Legislation

New Bills

Goods and Services Tax (Amendment) Bill 2002 (B38/2002)

The Goods and Services Tax (Amendment) Bill 2002 was read a third time and passed in Parliament on 5 December 2002.

The Bill amends the Goods and Services Tax Act (Cap 117A) to implement the increase in tax rate from 3% to 5%. The increase in tax rate was first announced in the 2002 Budget speech. However, the Ministry of Finance has, on 5 December 2002, announced that it has decided to phase in the increase of the goods and services tax (‘GST’) rate, and implement it in two steps instead of one. The GST rate will go up from 3% to 4% from 1 January 2003, and then from 4% to 5% from 1 January 2004.

Other amendments proposed by the Goods and Services Tax (Amendment) Bill 2002 are as follows:

• Section 21 will be amended to provide for the zero-rating of the supply of services for and to a person who belongs in a country other than Singapore in relation to computer server equipment belonging to that person which is co-located in Singapore. Such services include ancillary services (such as administrative, monitoring and support services), but do not include services not connected with the provision of an operating environment (such as transport and repairs).
• Section 39 will be amended to provide for the circumstances in which and the extent to which a tax invoice issued before the date a change in tax rate comes into operation ceases to have effect for the purpose of s 12 (pertaining to time of supply). Section 39 will also provide for the requirement of issuing a new tax invoice in respect of that part of the tax invoice which ceases to have effect.
• Section 84 will be amended to empower the Comptroller, among other things, to access, inspect, copy, check, make extracts from or take possession of any document, computer, device, computer program, computer software or computer output, or information, code or technology which has the capability of retransforming or unscrambling encrypted data, and to require the assistance of any person concerned with the operation of any computer, device, apparatus or material.
  

Income Tax (Amendment) Bill 2002 (B39/2002)

The Income Tax (Amendment) Bill 2002 was read a third time and passed in Parliament on 25 November 2002. The Bill implements the income tax changes announced in the Government’s 2002 Budget Statement. For example:

• new s 10N will be inserted setting out the tax treatment applicable to a securities lending or repurchase arrangement;
• new s 13N will be inserted to provide for tax exemption of certain income of an individual who has been approved as a non-ordinarily resident individual;
• new s 37C will be inserted to provide for the transfer of certain current year unabsorbed allowances, losses or donations (qualifying deductions) from one Singapore-incorporated company to another Singapore-incorporated company of the same group under a group relief system; and
• s 43 will be amended to reduce the tax rate of companies, trustees and non-resident persons from 24.5% to 22%.
  

Some of the proposed amendments are as follows:

• Section 10(5) will be amended to provide that any gains or profits, directly or indirectly, derived by any person from a right or benefit granted on or after 1 January 2003 to acquire shares in any company by reason of any office or employment held by him shall be deemed to be income chargeable to tax under s 10(1)(b).
  A new s 10(5)(b) will be inserted to provide that where the right or benefit granted is subject to any restriction on the sale of the shares so acquired, the gains or profits shall accrue at the time such restriction ceases to apply and the amount of gains or profits shall be computed based on the price of the shares in the open market at that time, less any amount paid for the shares. New s 10(5A) deems any gains or profits from a right or benefit to acquire shares in a company granted on or after 1 January 2003 to certain individuals to be derived one month before the date of cessation of employment or on the date the right or benefit is granted, whichever is the later. New s 10(5B) provides that the Comptroller of Income Tax may in certain circumstance use the net asset value of the shares for the purpose of computing the gains or profits derived by the individual referred to in new s 10(5A).
• Section 10A(1) will be amended to provide that the tax treatment in that section shall not apply to any transferred securities to which new s 10N (to be inserted) applies.
• Section 10E will be amended to extend the tax treatment therein to a trustee of a property trust which is in the business of the making of investment.
• Section 10F (gains from short-term real property transactions) will be repealed as it is no longer required.
• Section 10G (gains from short-term transactions of shares in private real property companies) will be repealed as it is no longer required.
• Section 10L will be amended to empower the Minister to remit the penalty imposed therein and to clarify one of the circumstances in which only 50% of the amount withdrawn from the Supplementary Retirement Scheme (‘SRS’) is deemed to be income chargeable to tax.
• A new s 10N will be inserted setting out the tax treatment applicable to a securities lending or repurchase arrangement.
• Section 13 (pertaining to exemptions) will be amended as follows:

1. to extend the tax exemption under sub-s (1)(o) to include payments to certain non-resident persons for the charter of a dredger, seismic ship, semi-submersible rig, foreign ship used for towing or salvage operations by an approved international shipping enterprise;
2. to provide for tax exemption on income derived by a non-resident individual from acting as an arbitrator;
3. to provide for tax at a concessionary rate of tax on certain foreign income received by a resident person; and
4. to exempt from tax certain Singapore dividends paid on or after 1 January 2003.
   

