New
Acts
Income Tax (Amendment) Act 2000 (A24/2000)
The Income Tax (Amendment) Act 2000 amends the Income Tax Act to implement the income tax changes announced in the Government's 2000 Budget Statement and to make certain other amendments to the Act. Some of the amendments are as follows:
Amendment of s 10(9), with effect from the Year of Assessment 2001 and subsequent Years of Assessment, to extend the tax concession to cover royalties received from a person carrying on in Singapore the business of recording music, or of producing cinematograph films, choreographic works or plays. The concession limits the taxable royalty income to 10% of the gross amount of royalties.
Amendment of s 10(10), with effect from the Year of Assessment 2001 and subsequent Years of Assessment, to extend a similar concession to cover royalties received by non-resident individuals and royalties received in relation to approved invention or innovation in the provision of service.
Amendment of s 10J, with effect from the Year of Assessment 2001 and subsequent Years of Assessment, to deem certain payment made by a company resident in Singapore to its shareholders, pursuant to a share buyback through a special trading counter established on the Singapore Exchange, to be a payment of a dividend by the company and, in certain circumstances, to be a receipt of dividends by its shareholders.
Insertion of a new s 13I with effect from 8 September 2000. The new s 13I provides for the tax exemption of dividends paid out of income derived by Singapore Exchange Derivatives Trading Limited (including income derived by it while it was known as Singapore International Monetary Exchange Limited).
Insertion of a new s 13J with effect from 8 September 2000. The new s 13J provides for 50% exemption of tax, in certain circumstances, on the gains or profits derived by any qualifying employee by the exercise, assignment or release of a right or benefit granted to acquire shares in any qualifying company in which he is substantially employed or to acquire shares in its holding company. The partial exemption is available to the employee for 10 years of assessment limited to the first $10m gains or profits derived by him.
Amendment of s 14I, with effect from the Year of Assessment 2000 and subsequent Years of Assessment, to reinstate the annual limits (which were temporarily suspended for years of assessment 1998 and 1999) on the amount of the general provisions for doubtful debts and diminution in value of investments allowed as tax deduction for banks.
Amendment of s 42, with effect from the Year of Assessment 2001 and subsequent Years of Assessment, to limit the highest effective rate of tax imposed on a person, other than an individual, under Part B of the Second Schedule to 25.5% on every dollar of chargeable income.
Amendment of s 43D, deemed effective from 1 December 1999, to reflect the corporate restructuring involving the Singapore International Monetary Exchange Limited. The restructuring does not affect the 10% concessionary rate of tax applicable to certain income derived by any company which was a member of the former Singapore International Monetary Exchange Limited.
Amendment of s 43N with effect from 8 September 2000 to empower the Minister for Finance to make regulations providing for a concessionary rate of tax of 10% on income derived by a financial institution from trading in interest rate or currency swaps or providing services as an intermediary in connection with such swaps. [See Changes to Subsidiary Legislation - S427/2000.]
Amendment of s 44(1) and (13), with effect from the Year of Assessment 2001 and subsequent Years of Assessment, to enable resident companies to deduct tax at the rate of 25.5% instead of 26% in respect to Singapore dividends paid to them. This is consequent upon the reduction of the corporate tax rate from 26% to 25.5% for the Year of Assessment 2001.
Amendment of s 45, with effect from the Year of Assessment 2001 and subsequent Years of Assessment, to reduce from 26% to 25.5% the withholding tax rates applicable on the gross amount of interest paid to a non-resident person.
Amendment of s 85(2), with effect from the Year of Assessment 2000 and subsequent Years of Assessment, to empower the Comptroller of Income Tax to extend the time for payment of tax on gains or profits from the exercise of certain employee stock options subject to the imposition of interest.
Provision for remission of 5% on tax payable for the Year of Assessment 2000 plus an amount not exceeding $500 as determined by the Comptroller.
