Legislation

New Acts

Income Tax (Amendment) Act 2002 (A37/2002)

The Income Tax Act (Cap 134) has been amended to implement the income tax changes announced in the Government’s 2002 Budget Statement.

Some of the changes are as follows:

• Section 10F (gains from short-term real property transactions) and s 10G (gains from short-term transactions of shares in private real property companies) have been repealed, with effect from 13 October 2001, as they are no longer required.
• Sections 13A, 13B and 13E have been amended, with effect from 1 January 2003, to 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.
• Section 13C (exemption of income of non-resident arising from funds managed by ACU, etc) has been re-enacted, effective from 3 May 2002, 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 13G (exemption of income of foreign trust) has been amended, with effect from 2 July 2002, 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) has been amended, with effect from 1 January 2002, 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 has been amended, with effect from 1 January 2002, to:
  

(a) 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

(b) 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 has been introduced, effective from Year of Assessment 2003 and subsequent years of assessment, 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 has been amended, effective from Year of Assessment 2003 and subsequent years of assessment, 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 has been introduced, effective from Year of Assessment 2003 and subsequent years of assessment, 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 for Finance to make regulations, among other things, to give full effect to or for carrying out the purposes of this section.
• Section 19A has been amended, with effect from 3 May 2002, 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.
• A new s 37C, effective from Year of Assessment 2003 and subsequent years of assessment, has been introduced 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 has been amended, with effect from Year of Assessment 2003 and subsequent years of assessment, 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 has been amended, with effect from Year of Assessment 2003 and subsequent years of assessment, to reduce the tax rate of companies, trustees and non-resident persons from 24.5% to 22%.
• A new s 43P has been inserted, with effect from 1 June 2001, 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) has been extensively amended with effect from 1 January 2003. Some of these changes are as follows:
  
  • Section 44(1) is 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 have been 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) has been repealed and re-enacted to provide for the circumstances under which tax shall be deducted from dividend under the new s 44(1). Also introduced are 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 remained so.
    
    
• Section 45 has been amended, with effect from Year of Assessment 2003 and subsequent years of assessment, 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.
• Effective from 1 January 2003, a new s 68(2B) is introduced 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 has been amended, with effect from Year of Assessment 2003 and subsequent years of assessment, to reflect the tax rates applicable to resident individuals for the Year of Assessment 2003.
  

Stamp Duties (Amendment) Act 2002 (A38/2002)

With effect from 1 January 2003, the Stamp Duties Act (Cap 312) is amended as follows:

• the definition of ‘contract note’ in s 2 has been deleted as it is redundant since no duty is now payable in respect of contract notes;
• section 16 is 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;
• section 22A(3) is amended to clarify that an agreement for the exchange of immovable properties is to be chargeable with ad valorem stamp duty;
• section 33 (previously pertaining to directions as to certain contract notes) has been repealed as the provision is redundant as contract notes have ceased to be subject to stamp duty.
  A new s 33 has been 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;
• section 36 is 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;
• section 37 is amended to enable the Commissioner of Stamp Duty to collect the adjudication fee for adjudication on any instrument at such time as he may determine. A new sub-s (1B) provides that such adjudication fee is payable notwithstanding that the application for adjudication is subsequently withdrawn;
• section 39A(1) is 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 is 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. the charging of 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. Previously, duty was charged according to the value of the immovable property of higher value.

Goods and Services Tax (Amendment) Act 2002 (A43/2002)

The Goods and Services Tax (Amendment) Act 2002 amends the Goods and Services Tax Act (Cap 117A) to implement the increase in tax rate from 3% to 4% for the year 2003. Further, for the year 2004, the tax rate will be raised to 5%.

Other key amendments, which are effective from 1 January 2003, are as follows:

• Section 21 is 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 is 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 also provides 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 is 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.
  

Economic Expansion Incentives (Relief from Income Tax) (Amendment) Act 2002 (A44/2002)

The Economic Expansion Incentives (Relief from Income Tax) Act is amended primarily to implement the tax changes announced in the Government’s 2002 Budget Statement, namely:

(a) to reduce the tax rate under the Development and Expansion Incentive from not less than 10% to not less than 5%;

(b) to allow unlimited flow-through of tax exempt dividends to the final shareholders at all levels for all incentives without any minimum shareholding requirements; and

(c) to make provision for the Technopreneur Investment Incentive.

The changes effected by the Economic Expansion Incentives (Relief from Income Tax) (Amendment) Act 2002 are effective from various dates.

New Subsidiary Legislation

Housing and Development (Mortgage to Lender) Rules 2002 (S650/2002)

Pursuant to s 50 of the Housing and Development Act (Cap 129), a Housing and Development Board (‘HDB’) flat may only be mortgaged if the prior written consent of the HDB has been obtained.

The Housing and Development (Mortgage to Lender) Rules 2002, which are effective from 1 January 2003, set out the standard terms and conditions which will apply to all cases where the HDB has granted its consent to a mortgage of a HDB flat.