• Sections 13A, 13B, 13E and 13H will be amended to:
  

1. treat exempt dividends paid by a company as having been distributed to shareholders in accordance with the proportion of their shareholdings in the company;
2. provide that exempt dividends paid by a company shall, subject to certain conditions, be exempt from tax in the hands of shareholders at all levels; and
3. deem certain dividends as interest income in the hands of shareholders and in certain circumstances as interest expense in the hands of a company.
   

• Section 13C (exemption of income of non-resident arising from funds managed by ACU, etc) will be re-enacted to provide for tax exemption on specified income derived by certain non-resident persons arising from funds managed by any fund manager in Singapore.
• Section 13F(1) (exemption of international shipping profits) will be amended to extend the tax exemption to include certain income derived by an approved international shipping enterprise from certain dredger, seismic ship, semi-submersible rig or foreign ship used for towing or salvage operation.
• Section 13G (exemption of income of foreign trust) will be amended to extend the tax exemption to include certain income derived by an eligible holding company set up by an approved trustee company as part of the trust business structure to hold assets of the foreign trust, and to clarify the categories of beneficiaries who can enjoy tax exemption on distributions from such foreign trusts.
• Section 13J (exemption of tax on gains or profits from entrepreneurial employee stock options) will be amended to extend the 50% exemption of tax to gains or profits derived from any right or benefit granted under a share acquisition scheme (other than a stock option scheme), subject to certain conditions.
• Section 13L is amended to:
  

1. extend the partial tax exemption (except for the first S$2,000 of gains or profits which is fully tax exempt) to gains or profits derived from any right or benefit granted under a share acquisition scheme (other than a stock option scheme), subject to certain conditions; and
2. provide for the aggregation of the number of employees of a qualifying company who are offered any right or benefit under any qualifying share acquisition scheme for the purpose of computing the 50% requirement.
   

• A new s 13N is inserted to provide for tax exemption of certain income of an individual who has been approved as a non-ordinarily resident individual, subject to certain conditions.
• Section 14E will be amended to allow a person carrying on a trade or business for the provision of any services to enjoy a further tax deduction for expenses incurred on research and development.
• A new s 14O will be inserted to provide a deduction for prescribed amount of special reserve set aside by an approved general insurance company for prescribed offshore risks and to empower the Minister to make regulations, among other things, to give full effect to or for carrying out the purposes of this section.
• Section 15(1) will be amended to disallow certain sums made by a transferee under certain securities lending or repurchase arrangement, and outgoings and expenses incurred in respect of any right or benefit granted to any person not by reason of any office or employment held in Singapore to acquire shares in any company.
• Section 19A will be amended to allow any person who incurs capital expenditure on the provision of a website for the purposes of a trade, business or profession carried on by him to claim capital allowances in respect of such capital expenditure over a period of one year.
• Section 35 will be amended to clarify the current tax treatment that unabsorbed capital allowances in respect of an earlier year of assessment shall be deducted from the aggregate of income of any person from each source for each year, before any capital allowances in respect of a later year of assessment, followed by current year of assessment is deducted.
• A new s 37C will be inserted to provide for the transfer of certain current year unabsorbed allowances, losses or donations (qualifying deductions) from one Singapore-incorporated company to another Singapore-incorporated company of the same group under a group relief system. Pursuant to this new section, qualifying deductions may be transferred between companies in the same group for each year of assessment subject to the conditions that companies must be members of the same group on the last day of the basis period, have accounting periods ending on the same day and the companies concerned have elected to transfer or claim, as the case may be, the qualifying deductions.
• Section 42 will be amended to provide that tax at a rate of 10% shall be levied and paid for each year of assessment upon interest derived by a body of persons from qualifying debt securities, except where the body of persons is related to the issuer of the securities.
• Section 43 will be amended to reduce the tax rate of companies, trustees and non-resident persons from 24.5% to 22% and to provide for tax at a rate of 15% to be levied and paid on gross amount of income accruing in or derived from Singapore from any profession or vocation carried on by certain non-resident individuals and foreign firms, unless they opt within the stipulated period to be taxed at 22% on their net income.
• Section 43A will be amended to provide for tax at a rate of 10% or such other concessionary rate to be levied and paid for each year of assessment upon prescribed income from prescribed activities denominated in Singapore dollar carried on by a financial institution with an ACU.
• Section 43D will be amended to extend the rate of tax of 10% or such other concessionary rate to income from specified transactions in approved derivative products carried on by a member of any securities market maintained by the SGX-DT and futures member of SGX.
• Section 43F (concessionary rate of tax for oil trading company) will be amended to provide that no approval shall be granted under that section on or after 1 June 2001.
• Section 43H (concessionary rate of tax for international commodity trading company) will be amended to provide that no approval shall be granted under that section on or after 1 June 2001.
• A new s 43P will be inserted to empower the Minister for Finance to make regulations to provide for a concessionary rate of tax of 10% or such other concessionary rate on the income of an approved global trading company derived from qualifying transactions in commodities or commodities futures.
• Section 44 (deduction of tax from dividends) will be extensively amended. Some of these changes are as follows:
  