Registered Designs Act 2000 (A25/2000)
The Registered Designs Act 2000, which has yet to come into force, establishes a system for the registration of industrial designs in Singapore. Brief details of the scope of the Act are as follows:
1 A design is defined as features of shape, configuration, pattern or ornament applied to an article by an industrial process, but does not include a method or principle of construction; or features of shape or configuration of an article that are dictated solely by the function which the article has to perform, that are dependent upon the appearance of another article of which the first article is intended to form an integral part, or that enable that article to be connected to another article so that either article may perform its function.
The designer of a design is treated as the owner of the design. However, where the design is commissioned, or created by an employee in the course of his employment, the person commissioning or the employer (as the case may be) shall be treated as the owner.
Only new designs may be registered. A design is not new if it is the same or substantially the same as a design that has been registered or published in respect of the same or any other article.
Certain designs may not be registered.
The novelty of a design that corresponds to an artistic work is not destroyed by any prior use of the artistic work, except where the prior use consisted of any commercial dealing in articles to which the design, or a closely similar design, had been applied industrially.
There will be two situations where an application for registration of a design will not be refused, and the registration of a design shall not be revoked despite the prior registration of the same design or a closely similar design. The situations are:
where the application is filed by the registered owner in respect of any other article; and
where the applicant becomes the owner of the prior registration.
An application for the registration of a design shall be made in the prescribed manner and be accompanied by the prescribed fee.
A person who has applied for the registration of a design in a country that is a party to the Paris Convention or a member of the World Trade Organisation may claim priority from the date of that application if he applies for registration under the Bill within six months of that application. Similar provisions may be made in relation to a country or territory with which Singapore has an arrangement for the reciprocal protection of registered designs.
The registration of a design will remain in force of an initial period of five years. It can be extended for up to two periods of five years each. However, the Bill specifies two situations where the maximum life of the registration of a design may be shorter.
The exclusive rights of a registered owner of a registered design include:
the making, or importing, for a commercial purpose; or
the commercial dealing in,
any article to which has been applied the design or a design not substantially different from the design.
Changes to Subsidiary Legislation
Income Tax (Exemption of Interest and Other Payments for Economic and Technological Development) Notification 2000 (S411/2000)
The Income Tax (Exemption of Interest and Other Payments for Economic and Technological Development) Notification 2000 is deemed to have come into operation on 25 February 2000.
Pursuant to this Notification, there shall be exempt from tax any payment made under an interest rate or currency swap transaction by a financial institution to a person who is neither a resident of nor a permanent establishment in Singapore.
Where the payment made under an interest rate or currency swap transaction by a financial institution is to a related party, the aforesaid exemption shall apply only if the transaction is carried out at arm's length and the following documents are furnished with the return of income made by the financial institution under s 62 of the Income Tax Act:
in relation to any such swap transaction entered into during the basis period relating to the year of assessment for which the return is made, a certificate issued by an external auditor certifying that the swap transaction between the financial institution and the related party is carried out at arm's length; and
in respect of each related party to whom interest rate and currency swap payments were made during the basis period relating to the year of assessment for which the return is made, a statement stating -
the name, place of incorporation and country of residence for the tax purpose of the related party;
the total amount of swap payments made to the related party during that basis period; and
the total amount of swap payments received from the related party during that basis period.
Code of Practice for Competition in the Provision of Telecommunication Services (S412/2000)
The Code of Practice for Competition on the Provision of Telecom Services, which was released by the Infocomm Development Authority of Singapore (IDA) on 15 September 2000, will come into force with effect from 29 September 2000.
The Code, which sets clear boundaries for competitive behaviour in the marketplace, was developed in close consultation with the industry. It provides a regulatory framework to facilitate the rapid entry of new competition in Singapore and a strong incentive for companies to invest in infrastructure.
The IDA believes that market forces are generally more effective than regulation in promoting consumer welfare and in accelerating the growth of competitively priced, high-quality innovative services. Therefore, the Code relies primarily on commercial negotiation and industry self-regulation. However, the Code does define minimum requirements to protect end-users and prevent anti-competitive conduct.