Where a flat is mortgaged to a lender as security for a loan which is disbursed on or after 1 January 2003, the HDB is deemed to have granted its prior written consent to the mortgage, subject to the following terms and conditions:

(a) the mortgage constitutes security solely for the repayment of a housing loan granted to the mortgagor to finance or re-finance the purchase of the mortgaged flat;

(b) the mortgagee will hold the mortgaged flat subject to the rights and powers of the HDB under the Act and subsidiary legislation enacted thereunder and the agreement for lease or lease entered into between the HDB and the mortgagor, and will comply with the policies of the HDB that may from time to time be imposed;

(c) the mortgagee will not exercise its power of sale under the mortgage unless it has first granted an option to the HDB or the HDB’s nominee to purchase the mortgaged flat at an official sale price determined by the HDB, and the option is not exercised within two months from the date it is granted;

(d) the mortgagee, in exercising its power of sale, will not sell the mortgaged flat to a purchaser unless the purchaser is first approved by the HDB as a person eligible under its prevailing policies to purchase the mortgaged flat; and

(e) the moneys received by a mortgagee in exercise of its power of sale, after discharge of prior encumbrances, will be held by the mortgagee in trust to be applied in the order of priority set out in the Housing and Development (Mortgage to Lender) Rules 2002.

Property Tax (Non-residential Buildings) (Remission) Order 2002 (S683/2002)

The Property Tax (Non-residential Buildings) (Remission) Order 2002 is operative from 1 January 2003 and will remain in operation until 30 June 2003 (both dates inclusive).

There will be a remission of the following amounts in respect of any building or part thereof which is permitted to be used under the Planning Act (Cap 232) for any purpose other than for human habitation:

• in the case of any building or part thereof owned and let by specified statutory boards, 30% of any payment made in lieu of tax under the Property Tax Act (Cap 254); and
• in any other case, the aggregate of:
  

(a) 100% of the tax payable on the first S$80,000 of the annual value of the building or part thereof; and

(b) 30% of the tax payable on the annual value of the building or part thereof exceeding S$80,000.

The Property Tax (Non-residential Buildings) (Remission) Order 2002 does not apply to all buildings. The buildings excluded from the Order are set out in the Order.

Companies (Accounts of Public Listed Companies) (Substitution of Period) Order 2002 (S684/2002)

Section 201(1)(a) of the Companies Act (Cap 50) requires the directors of a company to lay before the company at its annual general meeting, at least once in every calendar year, a profit and loss account for the period since the preceding account (or in the case of the first account, since the incorporation of the company). In the case of a public company listed or quoted on a securities exchange in Singapore, the accounts are to be made up to a date not more than five months before the date of the meeting.

Pursuant to the Companies (Accounts of Public Listed Companies) (Substitution of Period) Order 2002, for all public companies that are listed or quoted on a securities exchange in Singapore and whose financial year commences on or after 1 January 2003, the period of four months is substituted for the period of five months, that is to say, the accounts are to be made up to a date not more than four months before the date of the meeting.

The Companies (Accounts of Public Listed Companies) (Substitution of Period) Order 2002 is operative from 1 January 2003.

Companies (Accounting Standards for Listed Companies) Order 2003 (S2/2003)

Pursuant to the Companies (Accounting Standards for Listed Companies) Order 2003, which came into operation on 1 January 2003, where:

(a) a company which is listed on a securities exchange in Singapore is also listed on a securities exchange outside Singapore;

(b) the securities exchange outside Singapore on which the company is listed requires the company to comply with accounting standards other than the accounting standards prescribed under s 200A(1)(a) of the Act (referred to as the foreign accounting standards);

(c) the foreign accounting standards are approved by the securities exchange in Singapore on which the company is listed for the purposes of the exchange’s listing requirements; and

(d) the company has notified the Registrar of its intention to apply the foreign accounting standards,

the company shall, instead of applying the accounting standards prescribed under s 200A(1)(a) of the Act, apply those foreign accounting standards.

Companies (Amendment) Act (Commencement) Notification 2003 (S15/2003)

The following provisions of the Companies (Amendment) Act 2002 are operative from 13 January 2003:

• section 2(b);
• sections 3 to 35;
• sections 42 to 54;
• section 55(a);
• sections 56 to 60;
• section 62;
• section 63; and
• section 64.

To fully implement these changes, the following subsidiary legislation has also been issued:

• Companies (Amendment) Regulations 2003 (S16/2003);
• Companies (Filing of Documents) Regulations 2003 (S17/2003);
• Companies (Identical Names) Rules 2003 (S18/2003);
• Companies (Amendment of Second Schedule) Notification (S19/2003); and
• Companies (Amendment of Eighth Schedule) Notification (S20/2003).
  

Essentially, these amendments make the filing of documents with the Registrar of Companies and the issue of documents by him medium neutral, so as to facilitate the filing and issue of such documents using the electronic filing system known as Bizfile. In many instances, the Companies Act (Cap 50) is amended by a substitution of terms such as the following:

• ‘notice’ substituted for ‘certificate’, eg a notice of incorporation will be substituted for a certificate of incorporation;
• ‘approval’ substituted for ‘licence’;
• ‘declaration’ substituted for ‘statutory declaration’;
• ‘declaration of consent’ substituted for ‘written consent’;
• ‘copy of court order’ substituted for ‘office copy of court order’; and
• ‘notice in prescribed form’ substituted for ‘written notice’.
  

Elizabeth Wong
Allen and Gledhill