is amended —

by deleting the word “or” at the end of subsection (2)(a);

by deleting the full-stop at the end of paragraph (b) of subsection (2) and substituting a semi-colon, and by inserting immediately thereafter the following paragraphs:“(c)being any other person, is neither resident in Singapore nor constituted or registered under any written law in Singapore; or

is a trustee of another foreign trust specified under subsection (1).”;

by inserting, immediately after subsection (2), the following subsection:“(2A) Where any income of a foreign trust is exempt from tax under regulations made under subsection (1) in any year of assessment, the share of such income that a foreign account of a philanthropic purpose trust is entitled to receive for that year of assessment shall also be exempt from tax.”; and

by deleting subsection (4) and substituting the following subsection:“(4) In this section —“foreign account” and “philanthropic purpose trust” have the same meanings as in section 13O;“trustee company” has the same meaning as in section 43J(2).”.

Section 13O of the principal Act is amended —

by inserting, immediately after subsection (1), the following subsection:“(1A) Regulations made under subsection (1) may provide for the deduction of expenses, allowances, losses and donations relating to a foreign account of a philanthropic purpose trust or an eligible holding company established for the purposes of a philanthropic purpose trust, otherwise than in accordance with this Act.”;

by deleting paragraph (b) of the definition of “foreign account” in subsection (2) and substituting the following paragraph:“(b)companies each of which —

is neither incorporated nor resident in Singapore;

does not have a permanent establishment in Singapore other than a trustee company referred to in subsection (1)(a);

does not carry on a business in Singapore;

does not beneficially own more than 20% of the total number of the issued shares of any company incorporated in Singapore;

does not have 20% or more of the total number of its issued shares beneficially owned, directly or indirectly, by a company which —

has a permanent establishment in Singapore other than a trustee company referred to in subsection (1)(a);

carries on a business in Singapore; or

beneficially owns more than 20% of the total number of the issued shares of any company incorporated in Singapore; and

has —

if it has no more than 50 shareholders, all of its issued shares beneficially owned, directly or indirectly, by persons who are neither citizens of Singapore nor resident in Singapore; or

if it has more than 50 shareholders, not less than 95% of the total number of its issued shares beneficially owned, directly or indirectly, by persons who are neither citizens of Singapore nor resident in Singapore;”; and

by inserting, immediately after subsection (2), the following subsection:“(3) The Minister or such person as he may appoint may in any particular case waive any requirement referred to in paragraph (b)(ii) to (v) of the definition of “foreign account” in subsection (2).”.