  • Section 44(1) will be repealed and re-enacted to provide for tax to be deducted from dividend paid in certain periods and circumstances by any company resident in Singapore.
  • New sub-ss (5A), (5B) and (5C) to s 44 will be inserted. New sub-s (5A) provides for the circumstances under which a charge may arise during the period from 1 January 2003 to 31 December 2007, and the obligation to pay the charge and any tax unpaid to the Comptroller. New sub-s (5B) provides for the carry forward of the 44A balance to be set-off against the tax deducted from any ensuing dividend paid on or before 31 December 2007. New sub-s (5C) deems the 44A balance to be nil as at a certain date where a dividend is paid by a company which has not been subjected to the provisions of s 44 in force immediately before 1 January 2003.
  • Section 44(6) will be repealed and re-enacted to provide for the circumstances under which tax shall be deducted from dividend under the new s 44(1). The clause also inserts new sub-ss (6A), (6B) and (6C). New sub-s (6A) provides for the exercise of an irrevocable option not to deduct tax from the dividend under the new s 44(1). New sub-s (6B) provides that the provisions in new s 44A (to be inserted) shall continue to apply even if an irrevocable option under s 44(6A) has been exercised. New sub-s (6C) provides that a company shall not be entitled to deduct tax from the dividend under the new s 44(1) on or after the date when the 44A balance has been reduced to nil and remains so.
    
• A new s 44A will be inserted to set out the transitional provisions for any company subjected to the former imputation system.
• Section 45 will be amended to provide for the reduction in rate from 24.5% to 22% to be deducted on the gross amount of interest made to any non-resident person.
• A new s 45F will be inserted to provide for tax at the rate of 15% to be deducted from payment of any income accruing in or derived from Singapore from any profession or vocation carried on by certain non-resident individuals and foreign firms.
• A new s 46(1A) will be inserted to limit the amount of tax deducted from a dividend under s 44(1) to be set-off against the tax charged on the chargeable income of any person.
• Section 50A(1) will be amended to provide for unilateral tax credit to be allowed to any person resident in Singapore in respect of any foreign income tax paid on foreign income received from any professional, consultancy and other services rendered in any territory outside Singapore.
• Section 65 will be amended to empower the Comptroller to require a person to produce documents kept in electronic format or other medium.
• Section 65B will be amended to empower the Comptroller to access, inspect, copy, check, make extracts or take possession of any document, computer, device, computer program, computer software or computer output, or information, code or technology which has the capability of retransforming or unscrambling encrypted data, and to require the assistance of any person concerned with the operation of any computer, device, apparatus or material.
• A new s 68(2B) is inserted to provide that an employer is required to submit a return in respect of any gain or profit derived by an individual as computed under s 10(5), notwithstanding that the individual has ceased to be employed by him at the time the gain or profit is derived.
• The Second Schedule will be amended to reflect the tax rates applicable to resident individuals for the year of assessment 2003.
• The Income Tax (Amendment) Act 2001 (A24/2001) will be amended to provide for the remission of an additional 5% on personal income tax payable for the year of assessment 2001 by a resident individual and for the remission of 10% on personal income tax payable for the year of assessment 2002 plus an amount not exceeding S$250 as determined by the Comptroller.
  

Stamp Duties (Amendment) Bill 2002 (B40/2002)

The Stamp Duties (Amendment) Bill 2002 was read a third time and passed in Parliament on 25 November 2002. The Bill amends the Stamp Duties Act (Cap 312) as follows:

• s 2 will be amended by deleting the definition of ‘contract note’ which is redundant as no duty is now payable in respect of contract notes;
• s 16 will be amended to provide the criteria to be satisfied in order for a transfer of property to be treated as being made in consideration of marriage;
• s 22A(3) will be amended to clarify that an agreement for the exchange of immovable properties is to be chargeable with ad valorem stamp duty;
• s 33 (currently pertaining to directions as to certain contract notes) will be repealed as the provision is redundant as contract notes have ceased to be subject to stamp duty. A new s 33 will be enacted to prevent the avoidance of stamp duty on the disposal of shares in a company through the cancellation of existing shares and the re-issue of new shares in the company;
• s 36 will be amended to provide that the existing exemption from stamp duty is applicable to any instrument executed by or on behalf of or in favour of a co-operative society registered under the Co-operative Societies Act (Cap 62) only if the co-operative society is liable to pay the duty. The clause also consolidates in that section the provisions in other Acts by which various instruments are exempt from stamp duty, namely the Bankruptcy Act (Cap 20), Exchange Control Act (Cap 99), Land Acquisition Act (Cap 152) and Land Titles (Strata) Act (Cap 158);
• s 37 will be amended to enable the Commissioner to collect the adjudication fee for adjudication on any instrument at such time as he may determine. The new sub-s (1B) also provides that such adjudication fee is payable notwithstanding that the application for adjudication is subsequently withdrawn.
• s 39A(1) will be amended to require objections to any assessment under the Act (including any assessment in connection with s 16(3) (relating to voluntary conveyances)) to be made in accordance with the provisions of s 39A; and
• the First Schedule will be amended to provide for:
  

1. the payment of seller’s stamp duty in certain transactions involving trustees;
2. the charging of ad valorem stamp duty on the instrument in respect of a conveyance, assignment or transfer of immovable property or shares or any interest thereof which is distributed in specie to a shareholder of a company by the liquidator of the company after the liabilities of the company have been satisfied to a person who became a shareholder of the company after commencement of winding up;
3. the exemption from ad valorem duty for a duplicate or counterpart of an instrument which has been exempted from such duty or in respect of which duty has been remitted; and
4. to charge stamp duty on an exchange of immovable properties at the same duty as for a conveyance on sale for each of the immovable properties in the exchange. Currently, duty is charged according to the value of the immovable property of higher value.
   

Payment and Settlement Systems (Finality and Netting) Bill 2002 (B41/2002)

The Payment and Settlement Systems (Finality and Netting) Bill 2002 was read a third time and passed in Parliament on 25 November 2002. The Bill seeks to protect payment and settlement systems from disruptions that may lead to risks to the financial system. Proper protection of such systems is critical to the effective functioning of the financial system. The Bill provides a conducive environment for the operation of stable and secure payment and settlement systems by empowering the Monetary Authority of Singapore to designate payment and settlement systems. These designated systems will be exempted from the application of various laws, including the law of insolvency.

When enacted, the Bill will also provide the legal certainty that will enable Singapore banks to participate in the Continuous Linked Settlement (‘CLS’) system, which is a global system for the settlement of foreign currency transactions, and eventually pave the way for the Singapore dollar to be included within the CLS system.

Registration of Criminals (Amendment) Bill 2002 (B43/2002)

The Registration of Criminals Act (Cap 268) will be amended to introduce the concept of ‘registrable particulars’ and to legislate for the taking of body samples such as blood samples and mouth swabs. The Bill was read a third time and passed in Parliament on 5 December 2002.

Sections 8 and 9 will be repealed and re-enacted to empower an authorised officer to carry out the following in relation to any arrested person or any convicted person respectively:

• to take the finger impressions and photographs of any such person;
• to make a record of the registrable particulars and other particulars of such person; and
• to send any finger impression, photograph or record so taken or made to the Registrar of Criminals.
  

The new s 10 provides for the destruction of the finger impressions, photographs and registrable particulars of any person upon his being acquitted or discharged without a conviction being recorded against him.

Section 13 will be repealed and re-enacted with some drafting modifications to add to the duties currently imposed on persons under arrest who are accused of a crime and on persons who are convicted of a crime or who are ordered to be banished, expelled or deported. Currently, such persons are only required to submit to the taking of their photographs and finger impressions. With the amendment, they will be required to also provide such registrable particulars and other particulars as may be required under the Act.

A new Part IV (Taking of Body Samples) will be inserted comprising seven new sections, namely ss 13A to 13G. Body samples include a sample of blood, a sample of head hair, including the roots thereof, and a swab taken from a person’s mouth.

These new sections provide for the taking of body samples for forensic DNA analysis from arrested persons, convicted persons and prisoners, as well as from volunteers under s 13D.

The new s 13F establishes a DNA database in which is to be stored all DNA information derived from body samples taken under the new Part IV. The section also spells out the purposes for which such DNA information may be used.

Strategic Goods (Control) Bill 2002 (B44/2002)

The Strategic Goods (Control) Bill 2002 seeks to control the transfer and brokering of military goods, goods capable of military application, as well as technology which may be used to develop, produce or operate such goods. The Bill was read a third time and passed in Parliament on 25 November 2002.

Elizabeth Wong
Allen and Gledhill