For segments of the market that are not yet competitive, and where the dominant incumbent operator's market behaviour is not constrained by competitive forces, IDA will play a more active role to ensure that such dominance will not be abused. In this spirit, the Code requires the incumbent to comply with more stringent rules, designed to approximate conditions in a fully competitive market. As these market segments become fully competitive, IDA will allow free competition to determine the shape of the market.
Legal Profession (Law Corporation) Rules 2000 (S425/2000)
The Legal Profession (Law Corporation) Rules 2000, which are effective from 1 October 2000, provide that an application under s 81B of the Legal Profession Act for approval of a company or proposed company as a law corporation and of the name or proposed name of the law corporation shall be made in such form as may be determined by the Council of The Law Society of Singapore and shall be accompanied by (a) such documents, particulars and information as the Council may require, and (b) an application fee of $1,000. The Council may, in the interests of the legal profession or the public, reject an application.
The Rules also provide that the memorandum and articles of association of a law corporation shall provide for the following matters:
The primary object of the law corporation is to supply legal services.
The chairman and all the directors of the law corporation shall be solicitors.
The office of a director shall become vacant if the director ceases practice as a solicitor.
All the shares in each class of shares of the law corporation must be held by solicitors, unless otherwise specified in the Legal Profession (Law Corporation) Rules 2000.
The business of the law corporation, in so far as it relates to legal services, shall be under the control and management of all the directors.
No person shall transfer or dispose of any shares in the law corporation without the prior approval of the directors. The directors shall not grant their approval if such transfer will result in a contravention of any requirement in Part VIA of the Legal Profession Act (Cap 161) or any rules made thereunder on the holding, transfer or disposal of shares in a law corporation.
The manner and terms of the transfer or disposal of any shares in the law corporation in the event that the person holding such shares -
holds shares in any other law corporation;
is a director or consultant or an employee of any other law corporation;
is a partner or consultant or employee of any law firm;
is practising as a solicitor on his own account;
is suspended from practice or struck off the roll pursuant to any disciplinary proceedings; or
ceases to hold a practising certificate by reason of death, bankruptcy, or incapacity by reason of mental or physical disability, shall be provided for.
The memorandum or articles of association relating to the manner and terms of any transfer or disposal of shares referred to in paragraph 7 shall be subject to the approval of the Council.
The memorandum or articles of association relating to the matters specified in the Legal Profession Act and any rules made thereunder shall not be amended without the prior approval of the Council.
Income Tax (Concessionary Rate of Tax or Exemption for Income Derived from Debt Securities) (Amendment) Regulations 2000 (S427/2000)
With effect from 29 September 2000, tax shall be payable at the rate of 10% on any income derived by any financial institution during the period commencing from the first day of its basis period for the Year of Assessment 2001 to 27 February 2003 from -
providing services as an intermediary in connection with any transaction involving interest rate or currency swaps; and
trading in interest rate or currency swaps.
Income Tax (Exemption of Interest or Other Payments for Economic and Technological Developments) (No 2) Notification 2000 (S428/2000)
With effect from 25 February 2000, there shall be exempt from tax any payment made under a financial guarantee insurance policy by a financial guarantee insurer where -
the payment arises from a breach of any financial obligation the performance of which is covered under the policy; and
the beneficial owner of the payment is -
an individual who is not resident in Singapore; or
a person, other than an individual, who is neither a resident of nor a permanent establishment in Singapore.
The words 'financial guarantee insurance policy' mean a policy that guarantees to the beneficiary of the policy the performance of a financial obligation in accordance with the terms of the obligation, including the right to receive scheduled payments in a trust certificate or other equity security but excludes letters of credit issued by licensed banks, performance bonds, fidelity bonds and such other similar contracts of guarantee as the Monetary Authority of Singapore may determine.
The words 'financial guarantee insurer' mean an insurer who is registered under the Insurance Act and who is permitted by his registration to carry on the business of issuing financial guarantee insurance policies.
Elizabeth Wong
Allen & Gledhill